A b s t r a c t B2B E-Commerce Revisited: Leading...

A b s t r a c t

The application of Internet technologiesfor the conduct of interfirm business trans-actions has given rise to a boom inbusiness-to-business (B2B) electroniccommerce. Yet, although there are manysuccess stories that have been reported overthe past several years, the progress ofB2B e-commerce has been hindered byunanticipated technical, organizational,economic and legal challenges thatdiminish value. In this article, we report ona series of interviews with leading academicresearchers and industry senior managerswho are in a unique position to make senseof key issues and offer useful insights.The respondents provide their views onthe efficacy of different business models inB2B e-commerce, the problems associatedwith B2B technology platform adoptionand implementation, new ways of thinkingabout interorganizational informationsharing and e-procurement business pro-cess design, investment decision makingand financial returns for e-business infra-structure, international and regional issues,and research directions.

A u t h o r s

Qizhi Dai ([email protected]) is aPhD Candidate of the Department ofInformation and Decision Sciences atthe Carlson School of Management,University of Minnesota.Robert J. Kauffman([email protected]) isCo-Director of the MIS ResearchCenter, and Professor and DepartmentChair of the Department of Informationand Decision Sciences at the CarlsonSchool of Management, University ofMinnesota.

INTRODUCTION

The application of Internet tech-nologies for the conduct of inter�rmbusiness transactions has given rise toa boom in business-to-business (B2B)electronic commerce. Electronic pro-curement and electronic cataloguemanagement systems have been widelyadopted to move corporate purchasingand selling online. In addition, avariety of electronic markets have beenset up to facilitate inter�rm trans-actions and broaden market access forbuyers and suppliers. Yet, althoughthere are many success stories aboutthe application of Internet technolo-gies in this area reported over the pastseveral years, overall, the progress ofB2B e-commerce has been hinderedby many unanticipated technical,organizational, economic and legalchallenges that diminish value (Dai andKauffman 2002). And, even giventhe number of interesting and newtheoretical interpretations of thedevelopments in the marketplace andthe transformation of market structureand industrial organization (Timmers1998), the reality is that we are still ata very early stage in our understandingof B2B e-commerce phenomena.

In this article, we take a number ofsteps towards understanding the extentof the alignment between academicinterpretations and the reality of theever-changing industry marketplace.The �rst half of the article focuses on

B2B e-commerce business models,the issues that relate to technologyadoption in this context, and the busi-ness value and organizational bene�tsthat arise in this context. The latterpart focuses on managerial approachesto making B2B e-commerce pay off,considers the regional and globaldimensions, and concludes with somespeci�c suggestions for future researchthat we and our interviewees offer.

To explore these key issues anddevelop a sense for the appropriateresearch directions for the future, weshowcase the thinking of a number ofleaders in the area of B2B e-commerceand supply-chain management tech-nology solutions through a series ofinterview extracts. These interviewsalso were conducted in the time frameof the reviews for other articles in thisspecial issue of Electronic Markets,with the idea in mind that they wouldassist in grounding our evaluationof the research articles that were sub-mitted for review.

Interview Participants

From August to November 2001,we interviewed more than one dozenpeople, including university-basedsenior faculty, noted authors, researchcentre directors, e-commerce journaleditors, and visionary senior managerswhose �rms deal with the leading-edgeissues in B2B e-commerce on a daily

B2B E-Commerce Revisited: LeadingPerspectives on the Key Issues andResearch Directions

QIZHI DAI AND ROBERT J. KAUFFMAN

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basis. We chose the participants based on the extent of theirexpertise in a variety of e-commerce contexts (e.g., theory-building experience in research, knowledge of speci�cindustries, international coverage of leading e-commerceindustries in Asia, Europe and North America, leadershiproles in B2B e-commerce �rms, and experience with settingthe research agendas of leading university research centres).On the industry side, the participants were as follows:

� Mr Andrew Loder, Cargill eVentures, Cargill, Inc, USA;� Mr Kevin Lynch, president and CEO, Nistevo, USA;� Mr Joel Ronning, CEO, Digital River Inc, USA.

On the university side, we interviewed the following:

� Professor Eric Clemons, Wharton School, University ofPennsylvania, USA, and Electronic Markets editorialboard member;

� Professor Omar El Sawy, University of SouthernCalifornia, USA, and author of Redesigning EnterpriseProcesses for e-Business, McGraw-Hill, 2001;

� Professor Ray Hackney, Director, BIT Research Centre,Manchester Metropolitan University, UK, and author,with Dennis Dunn, of Business Information TechnologyManagement: Alternative and Adaptive Futures,Palgrave, 2000;

� Professor Jean Kinsey, Director of the Sloan Founda-tion’s Food Industry Center, University of Minnesota,USA;

� Professor Dr Stefan Klein, Chair in InterorganizationalSystems and Director, Department of IS, University ofMünster, Germany, European Journal of InformationSystems associate editor, and International Journal ofElectronic Commerce and Electronic Markets editorialboard member;

� Professor M. Lynne Markus, Chair in Electronic Busi-ness, City University of Hong Kong, China, and author,with Barbara Bashein, of Data Warehouses: More ThanJust Mining, Financial Executives Research Foundation,2000;

� Professor Barrie R. Nault, David B. Robson Professor ofManagement (MIS), University of Calgary, Canada;

� Professor Michael Shaw, Leonard C. Hoeft DistinguishedProfessor in Information Technology Management,University of Illinois, Champaign-Urbana, USA;

� Professor Peter Weill, Senior Research Scientist andDirector, Center for Research on Information Systems,Massachusetts Institute of Technology, USA, Pro-fessorial Fellow, University of Melbourne, Australia andauthor, with Michael Vitale, of Place to Space: Migratingto E-Business Models, Harvard Business School Press,2001;

� Professor J. Christopher Westland, Hong Kong Uni-versity of Science and Technology, China, author, withTed Clark, of Global Electronic Commerce, MIT Press,1999 and Valuing Technology: The New Science of Wealthin the Knowledge Economy, John Wiley & Sons, 2001.

Interview Process

Each participant was given the opportunity to comment onthree to �ve questions during a 15 to 20 minute telephoneor face-to-face interview session. In addition, one or tworespondents either provided us with written replies orsuggested that we examine some of their recent writingsfor their current perspectives, as a basis to make the briefinterviews more focused and meaningful. The interviewquestions generally dealt with industry issues and directionsfor B2B e-commerce research, and we encouraged theinterviewees to respond with their business experience andresearch �ndings to date in mind.

Our interviews re�ect comments on the range of B2Be-commerce solutions that can be applied in various con-texts, but they also emphasize the different roles thatparticipating �rms can play. For example, B2B electronicexchanges that emphasize liquidity are suitable for com-modity markets, while channel coordination is moreimportant where there are limited numbers of buyersand sellers. A related issue is the recognition of therole and impacts of inter�rm collaboration, businessprocess management, and supply-chain management inthe implementation of B2B e-commerce solutions. Inaddition, although our interviewees identi�ed variousvalue propositions that B2B e-commerce solutions canoffer to participants, they also mentioned the underlyingmotivations for �rms to adopt these innovations and theassociated adoption hurdles. The industrial and academicleaders propose a series of strategies that can help managersto discern appropriate business opportunities and maximizevalue from investments in B2B e-commerce solutions.Our interviews also uncover some regional characteristicsin the deployment and adoption of B2B e-commercesolutions. Finally, our interviews identify a number ofpossible development trends and potential issues for B2Be-commerce research.

