The Path Supply Chain Industry Making whitepaperwritten by: 1.0 3.0 4.0 Forward 2.0 Innovations Perspectives It Happen Christopher Sprague Bret Kinsella Andersen Consulting http://sprague.ASCET.com B2B E-Commerce Comes of Age and Drives Shareholder Value

The refrain is now common. Business-to-business (B2B) e-commerce is exploding. Trillion-dollar market estimates by 2003 and 90% compound annual growth rates are causing the bright spotlight that used to shine on business-to-consumer (B2C) companies to shift to B2B opportunities. Three years ago the story was AOL and Yahoo. Two years ago, it was Amazon. Last year it was eToys and eBay. This year it is Ariba, Chemdex, Commerce One, and VerticalNet that have broken through the mindshare clutter. While the B2C milestones have helped define technology standards, trans- action capabilities, buying experiences and business models, we believe that B2B e-commerce will be the vehicle that truly delivers on the promise of the Internet.

Awakening of the B2B Economy, which are focused on solving supply Christopher Sprague is an associate Slumbering Giant? chain and fulfillment complexity, are only now partner in the Andersen Consulting The emergence of B2B e-commerce is similar in emerging. Supply Chain Practice. He is a leader magnitude to the industrial revolution that So what? What’s in it for me? Plenty. spawned new manufacturing methods, distribu- Electronic commerce presents opportunities to in the development of e-commerce tion channels, and buyer-supplier relationships. increase revenues and decrease supply chain and strategies that focus on using Similarly, B2B e-commerce represents another customer relationship costs, translating into procurement to deliver operational and revolution that is fundamentally reshaping busi- higher margins that deliver higher shareholder strategic benefits. He has recently ness relationships and is causing dramatic shifts value – key drivers of the CEO agenda. For in channel power as information and communi- visionary entrepreneurs, e-commerce presents assumed leadership responsibility for cation imbalances disappear. Moreover, just as an opportunity to create new businesses, new Andersen Consulting’s e-procurement B2C e-commerce empowered consumers and industries, and enormous value for their market offering. several nimble retailers with more commerce investors and customers. options and lower costs, B2B e-commerce is In our conversations with executives and Bret Kinsella is a manager in the presenting buyers and suppliers with com- entrepreneurs we cover a common set of ques- Andersen Consulting strategy pelling value propositions to both lower trans- tions. What does the e-commerce solution and competency.His work focuses on action costs and increase the value captured in competitive landscape look like today? What business relationships. These value propositions trends are driving e-commerce adoption and strategiesy for building new are opening the door to a new set of players that marketplace evolution? How can I leverage the e-commerce marketplaces. Mr. focus on facilitating buyer and supplier adop- Internet and e-commerce opportunities to cre- Kinsella’s professional experience tion of e-commerce capabilities. ate value? This article explains how the diverse, includes e-commerce strategy,business To be clear, businesses are in the very early competitive, and complex landscape is being stages of e-commerce adoption. The underlying driven by the rate of buyer and supplier adop- plan development, market and customer technology is still being refined. Businesses tion of e-commerce practices in different sec- segmentation, alliance building, predicated on new models are being introduced tors. Moreover, we discuss the paths, pitfalls, and procurement solutions, and project daily, hoping to deliver innovative value propo- benefits associated with embracing e-commerce management. sitions. Companies such as Celarix and Electron opportunities.

http://sprague.ASCET.com 1 whitepaper The Path Supply Chain Industry Making 1.0 3.0 4.0 Forward 2.0 Innovations Perspectives It Happen

