There's a vast difference between the hype and the reality when it comes to building online marketplaces, according to attendees at a conference on business-to-business (B2B) applications held in Florida recently.
The Web remains years away from realising its full potential as a corporate business tool, despite all the publicity about supply-chain efficiencies gained by companies that invest in online exchanges and private B2B integration projects, said speakers at the conference.
In fact, most companies embarking on business ventures on the Web are likely to fail, said Shikar Ghosh, president of US-based Internet portal vendor iBelong. Poker games provide better odds of success, Ghosh said.
Moreover, he added, the companies that do realise supply-chain savings by using the Web - Dell Computer, for example - often also see the profit margins of their products shrink. That offsets much of the expense reduction, Ghosh said.
Illustrating the dangers that lurk on the Web, Ravi Kalakota, chairman of Hsupply.com, announced at the conference that the 11-month-old B2B exchange for companies in the hospitality industry had just gone bust.
Hsupply.com, which had 90 employees, had managed to sign up 400 hotels to use its online marketplace. But getting an exchange to function profitably is tricky and expensive, Kalakota said. For example, he noted, Hsupply.com's systems required a large amount of human intervention on the back end to process invoices and orders for customers.
"It got really messy," Kalakota said. Products that are back-ordered, or orders involving multiple suppliers, also were a nightmare for the exchange to deal with, he added. Web-based technology isn't automated enough yet to handle things such as reconciling invoices and orders, a situation that forced Hsupply.com to hire 15 accounting workers to manually handle orders and calculate the relevant taxes.
In many cases, achieving the benefits of B2B applications ceases to be a competitive advantage and simply becomes the cost of doing business for companies.