THE ROLE OF B2B ELECTRONIC COMMERCE SOLUTIONS

With the recent business and technological developmentsoccurring at such a rapid pace, our understanding of thenature of B2B e-commerce and electronic markets is likelyto evolve from a number of different perspectives. Amongthem we �rst consider the new kinds of business modelsthat have been developed, and the manner in which theparticipating �rms view these innovations. Some of theleading questions of our time are as follows: What will bethe successful business models for B2B e-commerce? Whatare the most successful strategies for B2B e-markets and the�rms that adopt them? How can industry operating B2Be-marketplaces be leveraged in supply chain management?What theoretical perspectives will help us to understandwhat is going on?

Ray Hackney: A number of business models have beendescribed within the e-commerce marketing literature, but

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there have been a few new ones that are speci�c to B2Be-commerce. The �rst is what we may call the virtualmarketplace, a place for products used in a single enterprise.The next business model, the virtual alliance, is slightlymore complex. By sharing business resources, this modelpermits the participating �rms to operate around a com-mon system interface, which enables cross-referencing ofkey data related to electronic procurement. Finally, thevirtual community business model expands upon thevirtual alliance, by permitting multilateral data sharing andparticipation.

Eric Clemons: B2B e-commerce has been in existencefor a long time – since the �rst implementation of inter-organizational systems such as electronic data interchangesystems. In prior research in IOS, the move-to-the-middletheory tells us that for many products, there is a need forcoordination (Clemons et al. 1993). This theory also helpsus understand various issues in today’s B2B e-commerceresearch. For example, for a pure commodity product witha nearly in�nite number of buyers and sellers, an exchangeis �ne. But, for a product with a limited number of buyers,a limited number of sellers and highly variable demand,you would almost certainly want explicit coordination.In this context, it is crucial to understand the role ofB2B e-commerce in terms of channel coordination, whichcoordinates the production schedule of suppliers with theproduction schedule of one’s own factory. Some B2Bexchanges emphasize the need for liquidity. But liquidityalone can not ensure success in the arena of B2B e-commerce because inter�rm coordination lies at the heartof interorganizational interactions. One of the reasons thatmany B2B exchanges fail in today’s markets is that theydo not offer enough support for channel coordinationbetween the buyers and suppliers participating in B2Be-marketplaces.

Peter Weill: Shared infrastructure models and inter-mediaries are examples of B2B exchanges where potentiallyhigh levels of value can be created (Weill and Vitale2001). One of the big issues with the shared infrastructuremodel is how you manage information, what information�elds or information elements are shared across the com-petitors, and what information �elds are private (Weilland Broadbent 1998). One of the reasons these sharedinfrastructure models are taking so long to implement isbecause �rms are still in the midst of trying to understandhow to manage information. A related issue is that sharinginfrastructures tends to reduce or remove one of thestrategic dimensions that companies can leverage.

An example is Covisint (www.covisint.com), a global andindependent e-business exchange for the automotive indus-try. It was initially founded by a group of car manufacturers(General Motors, Daimler Chrysler, Ford, Nissan andRenault, later to be joined by Peugoet-Citroen). We seethat the industry has begun to cooperate by building ashared infrastructure and technology platform which theyuse to access suppliers and manage their supply chains.In this case, those companies are saying that they will no

longer compete on the basis of the electronic connection tothe supplier. Instead, they are now aiming to have an equit-able and fair industry infrastructure that is used by allmanufacturers and accesses all of their suppliers. This is amajor change in strategic position that requires a lot oftrust and effort before it can be made to work. There is alot of opportunity too – both on the demand side and thesupply side of the value chain – but these are non-trivialagreements to negotiate and are very segment-speci�c aswell. (A number of our interviewees referred to Covisint,which is one of the major examples of a successful B2B e-commerce model. For an overview of Covisint’s businessmodel, see Figure 1.)

Kevin Lynch: Another important aspect of the businessmodels of B2B e-commerce involves inter�rm collaborationLangley (2000). There are two types of collaboration inB2B e-commerce. The �rst type is vertical collaboration,in which �rms are effectively collaborating backwards andforwards through the supply chain with either or bothof their suppliers or customers. Typically the return oninvestment (ROI) from vertical collaboration has resultsfrom rapid communication. This involves better infor-mation �ow across the supply chain and less latency incommunicating changes through the supply chain. Verticalcollaboration via B2B solutions enables manufacturers toobtain demand information faster and with greateraccuracy.

The second type of collaboration is horizontalcollaboration where companies are neither the suppliersnor the customers of each other; instead, they are mainlycompetitors, but they are working on some basic problemin the economy. In logistics, a good example of theproblem that �rms are sharing in the industry is assetrepositioning. Asset repositioning causes a hidden cost inthe economy that no one party controls directly, but allparties involved bear the cost. In the case of truck delivery,the time and distance that a truck driver has to take toget to the next pick-up from the last delivery destinationis an asset repositioning cost. So, through horizontalcollaboration, we create the possibility for bringingtogether both the demand and the supply, including thecarriers and the shippers. This way, we can optimizeschedules and squeeze more inef�ciency out of the process.The key thing is to reveal this hidden cost – the assetrepositioning cost – and then use a network approach toattack that cost, to measure and reduce it, and to share thesavings across the network.

ROADBLOCKS TO B2B E-COMMERCE TECHNOLOGYADOPTION

Although B2B e-commerce solutions are claimed to createvalue for �rms, the record shows that �rms have been slowin adopting these solutions. We next asked the intervieweesto consider the barriers that hinder the adoption of B2Be-commerce approaches, as a way of identifying some of

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the leading topics for research. They also offered thoughtson what strategies are effective for B2B market-makers andsystems providers to use to encourage more rapid adoption,and remind us to consider such issues as coordination,network externalities and the role of critical mass relative tothe successful implementation of e-business initiatives.

Stefan Klein: Many researchers have sought explanationsfor the overall slow pace of adoption in this area. First,an explanation for the accelerated adoption of B2B e-commerce approaches is the progress of technology. It isnow easier, more convenient, and the price to get involvedin doing it has come down. Second, and related to the �rstpoint I made, many especially small and medium enterpriseshave started to use Internet technology as a means forcommunication and e-mail. Hence, they can take advantageof the new technologies for more advanced applicationswithout bearing the full burden of the cost. As a result,B2B e-commerce can now be built upon this infrastructure.Where previous investments in interorganizational systems(IOSs) have been made – for example, in technical stand-ardization – the transition to B2B e-commerce will becomeeasier (Klein 1996).

Eric Clemons: Firms are moving to B2B e-commercesolutions because the coordination software is gettingbetter. When two �rms �nally get their SAP implementa-tions to work, and they are doing ERP system links, thenthey are able to do supply chain optimization.

Andrew Loder: Barriers that have hindered adoption ofB2B e-commerce are wide-ranging and complex, includingindustry-based, organizational and behavioural hurdles.Early B2B e-commerce solutions were simply misalignedwith industry structures. They ignored existing industrystructures, even proposing to disintermediate key industryplayers, but failing to recognize the role they play in anindustry. The ones that did get it right often struggled witha ‘chicken-and-egg’ problem. For a solution to be useful tousers, it required signi�cant usage. This is especially true in‘pure marketplace’ models that attempted to bring buyersand sellers together.

E-commerce solutions with an aligned industry andbusiness model face other barriers around organizationaland behavioural decision making. Many solutions aredeveloped by nascent startups that market into establishedenterprises. While enterprises are willing to experiment withnew solutions, they are reluctant to commit to productsor services from startups that might be out of business sixmonths from now. They can’t afford to take that corporaterisk. While this is true for any new products, the differenceis that many B2B e-commerce solutions address strategicand core business transactions, so the risk is more sig-ni�cant. Finally, B2B e-commerce took information tech-nology (IT) out of the back of�ce and put it into the frontof�ce – that is, B2B e-commerce created solutions thattouch customers, sales people and sales support. It’s notabout transmitting EDI messages between computers. It’snow about new tools for researching, decision making,ordering, selling, and communicating that the front of�ce is

using to change the way it does business. These requirebehavioural changes that don’t happen overnight.