Section I – A Snapshot pliers. This translates directly into better meet buyer needs. Electronic procurement of B2B E-Commerce in the commodity pricing and lower transaction software packages were developed by com- New Millennium costs. Additionally, new channel intermedi- panies such as Ariba and Commerce One to aries are providing buyers large and small create process, demand management, B2B E-Commerce Today – with access to these value propositions as information, and transaction efficiencies New Economics well as providing significant value to sup- for large buying organizations. British and New Channel Powers pliers such as increased access to qualified Telecom, CIBC, Citigroup, Chevron, Since the advent of the Industrial customers, lower transaction, and cus- Eastman Chemical, FedEx, and Revolution, one paradigm has reigned tomer service costs. The result of these Transamerica are a few of the Fortune 500 supreme in business-to-business com- changes? Channel power is shifting to companies with the resources and buying merce – supplier power. In recent years, Internet-enabled buyers and the new inter- power to deploy enterprise-level e-pro- some very large corporate buyers such as mediaries, B2B marketplaces. curement systems. While implementation AT&T, Compaq, and General Motors rec- of these systems combined with the ognized that their buying volume granted E-Commerce Value Propositions Are required process and organizational them certain channel powers that allowed Spreading Rapidly – First Suppliers, then changes can often cost millions of dollars, them to dictate pricing and service levels Buyers, then B2B Marketplaces these changes can translate into consider- for some commodities. However, strategic able benefits. And despite initial concerns, sourcing luxuries are reserved for only the Supplier-Centric Developments suppliers found that they to were able to largest buyers and only for a limited num- First suppliers published information on achieve broad benefits as well by conduct- ber of commodities.The time and expense the Web. A simple value proposition: pub- ing business online. These benefits includ- associated with gathering expenditure lish brochure-ware on the Internet and ed: lowers sales costs combined with data, negotiating new pricing with suppli- make it easier for customers and potential broader reach, accurate electronic orders, ers, and then managing contracts have customers to access and less expensive to better customer service, the potential to been undertaken by many large corpora- update. Then suppliers such as W.W. plan production around demand, and tions only to find that the benefits don’t Grainger, the nation’s leading business-to- more. stick. Although they may have negotiated business distributor of maintenance, repair, lower prices, the true benefits can be elu- and operating supplies and related informa- B2B Marketplace Developments sive if they are unable to deliver the enter- tion, recognized an opportunity to expand B2B marketplaces are the frontier that prise’s demand. sales volume by providing transaction capa- promises to extend buyer benefits beyond The Internet is inverting the econom- bilities on their Web site. About the same the Fortune 500 and offer new value ics of procurement. Electronic commerce time, companies such as Dell and Cisco propositions to Fortune 500 buyers.These technologies are not only extending tradi- turned to e-commerce to reduce sales and new supply chain or channel intermedi- tional value propositions to new classes of service support costs by transferring sales to aries are also positioned to provide bene- buyers and suppliers, they are also pre- the Web and away from costly call centers fits to suppliers, large and small. Smaller senting entirely new value propositions. and field sales representatives. Other suppli- buyers benefit from lower published pric- Buyers have access to more information, ers, such as Ingram Micro, a wholesale dis- ing and product search costs. Buyers of all buying tools, and electronic access to sup- tributor of computer-based technology sizes are benefiting from better pricing by products and services, adopted electronic employing reverse auction tools and elec- auctions to achieve better excess inventory tronic requests-for-quotes facilitated by W2 Weblink disposition pricing. As in the past, benefits such companies as BizBuyer, Commerce accrued to the suppliers. However, as more One, and Moai.These solutions allow buy- For more on channel inventory, see: suppliers came online, pricing differences ers to access far more suppliers than ever wayman.ASCET.com became easier for buyers to access due to before and use e-commerce tools, data, bruce.ASCET.com lower search costs. With this buying came and strategic sourcing to rationalize their anthony.ASCET.com the often tedious need to surf multiple sup- supplier base. Suppliers win also by gain- For more on revenues, see: plier Web sites to compare pricing, service ing access to new classes of buyers and are peters.ASCET.com level, and quality, and it presented new experiencing lower transaction costs For more on customer relationships: challenges in controlling off-contract buy- through intermediaries such as srivastava.ASCET.com ing. Could there be a better way? Chemconnect and PlasticsNet. For more on shareholder value, see: With that said, B2B e-commerce is in srivastava.ASCET.com Buyer-Centric Developments its infancy. Channel power struggles are These activities were closely followed by the uncertain. Will buyers win? Will new availability of Web-enabled tools designed to intermediaries dominate or fail? Will sup-

