What makes an e-Marketplace different from others?

By Zatni Arbi

Have you ever thought about how many hospitals, clinics, medical centers, community health centers and private clinics there are in Jakarta alone? Or of how many pharmaceutical companies, plus importers and traders of medical equipment and supplies there are? Think of how big the medical supplies business can be: disinfectants, latex gloves, blood collection needles, disposable syringes, rubbing alcohol, cotton swabs, surgical masks, test kits, disposable plastic glasses, transfer pipettes, specimen transport bags, petroleum jelly, you name it. These are goods that will always be needed. We may not have the data, but it is easy to imagine how huge the volumes are.

Suppose you are an Internet entrepreneur and you are thinking of starting an Internet business in Indonesia. Here is an idea of what you can do: Get all the hospitals, clinics, importers and sellers of medical supplies, etc. online and provide them with all the necessary infrastructure and support, including a B2B e- commerce site, so that the buyers and sellers can meet, request quotations, bid, negotiate, place orders, make payments and track orders online, then you'll be building the country's first medical supplies e-Marketplace in Indonesia.

Your medical supplies e-Marketplace will be a boon to both the health institutions and the suppliers. The hospitals can compare prices offered by the suppliers, and the suppliers can compete fairly in offering their products. The buyers review the sellers' capabilities, while the sellers obtain much better exposure in the market. You collect the transaction fees and become rich. Everybody is a winner.

A more common scenario would involve an e-commerce site run by a company that belongs to the same group as one of the hospitals. Today, in the new economic era, courting one's traditional competitors to form a business venture is no longer an alien idea. A bank with an expansive ATM network, for example, may invite its competitors to use the network. By so doing, the ATM owner will be able to maximize utilization of its network infrastructure and share operational costs with the other participating banks. The guest banks also benefit from the arrangement, as they can now extend the reach of their own banking services without having to make humongous investment in their own ATM machines, secured kiosks and ATM infrastructure. Similarly, it would not be strange for a hospital to invite other hospitals to join forces to build a B2B e-commerce. In today's business world, a win-win solution is what counts. Hence the term "coopetition", which combines the words "cooperation" and "competition". A paradox, maybe, but reality nonetheless.

However, when one of the participants controls ownership of the infrastructure, the others may sometimes feel that they are not exactly standing on a level playing field. There may be some features that are available only to the owner, and the others may not even be aware they exist.

What separates e-Marketplaces from ordinary e-commerce sites is exactly that. In an e-Marketplace, such as the SciQuest (www.sciquest.com), the keyword is neutrality. An e-Marketplace is a set of Web-based services offered by a completely neutral party. As IDC puts it, "e-Marketplaces by definition offer advantage to no particular party and should grow because of their open criteria for entry." Thus, a true medical supplies e- Marketplace cannot be set up by a hospital or a medical supplies vendor, it has to be built by a totally independent provider.

Like the "market" in the conventional sense, an e-Marketplace is neutral to everybody that takes part in the activities that go on in there. In a traditional marketplace, for example, buyers can go to any of the stores to buy whatever they need. The stores can sell to any buyer that come to them. It is unlike intercity bus terminals like Pulogadung or Kampung Rambutan, where agents and scalpers drag passengers -- sometimes almost by force -- to certain ticket counters where the bus companies have promised to give them the biggest commission for every passenger they bring in. In an e-Marketplace, there is no agent.

Research firm International Data Corporation (IDC), which is often quoted by IT industry players as the reference for their business directions, believes that e-Marketplaces have been gaining momentum and are ready for takeoff. While this year e- Marketplace accounts for only 7.5 percent of the total B2B e- commerce value, IDC expects that, by 2004, the share of e- Marketplace in B2B e-commerce worldwide will grow rapidly to 56 percent. "E-Marketplaces, the headline grabbing dot-coms of B2B, will eventually take the lead position as a number of them manage to establish themselves as de facto marketplaces in specific industries," says a recent report from this firm.

Let us take a brief look at SciQuest, an e-Marketplace that has been built using IBM's solutions and now lets laboratories and vendors of lab equipment and supplies utilize the site. Any time a lab needs some kind of reagent (chemical, cell biology, molecular biology, etc.), image analysis equipment or microscopes, even used or refurbished lab equipment, it can check the website, enter the marketplace, find what it wants, compare the prices and place orders.

There is added value, as well. The site also provides a library of resources and late-breaking news in the world of lab research. Buyers can also request to be notified if there is a special deal from one of the vendors that may happen to have excess inventory that it would like to get rid off. There is also an auction site, which allows interested buyers to participate in auctions.

GartnerGroup, another IT industry research firm, believes that around 600 e-Marketplaces have emerged in the past year. Other real-world e-Marketplace examples include FreeMarkets (www.freemarkets.com) and SuppliersMarket (www.suppliermarket.com) for industrial goods, as well as GoCargo (www.gocargo.com) and QuoteShip (www.quoteship.com) for logistics services. However, one of the most visible e-Marketplaces was formed when the three automaker giants -- Ford, GM and DaimlerChrysler -- decided to forge an alliance and build a B2B site, with Commerce One and Oracle as the technology partners. The B2B exchange for automotive parts, which is now known as Covisint, unites the three automakers with part suppliers, enabling the three giants to cut down the cost of parts and the procurement process. The site is now being scrutinized, however, for the possibility of having violated the antitrust law. Others, managed by totally independent providers, should have no such problem.

Another way of looking at e-Marketplace is that it is the natural evolution from a one-to-many e-commerce site. From the seller's point of view, it is the next step from being a lone seller selling to many customers -- just like amazon.com -- to a marketplace. From the buyer's point of view, it is also a natural evolution from a one-to-many, e-purchasing type of B2B commerce to many-to-many involving multiple buyers and multiple sellers.

Who are the biggest players in the e-Marketplace arena? Two names come to mind immediately. The first is the one that has just been mentioned, Commerce One, a US$5.6 billion company based in Pleasanton, California. The other is Ariba, a $13 billion company with headquarters in Mountain View, California. The two contenders have been fighting like crazy to get the biggest chunk of the e-Marketplace market. The difference is perhaps the fact that Commerce One strives to build a global trading community involving big names while Ariba aims at customers from the entire range.

What drives these two companies as they try to beat each other to death? As they provide the tools, they get paid for the licenses. In addition, as the service providers, they resemble our toll free operators. They collect a fee for each transaction that passes through their infrastructure. GartnerGroup, another IT research firm, predicts that this year, as much as $403 billion worth of B2B transactions will flow through the e- Marketplaces alone. Clearly the potential return is tremendous, because, like our motorists who take the toll roads to avoid traffic congestion, buyers and sellers choose to transact in the e-Marketplace because of features such as convenience, simplicity and huge cost savings.

Thus, if you're interested in establishing a medical supplies e-Marketplace for Indonesia, you can go to either of these leading e-commerce service providers. Just remember: The keyword is "neutrality".