Michael Shaw: The adoption of B2B e-commerceinvolves important issues in technology adoption. It ismore complicated than what happens when �rms take atraditional approach to adoption. Now, it includes not onlyadoption of IT within an enterprise, but also �rms haveto think about the adoption of IT solutions that involvemultiple enterprises. This is because B2B e-commerceinvolves market participation. On the other hand, B2Be-commerce also offers a way to solve the problem becauseit facilitates the standardization of technology in supply-chain management. So, although you have the technologyadoption hurdle, if they are developed well by solutionvendors and the �rms that adopt them, B2B e-commercemodels can actually provide potential solutions that themarketplace has not seen before.

Barrie Nault: Overcoming the problems of adoptionof B2B e-commerce technology solutions is related to theeffects of network externalities and technology standards. Onthe one hand, the implementation of standards will aid theadoption of networks. On the other hand, standardizationwill restrict the activities that are possible when �rms usenetwork technologies. I would especially point out theimportance of the complementarities involved with multipleparties’ investments in B2B e-commerce. This is anotherreason for why we are seeing relatively delayed B2B e-commerce adoption in the US and Canada. In implement-ing B2B solutions, investments from market-makers, buyersand suppliers are complementary in the sense that theinvestment from one party in developing the infrastructurewill give incentives to other parties to also make investmentsin the infrastructure.

There are two questions that arise here. First, what arethe optimal investment levels by electronic markets andparticipating �rms, respectively? How will senior managersknow how much to invest? When market-makers buildthe infrastructure of B2B electronic markets, they maychoose to make investments to customize their systems forindividual participants, as a subsidy to encourage adoption.Second, how are �rms’ investment decisions likely to beaffected by other participating �rms’ investments? Forexample, when more suppliers have set up linkages with anelectronic market, buyers will have a greater incentive tomake complementary investments in an electronic linkagewith the market. So as a result, generally, individual �rms’investments will be affected by those of their competitorsand partners. The question is how individual �rms decideupon optimal investment levels, given their competitors’and partners’ investments (Nualt and Dexter 2001).

In summary, it is dif�cult to get to a market equilibriumof investment levels, and this will result in some hesitationon the part of �rms in making investments in B2B electronicmarkets.

Peter Weill: Another of the key barriers for implementa-tion of B2B systems solutions is trust. The system will needto be fair and secure, and not put any of its participants at a

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disadvantage with respect to any other participant. Thesystems also need to treat partners equally. For example,since the time that the automotive manufacturers startedCovisint, they have invited other new players and newmanufacturers to participate in building a shared electronicprocurement infrastructure for the industry. The new parti-cipants may be placed in a less than equal position relativeto the founders of Covisint. So, one of the big issues thatarises is whether all of the participating companies are trulyable to have equal access to the marketplace. That’s a hardthing to ensure. It often requires a third-party managerialstructure or even an audit �rm to ensure that. So, againI would stress that trust is one big barrier.

The second big barrier is market preparedness – whetherthe marketplace is actually ready for B2B systems solution.In the last two or three years many observers have over-estimated the readiness of the marketplace for B2B e-business services, particularly the procurement exchanges.The reason for this has to do with an overall lack of under-standing on the part of market observers about marketsegmentation. There are segments of the market that areready to do business electronically – even strictly througha B2B exchange – but they are not universal. So I wouldargue that both business people and academic researchersneed to spend more time and effort in understanding thesegments.

The third barrier for these sorts of models and exchangesto be successful is that they should have single points-of-contact for customers from multi-business unit �rms. If alarge multi-business unit �rm wants to offer a B2B systemfor its corporate customers, then there ought to be therecognition that the greatest level of bene�t would �owfrom the customers being able to access all of the businessunits within the �rm. But achieving that requires a changein the way in which many companies market and managetheir customers, and the way in which the customerrelationship management function works. It also usuallyrequires shared �rm-wide IT infrastructure in a way thatmany �rms have not had before. Instead, �rms have hadinfrastructures that were targeted for a particular businessunit that was selling to a particular kind of corporatecustomer. Now, if a �rm offers a single point of contact,this will require a dramatically different �rm-wide infra-structure. That’s a big change for companies. Still, they aremaking progress towards building �rm-wide infrastructuresand shared services functions to provide this integratedcapability. But it takes time, it takes dollars to invest and italso calls for a change in internal organizational behaviour.

Jean Kinsey: In most industries, such as the one Ifollow most closely – the food industry – we see a highlyfragmented B2B procurement market. The problem withsmaller companies adopting B2B e-commerce in thefashion that most observers suggest is that they do not havethe capital to invest. And even if they did, they probably arenot able to carry a large enough volume of transactionsin their supply chain to bene�t that much from usingthe technology. Another thing that has been a signi�cant

roadblock for a long time is that the computer systems donot talk to each other easily. For example, a set of grocerystores in upper Michigan set up a ‘nice’ computer systemthat they use to transmit data and receive data. But thatcomputer system is not able to talk to the computer systemat Proctor & Gamble. The systems are built to totallydifferent speci�cations.

The other problem is that retailers lack enough trust intheir suppliers in sharing supply chain and procurementdata. Retailers are afraid that a big supplier – say a Proctor& Gamble or a General Mills – will either share that datawith a competitor or will somehow use that data to achievecompetitive advantage in some way. So they are reluctant toshare even that standard data, at least in an ‘unsanitized’form. By keeping their data private, they hope to realizea competitive advantage over suppliers; meanwhile theycompromise ef�ciencies that could be gained from thesharing of data with suppliers in the distribution chain.Therefore, I argue that the key success factors in B2Be-commerce are trust and compatible computer systems.

BUSINESS PROCESS DESIGN AND SUPPLY CHAINMANAGEMENT

Most observers note the extent to which business processeshave been changed by B2B e-commerce applications.Others suggest that it is not only the business processes thatare changed, but the competitive positions of participatingorganizations are subject to change as well. In this context,we asked the respondents to consider the issues that arisewhen �rms plan the deployment of B2B solutions – forexample, changes in critical business processes and �rm riskmanagement – and how implementation success is likely toaffect �rm performance.

Stefan Klein: B2B e-commerce solutions are an expan-sion of IOSs based on new technology. B2B is very muchrelated to interorganizational business process redesign andnetwork redesign. In fact, in my view, it has become muchmore a matter of process integration than anything else.Today, as a result, what we see are different aspects ofthe overall process from procurement to sales and dis-tribution which in the past have been dealt with separately(Klein 1996). These processes are coming together intocoordinated activities now.

Omar El Sawy: First of all, I think that process manage-ment becomes a more pressing issue with the increase inB2B e-commerce, where inter�rm collaboration becomesimportant and processes interact in near-real time. Processmanagement involves making sure that enterprises havebusiness processes that are well designed, that the processesare effectively integrated with information technologyinfrastructure, and that they are also well managed.Business process redesign emerged in the early 1990s,but managerial expectations were set too high and weremisplaced amidst cost-cutting and downsizing. There wasbroad-based disappointment and the impetus for further

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process reengineering initiatives cooled down over theensuing years. Today we are seeing a second wave ofbusiness process redesign occurring in industry with thegrowth of e-commerce and e-business. This new waveinvolves rethinking, redesigning, integrating, and managingbusiness processes at both the enterprise and supply chainlevel to take advantage of Internet connectivity and newways of creating value.