2 Achieving Supply Chain Excellence Through Technology ment application software. Ford’s AutoXchange is competing head-on with B2B e-procurement projections may reach 9% of all business sales in 2003 General Motor’s TradeXchange to create Revenue electronic trading markets in the automo- ($ billion) $1,400 tive industry. Chemdex and SciQuest are 5-Year CAGR 1330.8 (1998-2003) battling to attract a critical mass of $1,200 Forrester Group (U.S. only) 99% researchers in the life sciences arena. $1,000 IDC Corporation 92% 974.8 Keenan Vision 97% 842.7 Metalsite and eSteel are battling in the $800 730.6 metals segment.And while this is going on $600 499.0 528.2 in the United States, similar competition is 422.9 $400 emerging in other parts of the world, such 270.7 251.1 228.3 $200 as Ariba and Telefonica teaming up against 109.3 188.3139.4 56.9 64.6 24.5 27.2 43.1 $0 Commerce One and Banacci to create Latin 1998 1999 2000 2001 2002 2003 American e-commerce marketplaces. Year Sources: Forrester Research Group, November 1998 International Data Corporation, June 1999 Traditional Scenario – Suppliers and The Yankee Group, March 1999 Large Buyers Win Figure 1.0 B2B growth projections The lower left quadrant represents every- thing that you would expect of the pre- Internet and pre-e-commerce era. It is a pliers reassert their power? Moreover, the Consulting believes will determine the rate world of paper-based solutions and sup- ability to scale buying activity and supplier at which we arrive at the trillion-dollar plier-dictated pricing. Because of their cost connectivity, and navigate the myriad ful- e-commerce world are: and complexity, EDI connections that rely fillment challenges is still unproven.Where on proprietary networks are suitable for will buyers congregate? Will integration • Buyer B2B adoption rate: the extent to only the largest corporations and general- with suppliers ever allow widespread or which buying organizations are able to ly are reserved for key production true real-time price, inventory, and order- migrate from paper-based or EDI plat- resources. Relationships here are frag- tracking capabilities? Will B2B companies forms to automate B2B transactions mented, and there is considerable infor- succeed in fulfillment where B2C compa- using e-commerce enablers and new mational disparity between buyers and nies to date have come up short? market mechanisms. suppliers. In general, suppliers have an • Supplier B2B adoption rate: the extent to information advantage and, therefore, Section II – B2B which manufacturers, distributors, and channel power. Only very large buyers E-Commerce Moving other intermediaries are able to use such as Fortune 500 companies can set Forward enabling technologies and new business their own prices and then only for a small models to deliver new value to their cus- subset of commodities. For the balance of Which Catalysts are Defining tomers and themselves. commodities, Fortune 500 and most other the Evolution of E-Commerce? buyers are price takers – that is, suppliers Executives, entrepreneurs, and venture cap- Taken together, these two factors identify control the price and service umbrellas for italists are all placing bets on how the mar- the four market scenarios in which orga- products and services. ket will evolve and who will be on the nizations currently are transacting and winning end of the channel struggles. To could transact. Four marketplace scenarios Supplier-Centric Scenario: Early Inroads answer these questions and others, define how buying and selling organiza- in B2B E-Commerce Andersen Consulting has developed a sce- tions will transact in B2B e-commerce: tra- As the Internet became commercially nario planning framework around tradi- ditional, supplier-centric, buyer-centric, viable, the first B2B e-commerce wins tional purchasing practices, three new and B2B marketplaces (see Figure 2.0). came from seller-centric offerings in the marketplaces listed above (supplier-cen- Today each of these worlds exists in upper left quadrant. Suppliers recognized tric, buyer-centric, B2B marketplaces) and varying stages of development. Market opportunities to make old practices more the catalysts driving e-commerce today: leaders and innovators are aggressively in efficient and maintain their one-to-many buyer and supplier adoption rates. With “land grab” mode trying to execute new relationships that they had cultivated. each scenario comes different business and business models and lock in major cus- Buyers in turn were forced to access mul- operating models, value propositions, and tomer segments. For instance, Ariba, tiple Web sites to conduct buying. Going vendor solutions. Commerce One, and Oracle are battling forward, this quadrant will continue to The two factors that Andersen for Fortune 500 clients for their procure- provide suitable solutions for small and

