Conklin

Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 1

Global B2B eCommerce Adoption: The Business Perspective

Presentation to The Information Technologies Group at the Center for International Development

Harvard University by Jeff Conklin

Founder and CEOMay 2, 2001


Context for global B2B eCommerce

What is driving adoption of global B2B eCommerce?

What companies are looking for in B2B eCommerce solutions, and why?

Issues and forecasts for global adoption

Introduction


B2B eCommerce is complex and contract based

B2B supply and distribution chains are international

Buy-side, or procurement focus in this presentation

Context


Logistics

Sell-side Requirements

Sales

Legal

Engineering

Manufacturing

Management

Finance Info

Services

Buy-side Requirements

Procurement

Finance

Logistics

Manufacturing

Engineering

Management

Legal Info

Services

Business RulesInter-enterprise Data

Valid Commerce and Non-RepudiationInternational

Trade Practicesand System

Requirements

Inter-enterprise Requirements

Banking

Contract negotiations and transactions

Financing

Escrow

Factoring

Schedule, Delivery Terms, Returns

Form, Fit, Function, Quality

Credit, Payment Terms

Ts & Cs

Warranties, Schedule, Quality

Service Level Agreements

Complexity of Contract eCommerce

ContractDocument

ContractDocument


Complexity of Procurement Cycle

Key Activities

Forecasting

Operations/

productionplanning

New product design

Supplier identification

RFI, RFP, RFQ

Vendor short list

Vendor selection

Terms negotiation (e.g., BOM, payment, delivery, T&Cs)

Vendor selection

Agreement renewal

Respond to changes

Journaling / archiving

Purchasing / ordering

Order management

Physical delivery / Materials management

Payment processing

Financial settlement

Reconciliation

FulfillmentNegotiationSourcing

(RFx)OperationsPlanning

Vendor Evaluation and Feedback


Market Magnitude

Total - $20 Trillion Contract-Based B2B - $13 Trillion

Contract-based goods commerce represents approximately $13 trillion of business in the US, and $52 trillion globally

- US Goods Commerce ($ Trillions) -

Consumer

B2B Spot Market

($3)

B2B Under Contract

($13)

Indirect Goods

($2)

Direct Goods($11)

Sources: CAPS Procurement Survey Ratios, U.S. Department of Commerce data and Morgan Stanley analysis


Company Spend Analysis

Sources: CAPS Procurement Survey Ratios, Accenture and Ozro Analysis

Communications & Hi Tech Industry Spending Benchmarks

0%

25%

50%

75%

100%

ProcurementSpend

Contract-BasedProcurement

Percent of CompanyRevenues 67%

Contract-Based

18%Spot Buying

85%

59%Direct

67%

8% Indirect


Supply Chain Best Practices

Obtain CompetitivePurchase Price

Reduce Total Cost of Ownership

Improve Supplier Performance

Motivate Early Supplier Involvement

2

3

4

Tactical Solution Strategic Solution

(1 time, per event )1

What Companies Want

1st Generation, Reverse

Auction

2nd Generation,Effective

Negotiation

VS.


Continuous Improvement

Continuous

Improvement

• Inform Multiple Business Processes of Key Terms

• Coordinate Internal Groups

• Manage External Partners

Monitor/Report on:

• Vendor Activity

• Organizational Activity

• Vendor/Customer Performance & Feedback

• Compliance Reporting

• Negotiate Lowest Total Cost Terms

• Respond to Changes

• Re-negotiate or Renew Agreements

Inform

Negotiate

Monitor

eCommerce Virtuous Circle


Companies spend 5% of revenues managing contracts

eCommerce software can cut this to 1% - 2.5%

eCommerce software can also reduce total purchase costs as much as 30%, and sourcing cycle times 50%

Direct materials savings flow through COGS; even small savings create significant impact on profitability

Why

Sources: Goldman Sachs estimates and Ozro Analysis


Significant Savings


Internet access and infrastructure

IT infrastructure

Payment processing

Security concerns

Competitiveness

‘Red Herrings’

Issues in Global Adoption


International Timing, by Region


Worldwide eCommerce Growth

$ Billions

Sources: Forrester Research, Inc.


Countries that have invested in competitiveness will lead global adoption 86% of Singapore’s exports sold to computing and

electronics industry/US supply chainseCommerce hyper growth in 2002

.3% of Turkey’s exports tied to US supply chainseCommerce ramps in 2006

‘Red Herrings’ stall supporting policiesTax collectionCustomsSecurityFinancial controls

Money talks in B2B…

Summary

Conklin

Business

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