In this context, there are a number of issues that will bevery interesting to tackle. One is: How do you designknowledge-intensive business processes, and conversely,how do you harness knowledge management as a strategyfor business process redesign? There is a lot of interplaybetween knowledge management and business processredesign, and this connection has yet to be fully leveraged.We really do not yet fully understand how to best capturethis relationship and increase the knowledge creating cap-acity of day-to-day operational processes. So it is no surprisethat this is especially true in the B2B e-commerce context.In addition, there are questions that arise related to whattypes of information you gather and share to improveknowledge creation and sharing, and whether the informa-tion is structurally different across different organizations inB2B e-commerce. So these knowledge and process-relatedconcerns become one important aspect of redesign thathave the power to make or break the value they bring to anenterprise.

There are other aspects of redesign that arise in e-business when processes become as complex as they are intypical day-to-day supply chain processes, such as procure-ment or order management. One key issue is how wedesign business processes to deal with exceptions whenthe process is being executed? One intriguing school ofthought suggests that the exception process itself should bedesigned as a separate process. Thus, an e-business processwould be designed as two processes: a simple process thatmaps the typical way the process works under normalconditions, and a separate exception process that capturesboth identi�ed and non-identi�ed exceptions that occurinfrequently. The logic of the separation is that the twoprocesses are structurally and inherently different. Theexception process is much more knowledge-intensive,involves heavier information exchange, is generally muchmore costly, and needs to be redesigned very frequently asnew exceptions occur. Does this approach result in morerobust designs? What trade-off theories can be developedhere?

Then there is the process integration aspect in B2B con-texts. That is a really dif�cult area for practice and it isalso under-researched by IS academics. It brings to the fore-front a number of research issues. One is interoperabilitystandards at the process level and process modularity.How do we design modular processes that ‘plug-and-play’with each other across enterprises and supply chains? Howdo we design standards for interorganizational interfaceprocesses such that automated applications can effectivelycommunicate at the business level and the technology infra-

structure level? What types of infrastructures will facilitateinformation and knowledge exchange and capture acrossdisparate enterprises with different back of�ce systems?The RosettaNet consortium (www.rosettanet.org) in theIT industry was one industry’s effort to deal with processintegration issues across multiple partners in a very dynamicindustry. RosettaNet had an accompanying research effort,with which I and two junior colleagues were involved,that tried to answer some of those questions, and howenterprises could be made organizationally ready for suchB2B e-business activities.

Another related issue is around the sequence of initiatingIOS integration in the B2B e-commerce context: Shouldenterprises focus on internal integration �rst and get theirERP and back of�ce in good shape? Or should businesspartners in a supply chain work towards achieving externalintegration with others �rst? While there are arguments thatsupport either side, the current software market is mainlygeared to designing software and structuring licensesmostly for individual companies. However, there appearsto be an emerging trend to design software that is targetedfor groups of enterprises together, whether in functionalityor in licensing arrangement terms. These are just some ofthe interesting issues in process integration, and I thinkwe will be dealing with the process of integration for manyyears to come.

The third part of process is process management. Thataspect brings up a number of key areas that require atten-tion in both practice and research. First, there is much workto be done on understanding how to effectively manageautomated work�ows that cross enterprise boundaries. Weneed to focus on how to more closely achieve real-timeprocess monitoring as a process is being executed, and �ndways of correcting errors and performance problems infaster and more ef�cient ways. In large-scale B2B processesit is desirable to get alerts and redirect processes, to ensurethat the operational performance is acceptable. Second,there are issues of collaboration. That is where a lot ofthe value can be created. Collaborative integration entails atight collaborative relationship among all partners, deepvisibility across all tiers of the supply chain, and near-real-time information exchange and knowledge sharing aroundsupply chain processes. Visibility is becoming an importantresearch issue in this context. Companies that act as supplychain leaders or orchestrators want to get early warningof changes in the status of their partners’ processes. Theywant to see three or four levels deep into the supply chainto identify what the status of the suppliers is, so that ifthere is any change in demand or supply, they can quicklyadjust to it. They also want to be able to capture customerinformation in this way so they can understand customerneeds and anticipate them, and then create value bycustomizing around that. Clearly, the value comes frombeing able to collaborate, and being able to take advantageof the information technology platform and different formsof information exchange. This is the way to generate newproducts and services, as you �nd out more about the

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market and the customers you serve. Collaborative integra-tion is one of the key elements of process management inB2B e-business environments.

Michael Shaw: B2B e-commerce makes managementmore productive because it provides additional channelsfor supply chain departments to work with each other.Those interactions will provide opportunities to coordinateactivities across the supply chain. The impact of B2B e-commerce should be seen from the viewpoint of supplychain integration.

Andrew Loder: I agree that one of the biggest issuesthat you have with most supply chains is visibility across theentire supply chain. So, ideally the Internet and IT willallow you to increase that visibility, and allow the decisionmakers to get real-time information to see where thebottlenecks are in their business processes. Obviously thetechnology does not change anything by itself, but it allowsthe key people along the supply chain to make better-informed decisions.

Chris Westland: In spite of some of the bene�ts that�rms expect, one big risk in B2B e-commerce is compatibil-ity risk. The crucial relationship in B2B markets is the com-patibility among the pieces of the network. Compatibilityassures that various orders in the market can be mixed andmatched for free to produce demanded and, thus, valuableservices. This is why standards are important. Compatibilityrisk can be managed by establishing responsible, incentive-driven and well-informed standard setting bodies, forexample ANSI and the IEEE. The second big source ofrisk is transaction completion risk. This is the risk thata buyer may not pay for, or a seller may not deliver theproduct at the price and terms negotiated. In the extreme,it is also possible that one of the parties to the transactionmay renege entirely. The solution to this risk is licensingand bonding all participants in a market, forcing them tomaintain minimum capital balances, and to establish abroker community through which buyers and sellers cantrade. A broker can act to balance the risk concerns of theparties in a trade transaction.

VALUE AND BENEFITS

One of the most important aspects of B2B e-commerce isthe considerations that �rms give to investment decisionmaking about the related Internet technologies, and themanner in which they understand business value and ROI(Kauffman and Walden 2001). The key issues involve how�rms can leverage B2B e-commerce solutions, such as opene-procurement systems or B2B e-markets, to improve �rmperformance and generate business value. Organizationsadopt B2B e-markets and e-procurement systems as �rminfrastructure to improve inter�rm transactions. However,the investment levels that are required are very large (com-pared to business-to-consumer Websites, for example),and the bene�ts are uncertain. We asked the interviewees tocomment on the investment incentives and the nature of

decision making in deploying B2B e-commerce solutions.In particular, what are the key things that market operatorsand industry participants need to get ‘right’ for industry-focused B2B e-marketplaces to be successfully implementedand to create value for their participants?

Lynne Markus: Different B2B e-commerce applicationswill have different bene�ts for �rms that invest in them.For electronic markets, for example, there are two parts ofthe bene�ts: the business part and the technology part. Onthe business side, B2B e-markets enable �rms to �nd newsuppliers, and they tend to drive down product prices. Onthe technology side, e-markets provide external IT services,and valuable IT skills and expertise that will drive theadoption of B2B e-commerce. I personally think that thelatter weigh more than the former. In fact, based onthe previous research and industry experiences, we knowthat �rms do not want to drive their suppliers out ofbusiness by forcing them to lower their prices too much.