http://sprague.ASCET.com 3 whitepaper The Path Supply Chain Industry Making 1.0 3.0 4.0 Forward 2.0 Innovations Perspectives It Happen

mid-sized businesses, but will only serve large buyers on rare occasion. Companies Supplier B2B Adoption Fast such as Dell,W.W.Grainger, and Works.com are well positioned to succeed in this space. Moreover, most suppliers will reap benefits from additional spot-buy sales and lower Supplier-Centric B2B Marketplaces Markets transaction and customer service costs as a result of having a presence of this sort. Buyer B2B Adoption Buyer B2B Adoption Slow Fast Buyer-Centric Scenario: Introducing the “Electronic Avon Lady” Traditional Models- Buyer- While some suppliers were investing to Sellers Win Centric Markets publish electronic catalogs, early adopters of intranet buying solutions were forcing other suppliers down this same path. Ariba Supplier B2B Adoption and Commerce One have defined the Slow buyer-centric world in the lower right quadrant by developing applications to Figure 2.0 B2B marketplace scenarios streamline many-to-one buying for Fortune 500 companies. They provide strong buyer value propositions in demand efficient? Is there anyway they can access B2B Evolution – Favoring Buyers or management and process savings. Buyers in e-commerce value? Suppliers or Both this category are large enough to negotiate Three strategies are emerging as viable terms that even the largest commodity sup- B2B Marketplaces Scenario: Creating options for businesses in each of the pliers are willing to concede. As a result, Entirely New Buying Alternatives quadrants: large volume buyers have become price The upper right quadrant consists of makers. With that said, the suppliers entirely new business models and new • Focused entrenchment learned that being price-takers was not all businesses. Some have a bias in favor of • Migration bad. Not only do they gain greater market suppliers. Some have a bias in favor of buy- • Multiple markets share within these corporations, but they ers. Some claim neutrality. What they also are able to reduce sales costs, reduce intend to do well is bring together previ- Focused entrenchment: A focused order entry errors, receive faster payment, ously fragmented communities of buyers entrenchment strategy involves making a and optimize production based on real- and suppliers through many-to-many plat- decision to either help buyers or suppliers, time market demand. forms.These communities can be designed and requires a company to be dedicated to Buyer-centric solutions, however, are for large or small companies and potential- one quadrant. Companies such as designed for large enterprises. In fact, the ly for both. Unlike the buyer-centric sce- Harbinger, a worldwide provider of busi- original solutions were available only in nario that requires large capital investments ness-to-business e-commerce software, ser- enterprise editions with price tags in the for “inside the firewall” solutions, we are vices, and solutions, are committed to help- seven digits. Buyer-centric solutions focus now seeing a variety of hosted services and ing suppliers navigate e-commerce com- on aggregating large catalogs of commodi- procurement portals targeting both hori- plexity by deploying, maintaining, and ties from existing suppliers and placing zontal and vertical markets with transac- even hosting electronic catalogs. Moreover, them in searchable databases where buyers tion-based pricing instead of the seven marketplaces such as ChemConnect have no can easily access items and create purchase digit up-front costs. intention of committing solely to supplier- orders. The considerable effort involved in Winners in this space will organize centric or buyer-centric solutions, but are establishing these systems, reliance on communities in industries with thousands committed to developing many-to-many process and demand management savings, of buyers and suppliers to facilitate trade. trading communities. and their high cost make buyer-centric They will provide tools to manage infor- solutions inappropriate for most small or mation, suppliers, and customer relation- Migration mid-sized businesses. But what about orga- ship management activities, to buy and sell Migration strategies are being employed by nizations that lack the procurement vol- more efficiently as well as publish indus- companies that are either not succeeding in ume to invest in e-procurement? What try-oriented content. Moreover, they will the quadrant they originally entered or are about organizations unwilling or unable to provide multiple value propositions to seeking greater opportunities in an adjacent spend millions to make procurement more both suppliers and buyers. quadrant. For example, Elcom, a company

