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
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 2
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
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 3
B2B eCommerce is complex and contract based
B2B supply and distribution chains are international
Buy-side, or procurement focus in this presentation
Context
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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
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 5
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
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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
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 7
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
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 8
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.
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 9
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
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 10
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
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 12
Internet access and infrastructure
IT infrastructure
Payment processing
Security concerns
Competitiveness
‘Red Herrings’
Issues in Global Adoption
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International Timing, by Region
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Worldwide eCommerce Growth
$ Billions
Sources: Forrester Research, Inc.
Copyright ©2001, Ozro Inc. US Patent 6,141,653 Other patents pending 15
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
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