Michael Shaw: First, B2B e-commerce systems provideeconomic value. Second, one can also argue that they pro-vide value to process re-engineering. And third, theyprovide value by enabling senior managers to think aboutways of doing things in a completely different way onthe organizational level. As a result, the key issue here is toprovide a methodology for measuring business value.

Jean Kinsey: Firms believe they can increase ROI onB2B e-commerce investments by taking costs out ofthe distribution channel. They can increase the ef�ciency ofdistribution channels by providing suppliers with salesinformation from the stores. Ideally, a good B2B e-commerce system will transmit data on items sold, whichare collected by the scanning system, almost directly to thesupplier. The supplier then can determine the schedule bywhich the �rm should be replenishing or replacing itsproducts on the retail shelf. As a result, there is an attemptto build a just-in-time delivery system. Through thearrangement of just-in-time delivery, both retailers andsuppliers are able to reduce inventory costs because thecomputer systems linking the two sides enable timelyinformation exchange and reduce the need for highinventory levels.

Andrew Loder: E-commerce solutions have to presenttangible value with a concrete ROI, either by increasing therevenue or decreasing the costs for a user. Increasinglyparticipants are looking at the full, hard and soft costs ofimplementing solutions, including costs associated withlicenses and fees, integration, implementation and training.The higher the cost of a solution, the more concrete theROI has to be. And in today’s market environment,the payback horizon on that investment has shortenedconsiderably, in many cases to under a year.

Kevin Lynch: Collaborative B2B networks have signi�-cant value for their participants. One is better predictabilityand reliability in providing services. In the case of logistics,think about a truck driver who is able to run on scheduledroutes at a relatively regular basis because the collaborationamong carriers and shippers makes his running schedule

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more regular. So he has a better idea of the traf�c patternson the route and is able to deliver the goods more ef�-ciently. The shipper also bene�ts because now she is in asituation where the service reliability, from an on-timedelivery standpoint, might go from 96% to 99%. Forcarriers, in addition to the improved service quality, theincreased regularity in scheduling tours also helps relievedriver retention problems. Nistevo’s (www.nistevo.com)collaborative logistics network enhances the forward ordemand visibility for the carriers by letting them receivetimely information from shippers. This helps the carriersto position their assets better. This way, we are actuallyincreasing the carrier’s margin, but at the same timereducing the overall cost of transportation because we havetaken out the inef�ciency and are splitting the bene�tsbetween the shipper and the carrier. This is a pure gain-sharing model, and you need to have something like thisin place to make B2B e-commerce work well on behalf ofall the participants.

Joel Ronning: Asking ‘How can we maximize ROI forinvestments in e-business infrastructures?’ is a very timelyquestion. That is because virtually every client with whichmy company, Digital River, talks does an ROI evaluation.There are several components to ROI in the B2B e-commerce context that we serve. One is the dollar level ofinvestment that is made by the company, and the others,on the back-end, are the level of margin that develops andthe savings enabled by the project.

The �rst thing that we ask a client like Fujitsu, Siemens,Symantec, 3M, Polaris or Nabisco to do is to de�ne whattheir goals are for the initiative. What are the revenues orsavings that managers expect the project to deliver? Ourstrategy is to set up an achievable goal on the back-endin terms of revenue or cost savings, and then from thatwe help the client decide on the appropriate scope of theproject on the front-end. Matching the expenses on thefront-end to the output on the back-end: that’s the key tothe ROI. You need to test the goals you set against otherinvestors and companies that have experience with atechnology or a business process. Once you have testedthat, then you do what you can to make sure that youde�ne the scope of the initial project so that it does notoverwhelm the ultimate back-end value of the project.

MANAGERIAL STRATEGIES

Prior research and practice have shown that IT often hasimpacts on organizational structures, business processes,industrial structures and so on, many of which areunanticipated. This has been no different in the area of B2Be-commerce, and, as a result, �rms are forced to explorenew management strategies that they did not expect eventwo years ago. For example, one way that the industryoperating B2B markets can reach critical mass is to getliquidity commitments from the founding companies andpartners, so that they can assure a certain transaction

volume to get the market jump-started. (Covisint againprovides a good leading example.) Another example isfound in the guest editors’ recent research on the businessmodels of B2B e-markets. We note that, in addition to thecore market functions that initially drove this area of tech-nological innovation, there is now much greater emphasisplaced upon consulting services for business processredesign, efforts to sponsor technical standards, help withinter�rm coordination, and technological adaptability andsystems integration (Dai and Kauffman 2002). Anotherimportant aspect, as we will shortly see from our interviewrespondents, is how the general industry structure is beingre-oriented around private trading networks and publicelectronic markets. We begin with a consideration of theplanning process for B2B e-commerce and what it takesto launch successful technological solutions in this arena,including B2B procurement exchanges.

Ray Hackney: The main issue related to strategicplanning in B2B e-commerce is the formulation ofa strategic approach for e-commerce adoption and e-commerce deployment. This strategy should be context-speci�c. As a result, B2B e-commerce deploymentessentially needs to be focused towards speci�c objectives –the strategic mission – of the organization. The speci�cfocus in strategic planning for B2B is the notion of inno-vation value and the �nancial return that the technologyis providing in relation to the customer interface. Thisinvolves trying to identify the core value proposition.With B2B e-commerce technology investments, the focusof valuation should be to move away from technologicalsophistication within B2B systems’ deployment, and moretowards making certain that the objective of marketsegmentation and segment returns are achieved.

Eric Clemons: To launch an exchange, you need the lawof large numbers working for you: you need lots of buyers,lots of sellers, and more or less statistically predictabledemands. The �rst thing that the exchanges should do is tomake sure that they are targeting a product or service, and amarket to which an exchange makes sense. For instance, thebuying and selling of fresh �sh demands an exchange ratherthan bilateral channel coordination agreements betweenbuyers and sellers. You cannot produce fresh high qualitydeep-sea �sh like sashimi grade toro tuna to meet a buyer’sschedule. You cannot harvest a large quantity of sashimigrade hamachi or uni in advance and save it until demandmaterializes. You will always need to match current suppliesand current demands, using the pricing mechanisms of anexchange to perform price discovery and achieve allocativeef�ciency. For this reason we have always had local marketsfor fresh �sh, in Tokyo, New York, San Francsico and anylarge city with a �shing �eet. Perhaps for those products forwhich the value of the �sh justi�es air shipment, linkedglobal sashimi markets may some day emerge, but for thesegame �sh bilateral contracts do not appear likely.

There probably will be an exchange for overstockedor out-of-date computers because you never know whatthey are going to be worth. So there are still opportunities

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for exchanges, but the market for fresh �sh and the marketfor obsolete Pentium II machines are very small: muchsmaller, in fact, than the markets that Vertical Net(www.verticalnet.com) has for pulp and paper, or aerospaceparts, for example. The second thing to remember is that itis extremely dif�cult to compete with an exchange thatalready exists. We already have signi�cant evidence that sayscompeting with a liquid exchange is extremely dif�cult, sothat means you need to �nd a market for which there is notalready a successful exchange. Only then, will there bemuch chance to create value in the marketplace.

The main function of exchanges is to enable price dis-covery and this is most ef�cient when there are a largenumber of buyers and sellers in the marketplace. However,for many B2B transactions prices are transparent and soprices are not the key issue. Other issues, such as timelydelivery, quality and supplier reliability are the main con-cerns. In these cases, explicit channel coordination is moredesirable than price discovery, and �rms tend to enter intobilateral buying and selling rather than transacting withmultiple parties. The fundamental issue here is to be able totell when you will need exchanges and when you will needexplicit channel coordination.