4 Achieving Supply Chain Excellence Through Technology that develops, licenses, and uses Internet- form that was suitable for buyer-centric as competition and resource constraints based e-procurement systems, has not solutions or B2B marketplaces and have begin to take a toll. achieved broad recognition or critical mass customers in both quadrants. Ariba, the in the buyer-centric market. However, they early leader in buyer-centric e-procure- Section III: Opportunities have recognized an opportunity to use their ment solutions, recently acquired Tradex to for Delivering Shareholder buying platform as a hosted solution that give itself more functionality and a greater Value could be offered to large or mid-sized com- presence in the B2B marketplace arena. So where is the value and what should I do panies. Moreover, they took the additional Aspect Development, whose solutions pro- to capture it? The first place to start is pro- step of developing StarBuyer, an online cat- vide digital catalog content management curement of indirect goods. This section alog with public pricing where customers and decision-support tools for high-tech describes the types of benefits organiza- can buy goods and services through a single industries, not only deploys and maintains tions can achieve, likely migration options interface. These actions are moving Elcom catalog content for suppliers, but also is for capturing value, a number of enablers away from the buyer-centric to the B2B spawning vertical marketplaces for many- required for success and several barriers marketplace arena. to-many communities. Moai Technologies that will threaten the process. is providing auction software for large sup- Early adopters that have combined Multiple Markets pliers and for B2B marketplaces. Straddling strategic sourcing with e-procurement At this point, however, many companies multiple markets is attractive, but it carries have been able to achieve savings of 10 to are not willing to commit to one quadrant inherent risks for those companies with 30% per billion of indirect goods and ser- because of the tremendous opportunities limited time and resources. The largest, vices purchases by changing the way they available and the usefulness of their tech- most aggressive businesses employing this buy. Benefits from transforming procure- nologies in multiple markets. From the strategy will succeed while others will be ment fall into the following categories: onset, Commerce One developed a plat- forced to adopt an entrenchment strategy • Reducing price paid by consolidating

PROCUREMENT COST LEVERS Determine Whether •Leverage total volume to negotiate rates Purchasing Organization •Establish enterprise-wide agreements is Optimized

Create •Expand supplier universe Credible Switching •Develop consistent message on threat Effective Supply Threat Management Increase Pricing •Understand industry/supplier economics Transparency and drivers of cost components

Restructure Supplier •Understand economic drivers Relationships •Redefine supplier roles

Ensure Compliance •Purchasing practices should adhere to standards/policy guidelines

Capture Top •Zero-based approach Management's •Comprehensive effort Procurement Value Effective Demand Attention •High corporate priority Levers Management Rationalize Buyer Specifications •Simplify complexity

Enhance Demand •Rate cards Management Tools •Approved configurations

Determine Whether •Shared services with a vendor, user and Purchasing Organization a commodity focus is Optimized •Cross functional involvement

Improved Purchasing Assess Opportunities •Supplier process linkage Processes and to Simplify and •Potential to leverage technology Practices Coordinate Processes Implement •Aligned procurement strategies Improvement •Optimized organization with coordinated processes Options •Enabling technology

Figure 3 .0 Procurement Cost Levers highlight the different ways in which organization can track the benefits that come from transforming procurement.