Chris Westland: Market exchanges work best whenthe items traded are homogeneous : all items have the sameidentical speci�cation. They also function well whenstandard settlement and delivery terms apply, and creditrisk and quality control are non-issues. When multipleparameters other than price need to be negotiated, or wheneach party to a trade needs to assess the creditworthiness orthe ability to ful�l a contract by another �rm, then theanonymous exchange system becomes impractical andthe ability to ‘auto-match’ buyers and sellers breaks down.Typically, direct negotiations will then take place, and theparties involved will regard the result as a commercialsecret. It is also the case that the large consumers and dis-tributors of products, such as steel and paper, will alreadyhave steady relationships with existing suppliers. Thesesuppliers will be ‘pre-quali�ed’ in some sense. So, therefore,if a buyer wants to invite tenders from these familiarbusiness partners, they can send out e-mails themselves, orset up their own tendering Website (as have a numberof the big auto �rms), and invite bids from suppliers. Theyare unlikely to go to an exchange and pay someone else todo it.

Andrew Loder: There are many strategies for success,and not every approach is applicable. These are a fewstrategies we’ve seen succeed:

� Break ‘the chicken and the egg’. The example is GlobalSteel Exchange (www.gsx.com), which has a signi�canttransaction volume, enabling it to survive the recentslump in e-commerce when many B2B electronicmarkets folded. (See Figure 2.)

� Consider and address the full transaction. Too often,solutions don’t address the full activity, and the result isthat the product or service is not useful in the absence of

other components. For example, when Cargill shipsgrains from one port to another, managing the voyageafter a vessel has been chartered is as important as thetransaction to charter the vessel. An example is Level-Seas.com (www.levelseas.com), a complete voyagemanagement solution that provides pre-transactionand post-transaction capabilities to participants.

� As industry adoption and usage grows, pursue additionalchannels of revenue that uniquely leverage the informa-tion and the customer base. For example, market analysesor correlated services from related partners can beuniquely offered to participants.

� Drive adoption with a solid plan to get participantsto implement. You have to have a plan in place that isgoing to accelerate adoption. Investors need to obtainincentives to implement and then to keep using themarket. A plan is needed to get people to use it.

Joel Ronning: To successfully implement e-businessinitiatives, absolutely ‘Number One’ is appropriate goal-setting and expectation-setting. Most of the projects thatfail end up that way because the goals are not clear, theoutcome is uncertain and is not clearly communicated, andit is not suf�ciently bought into by senior management.By the way, this process has to include identifying theproper mix of political and economical objectives. Then,there is ‘scope creep’. To make B2B e-commerce projectsreally come together you have to be very adamant aboutnot letting the scope expand beyond the agreed uponparameters because that will destroy the project. Thatrequires a tremendous amount of discipline, because every-body has an opinion on what the opportunity is and onways of doing it. Keep in mind that, because nobody has alot of experience, everybody is an expert.

Kevin Lynch: Another important managerial consider-ation is the application contexts for public trading networksand private trading networks. The key here is that peoplewill put non-strategic intellectual property in a publictrading exchange in order to gain whatever value is createdby that public exchange. For example, a manufacturer maywant to normalize its packaging SKUs through a publicexchange, since this is not strategic and the exchange hasalready done the standardization. The standardizationhas economical bene�ts to participants in the network. Themanufacturer bene�ts from a public domain source ofstandards, and that is something that it will participatein because its competitors are going to participate andenjoy increasing returns. If it does not join, it is actually ata disadvantage, and if it does join, the advantage for both isequalized.

In contrast, �rms are going to take strategic intellectualproperty – be they business processes or strategic suppliers –to private exchanges. For instance, a manufacturer has�gured out that a certain chemical provider can give yourproduct a strategic bene�t over your competitors. The lastthing the �rm wants to do is to let its competitors knowabout its relationships with the supplier. This is where

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Source: www.gsx.com, 22 October 2001

Figure 2. GSX, the Global Steel Exchange: A B2B E-Market Survivor

private networks play an important role. Private networksare formed around individual �rms’ intellectual propertyand supplier base, protecting critical business relation-ships. In our network, we’ve created a foundation wherecustomers can go in and speci�cally de�ne the relation-ships they have with particular players and change themdynamically. In our network, �rms are able to keep strategicintellectual property from competitors but at the same timecollaborate with them by sharing non-strategic informa-tion. In addition, we have used Federal Trade Commission-approved techniques to keep away from collusion. And wehave created what we call a ‘Community Non-DisclosureAgreement’ to make sure that none of the price informa-tion �ows back and forth between our buyers and suppliers.

REGIONAL AND GLOBAL ASPECTS OF B2BE-COMMERCE

There is no question that the issues that arise aroundthe diffusion of B2B e-commerce have taken on a globalscope, even though there are probably regional differencesin the intensity of technology investments, evidence ofcorporate commitments, the extent of governmentsponsorship and the potential for value that exists. Ourrespondents provide insights on the impact of B2B e-

commerce in international business. They also offer com-ments about regional opportunities, especially related tothe European Union and to Hong Kong. The latter, as aglobal trade centre, has been a leader in adopting IT amongAsian countries.

Stefan Klein: As a whole, B2B e-commerce is a globalphenomenon. It does not have many aspects that arespeci�c to business practices in Europe because companiesare trying to expand their activities worldwide. However,in some cases, European B2B software solution vendorsappear to be preferred by �rms in European countries. Forexample, �rms often prefer to choose products from SAP,which holds a dominant market share in Europe. CIOsfeel more con�dent if they go for the leader and SAP hasshown a profound understanding of business needs withincompanies as well as across industries. In addition, thereare numerous discussions about regulatory issues, suchas taxation, anti-trust or patent issues, where Europeantraditions and positions might con�ict with those of theUS. The challenge is to �nd a solution that is acceptablein different regulatory environments and to create a levelplaying �eld. Moreover, there are governmental efforts topromote B2B e-commerce adoption, best symbolized inthe European Union’s ‘eEurope Initiative’. The EuropeanUnion countries invest a lot of money to facilitate the dif-fusion of B2B e-commerce, mainly on the technology

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development and the technology acceptance aspects.Global issues are complemented by regional or local issues:B2B is also viewed as having the capacity to facilitateregional commerce development and companies areexploring these opportunities, getting together and discuss-ing opportunities for some kind of innovation partnerships.

Lynne Markus: It is also interesting to observe someof the developments related to B2B e-commerce in EastAsia. There are two speci�c characteristics of Hong Kongbusinesses that in�uence B2B e-commerce practices inHong Kong (Markus et al. 2002). First, business establish-ments are very small. These �rms have low levels of ITsophistication, and only a small amount of availableresources for implementing B2B e-commerce solutions.As a result, the level of adoption of B2B e-commerce islow in Hong Kong. Second, in Hong Kong the level ofsystematization of information and knowledge is low.Most information and knowledge is stored in the heads ofowners. These people are often unwilling to put theirknowledge into computer systems. In addition, companieshave less trust in employees and in business partners, andthis also hinders the use of IT in conducting business withother companies.

As a result, B2B e-commerce in Hong Kong is still inits infancy. Most �rms are sceptical about the functions

and bene�ts of B2B electronic markets. So if they do adoptB2B e-commerce solutions, it is for one or two purposes.One is to �nd out how the B2B electronic markets or B2Be-commerce solutions work, and what are the advantagesand disadvantages of these solutions. The other purposeis to search for more information about suppliers andproducts through these online markets. But purchasingtransactions are still done by phone, and it will take a whilebefore we see much change occurring.

Chris Westland: Developments related to B2B e-commerce in Hong Kong and China have been interestingto observe (Westland and Clark 1999). Hong Kong’s B2Be-markets have displayed mixed results, but there are someinteresting examples that I think are worth noting. Oneexample of success is the B2B market operated by the largetrading company, Li & Fung Limited (www.lifung.com),a traditional intermediary in the import–export business.Li & Fung has been a major global player in textiles,for example, and is arguably one of Hong Kong’s mostsuccessful companies. Over the past four years, this com-pany has aggressively invested in technology to streamlineits supply-chain management functions. At the core ofthis restructuring is a sophisticated B2B e-market thatincorporates and plays to Li & Fung’s strength in theregion. (See Figure 3.)

Source: www.lifung.com, 20 October 2001

Figure 3. Supply-Chain Management Services from Li & Fung Limited in Hong Kong

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Another new digital intermediary is Alibaba.com(www.alibaba.com), which has about 150 employees, and isan example of a marketplace that emphasizes support forexploring potential counter-parties for trade. This B2Bmarket seeks to link commercial buyers and sellers in 27primary categories, covering the gamut of product areasthat we see in international trade in Asia. The companyhas about 190,000 listed producers throughout Asia, andprovides a listing and e-mail-based transaction service.Alibaba expects ultimately to generate revenue throughtransaction fees, membership fees and advertising revenue.(See Figure 4.)

My third example is an ‘impersonator’ among B2Belectronic markets, but worthwhile to comment on none-theless. It is iSteelAsia.com (www.isteelasia.com) (seeFigure 5). The core concept behind iSteelAsia is a glori�ede-mail system for trading steel. When a buyer wants goods,she can post her requirements through forms on the site.The site then forwards the requirements to all suppliers bye-mail, and they can send back quotes on an anonymousbasis. When quotes are accepted, identities are revealedand the trade is then �nalized. In practice there mustbe numerous parameters – other than price and volume –to be negotiated, and so I remain sceptical that B2Bexchanges of this nature can take a meaningful share ofworld trade. They fail to solve some of the key businessprocess issues.

FUTURE TRENDS AND RESEARCH DIRECTIONS

What lies ahead for B2B e-commerce technology solutionsin supply-chain management? Now that we have consideredthe spectrum of issues related to B2B e-commerce, we con-clude our discussion with the experts with their readings onthe ‘next wave’ in the evolution of B2B e-markets. We alsoprobed what advice they have to offer to other universityresearchers about the key issues that should be on theiragendas for contributing to what we know about B2Be-commerce. They also considered the extent to whicheconomic theory offers relevant theoretical perspectives foradvancing managerial knowledge and for improving ourunderstanding of B2B e-markets, and offer the followingclosing thoughts.

Lynne Markus: It is still early to say how B2B e-commerce will develop. But we see that B2B e-marketswill play an important role as system providers that offer ITservices and skills. Once the adoption of B2B e-commercetakes off, we will come to see changes in industrial struc-tures in the future, although it is early to foresee the exactchanges that will occur.

Chris Westland: I see a number of developments onthe horizon. First, expect B2B markets to consolidate untilthere are only one or two markets for any particularproduct inventory or service market. Second, expect thelargest B2B market players to be major market participants

Source: www.alibaba.com/bin/marketplace/china, 21 October 2001

Figure 4. Alibaba.com’s Regional Procurement Marketplace for China

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Source: www.isteelasia.com, 21 October 2001

Figure 5. iSteelAsia.com, an Email Messaging-Based Procurement Network

(either as vendor or producer, or as a customer) relative tothe products sold in that B2B market. I call these producer-owned markets. Third, expect an increase in governmentregulation, because the synergies in the second trendwill concentrate power in the hands of just a few large pro-ducers, who then will be able to pro�t at multiple points inthe value chain. Finally, with the accounting profession’srecent move to insert ‘fair value’ accounting into GAAP(the Generally Accepted Accounting Principles), expect agrowing business of the primary B2B market in a productsector to be the sale of ‘fair’ market prices, and ‘price-setting’ for other B2B markets and sales off-market. This issimilar to what we already see with the New York StockExchange setting trade prices for after hours trading, foronline brokers and for regional exchanges in securities.

Barrie Nault: An important role for B2B e-markets isas intermediaries for information sharing among multipleplayers in a common business process. An example is that oftransportation agencies at different locations that worktogether to streamline shipping processes via a collaborativeB2B e-market. We will see similar phenomena as we saw inthe development of IOSs and electronic data interchangesystems. Like those, B2B e-markets will become moreindustry-speci�c. That is, B2B e-markets will be morefocused on industry-speci�c processes because the ways ofdoing business have been speci�c to particular industries fora long time.

Due to positive network externalities, electronic marketsare a natural monopoly. The automotive e-market Covisintthat Peter Weill mentioned earlier in this article is primarilyrun by big United States automobile manufacturers,although other manufacturers are joining in. It’s a goodexample of a setting that tends toward a natural monopoly.In transportation, we may see e-markets that specialize inocean, motor carrier (road) and rail transportation. We mayalso see specialized markets by location and by country, forexample. With dynamic pricing and reductions in productlife cycles – both of which increase market uncertainties –we will see a shift from long-term contracts to contingentlong-term contracts where the contingencies are designedto accommodate the market uncertainties.

Peter Weill: Even though we are still in the early days ofB2B e-commerce, if we take a look at the potential impacton organization structures, I think it will de�nitely increaseoutsourcing. B2B e-commerce will reduce company size:in other words, revenue per employee will go up, but wewill ‘skinny down’ companies so that there is a greaterfocus on core competencies. Because much of this activitywill occur outside the company – the B2B e-commerceactivity – we will have to see a reengineering of processesand also greater reliance on straight-through processing.So, once these processes are automated, and decision rulesare built into the processes, we should begin to see changesoccur.

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Finally, there is likely to be change in industrial struc-tures. I don’t know exactly what is going to happen tothem. But we should see a move to a world where we havevirtual value chains that will be accessed by multiple playersin the industry, as well as a physical value chain.

There may even be consolidation of information inindustry as B2B e-commerce systems integrators coordinatethe activities of the value chain and begin to exert somenew control of information. Cisco and General Motors, andother large organizations are moving towards that model,for example. They will continue to own the relationship withthe customer, and they will have electronic connections toall of the partners they have in the value chain. But they willnot own many of the assets. Instead, they will outsourcethese assets to exchanges and other forms of market trans-action models. Thus, there is the long-term potential for sig-ni�cant changes to the industrial structure in many sectors.

Omar El Sawy: There is a de�nite trend towards col-laborative types of transaction and supply chain coordi-nation arrangements in B2B e-commerce – even when B2Bexchanges are involved. The process view works very wellhere too because, even when an enterprise’s transactionspass through a B2B exchange, what you are really doing isleveraging the business process and reducing its entropyby enabling it to be more ef�cient, as well as energizingand enhancing it through additional services and broaderopportunities. You end up with more possibilities forobtaining value by going through that intermediary. So,the future will see much more collaboration, much moreemphasis on information and knowledge exchange, andmuch more emphasis on business relationships that gobeyond transactions. Future research should track andattempt to explain and guide these developments.

Kevin Lynch: For both collaborative logistics andcollaborative supply-chain management, technology isonly a part of the equation. You need to be able to buildbusiness processes that make sense for an organization.For collaborative models to work, you need to give theindividual �rms the ability to execute their businessprocesses with complete freedom, but bene�t througha network that makes collaboration: easy to do; easy tomeasure the bene�ts of; and, seamlessly integrated withother business processes both in the four walls of a businessand across business partners’ technical infrastructures.

What we have done at Nistevo is attack network ormarket costs rather than individual corporate costs. The jobof a network is to uniquely identify inef�ciencies that areshared by the community and illuminate them, measurethem, and help de�ne a business process that reduces thecost or increases the ef�ciency of interaction between the�rms. In public exchanges the approach typically involvessetting standards for communication. In private exchangeslike ours, they are standards where our carriers connectonce for every member on the network, and they are alsobusiness processes for improved asset utilization. The valueof collaboration for our membership is unlocked at thebusiness process level.

The other thing that I see happening purely in logistics isthe sharing of assets beyond trucks. For instance, today,shippers and carriers are collaborating around delivery oftheir product. In the future, they might be co-loadingproducts through shared warehouse space. And the tech-nology does not yet exist to make that happen in a trulyeffective manner. So I think that, in the next �ve to 10years, senior management interest in logistics will focus ona key question: How will we use technology to unlock theef�ciencies of collaboration in logistics networks. This hasbeen the ‘Holy Grail’ of the third-party logistics industryfor the last 10 years – bridging their networks to create morevalue for the customer base. But the real value has yet to �ow.

Joel Ronning: We have seen a new trend gainingstrength over the past year or so. There is a fundamentaland large shift in focus from getting a site up and making itwork as a technology tool, to operating B2B solutions as achannel management product and a means to support truecommunity development. The latter offers a real channel –one that you can develop with recurring buyers and loyalclients. As a result, �rms are now shifting away from theirinitial fascination with the Internet as an emerging tech-nology towards a more meaningful focus on the Internet asa business development opportunity and the dynamics ofthe long-term sustainability of the new business channels itopens up.

Eric Clemons: Two related research areas are promising.One is to �nd a clear way of characterizing when you wantB2B e-commerce to occur through integration and channelcoordination, and when you want B2B e-commerce tooccur through an exchange. A second issue would be to seewhat kinds of B2B channel coordination are now possibleas a result of the Internet.

Jean Kinsey: For future research, it would be usefulto look at individual companies and �nd out how muchsavings or reduction in cost those who have adoptedB2B e-commerce actually have realized. Has it reallymade �rms more productive, more ef�cient? Has it loweredtheir costs of operation? Has it increased their ROI?Has it, in fact, reduced their need for labour, or hasit just changed the type of labour that they hire? Inother words, are they getting rid of low cost labourand having to hire higher cost labour because of their moveto a more technology-intensive approach to supply-chainmanagement?

Senior managers will especially want to know about theshape of the curve of returns to B2B e-commerce. Does itgo up right away? Do you get most of the return in the �rsttwo years and then see it tail off? Or is there a slow-buildingreturn that really does not take off until �ve or even 10years later? And how long does it take to get a positive ROI?This is a separate research question because the popularbelief up until now is that �rms that invest in B2B e-commerce infrastructures will have positive ROIs. We needto nail down some facts in this area.

Another research issue is the effects of compatibility ofcomputer systems among �rms. Incompatible computer

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systems make transaction costs very high, so investmentsthat involve incompatible systems may not, in fact,reduce transaction costs. On the other hand, interoperablesystems enable computer systems on both ends to transmitand interpret each others’ data smoothly, lowering trans-action costs. So, transaction cost theory is probablyone economic theory that would be applicable to theinvestigations.

CONCLUSION

The wide application of B2B e-commerce solutions hasopened new channels for �rms to transact and communi-cate with each other, and has encouraged the emergenceand evolution of a great number of electronic exchangesand �rms that can provide innovative technologyand service support. The rapid development of B2B e-commerce engenders our inquiry about the nature of thisinnovative form of business. In this article, we have pre-sented opinions from more than a dozen people from bothindustry and university sides, addressing several aspects ofB2B e-commerce.

Several of our interviewees have pointed out thatB2B e-commerce applications and electronic markets playdifferent roles in different contexts. For example, althoughexchanges are viable in commodity markets, channelcoordination is preferred where there are a limited numberof suppliers and variable demand. In addition, the hurdlesthat �rms encounter in adopting B2B e-commercesolutions are not always readily surmounted. Even thoughadvanced technologies attract �rms to move to theInternet-based B2B e-commerce solutions with promises ofhigh levels of ROI, still issues of trust, market readiness,investment complementarities and technology standardiza-tion seem to be working in concert to hinder the wideadoption of B2B e-commerce solutions.

The next aspect that we believe will become a signi�cantemphasis in the area of B2B e-commerce practice andresearch is how business processes and supply chains shouldbe managed in the presence of the Internet. Many ofour interviewees share the opinion that integrated businessprocesses and improved visibility along the supply chain areimportant value drivers for implementing B2B e-commercesolutions. Moreover, our interviewees also comment on thevalue that �rms can obtain by adopting B2B e-commercesolutions. Electronic exchanges bene�t adopting �rms byoffering technological skills, network infrastructures andcollaborative solutions to problems shared across a com-munity of �rms in an industrial sector. In addition toidentifying the various issues in the development ofB2B e-commerce, our interviewees also have providedsuggestions on appropriate strategies in deploying thesesolutions. For instance, public trading networks arerecommended for sharing non-strategic information whileprivate trading networks are recommended for sharingstrategic information.

Furthermore, B2B e-commerce is diffusing globally,even though there are some differences in market pene-tration and corporate willingness to invest across differentgeographical regions. This article points to some of theregional features in European Union countries and HongKong that may affect the acceptance of B2B e-commerce.To identify areas for future research, we asked our inter-viewees to comment on the development trends of B2B e-commerce applications and what they saw as the key issuesfor research. One trend that was mentioned is that marketconsolidation leads to natural monopoly where only afew large players will enjoy signi�cant market power. Inaddition, future research must address such questions ashow �rms choose different types of B2B e-commerce appli-cations in different competitive contexts, and how IT solu-tions can be leveraged to enhance inter�rm collaboration.

In summary, our interviews have identi�ed a range ofissues for future B2B e-commerce research, and pointtowards a broad spectrum of economic and organizationalperspectives from which to understand them. Our inter-viewees’ insights enrich our understanding of the variousaspects of B2B e-commerce, and help us to exploresolutions to some of the leading research questions. Inaddition, the issues discussed in this article are rootedin the daily practice of B2B e-commerce �rms and, thus,this article is also able to offer managerial implications tothe many organizations that are currently using or arebeginning to experiment with the technological solutionsassociated with B2B e-commerce.

ACKNOWLEDGEMENTS

We wish to thank the following people for contributingtheir time for the interview process that led to this article:Eric Clemons, University of Pennsylvania, USA; OmarEl Sawy, University of Southern California, USA; RayHackney, BIT Research Centre, Manchester MetropolitanUniversity, UK; Jean Kinsey, The Food Industry Center ofthe University of Minnesota, USA; Stefan Klein, Universityof Münster, Germany; Kevin Lynch, Nistevo, USA;Andrew Loder, Cargill eVentures, Cargill Inc., USA;M. Lynne Markus, City University of Hong Kong, China;Barrie Nault, University of Calgary, Canada; Joel Ronning,Digital River, Inc., USA; Michael Shaw, University ofIllinois, Champaign-Urbana, USA; Peter Weill, Centerfor Information Systems Research of the MassachusettsInstitute of Technology, USA; and Chris Westland, HongKong University of Science and Technology, China. Wealso appreciate the kind assistance of Kim Thompson atthe Carlson School of Management of the Universityof Minnesota, who coordinated the transcription of theinterviews. Finally, we thank Lucia Pavlikova of the staff atElectronic Markets for editorial assistance on this project,and Beat Schmid for encouraging this special issue. Anyerrors or inaccuracies in the contents of this article are thesole responsibility of the authors.

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