http://sprague.ASCET.com 5 whitepaper The Path Supply Chain Industry Making 1.0 3.0 4.0 Forward 2.0 Innovations Perspectives It Happen

purchases enterprise-wide with suppliers who can deliver with the lowest total cost of ownership • Reducing the cost of buying by centraliz- Internal Demand Supplier Customers Management Enablers Network ing and streamlining processes while providing business users the ability to Internal Systems Catalogues Suppliers self-service their own demand • PCs/Technology Corporate Information • Buying less and better (managing Internet • Office Supplies Orders • Copiers

demand) by proactively influencing Department A • Telecom Procurement Order Status Internet • Forms business buyers to buy what they need Professionals • Temp Services Payments Internal from the preferred suppliers Systems • Managing suppliers by proactively gen- erating information automatically as a by-product of day-to-day transactions Many commodity purchases bypass

Department B Procurement entirely, going straight that provides real-time knowledge and to suppliers feedback • Growing revenue by extending comple- mentary procurement service offerings Figure 4.0 New E-Procurement Operating Model that increase your customer’s or supply chain partner’s profitability and effec- tiveness • Potentially increased spending – with Option #2- Buyer-Centric E-Procurement Migration Options for Buying this access, it is likely that spending will Solutions (Transform Thyself) Organizations increase, due to a lack of an overall Many organizations will decide to adopt Most large organizations are starting in the approach to proactively manage demand. buyer-centric solutions found in the lower lower left (traditional) quadrant when it • Minimal buying information – suppliers right quadrant. This is typically driven by comes to indirect procurement. There are now control spending data leaving clients corporate and divisional CFOs in industries several migration paths organizations are with the only option of “reading the that are under pressure to deliver increases taking in search of procurement related accounts payable tea leaves” to try to in the bottom line. Ideally, many of these savings.While some give the appearance of understand where and with whom they organizations have engaged in strategic savings, they may in fact drive costs and are spending. sourcing but find that they cannot make the overall spending up. • Lost control – left decentralized, the cor- benefits last without e-procurement. With porate CFO has little power and finds the these solutions, they can now publish cata- Option #1- Seller-Centric Panacea organization cannot manage procure- logs with preferred supplier deals on desk- (Buyer Beware) ment effectively. tops enterprise-wide, allowing commodity Devoid of an overall procurement strategy, Decentralized buying is the CFO users to interact and transact with the assis- decentralized buying organizations are like- nightmare that is now being addressed by tance of automated approval workflow. ly to take advantage of supplier-centric Web many large organizations. Given the need Andersen Consulting can help these sites to order directly. While this gives the for bottom-line profits, many CFOs find it organizations to develop new e-procure- appearance of effective procurement, there unacceptable not to be able to answer easi- ment operating models (see Figure 4.0) are a number of drawbacks to this strategy: ly the questions “What are you spending? which transform procurement end to end. With whom? For what?” Increased finan- Such models combine “inside the fire- • Fragmented buying across multiple sup- cial pressure will mean more organizations wall” infrastructure with Internet commu- pliers – failing to have enterprise-wide will find this situation untenable. Some nications directly to suppliers. More sourcing – suppliers now proliferate as may resort to strategic sourcing to rational- specifically, they rely on: buying divisions go online with their ize suppliers and negotiate lower prices, favorite suppliers. which may be a good short-term strategy, • The application to gain access to cus- • Perception of decentralized control – though experience shows that savings are tomized catalogs with pre-negotiated decentralized organizations further rarely sustained without launching similar items and prices from preferred suppliers strengthen their claim on procurement initiatives every three years. So what • The intranet to consolidate the organiza- and likely develop redundant, non- options do they have for more fundamen- tion’s buying with electronic desktop standard purchasing systems and drive tal change and recurring savings? catalogs, automated approval routing, up costs. and integration with financial systems

6 Achieving Supply Chain Excellence Through Technology • The Internet to check availability elec- little to show for their efforts. nesses will rapidly see the promise of the tronically,place orders, track order status, • Implementation complexity: Simply put, Internet being delivered through B2B e- and make payments it’s hard to integrate disparate solutions commerce and will adopt indirect goods – while transforming processes and the and eventually direct goods – procurement Underlying this new business model are a organization. via the Web. Finally, we believe that history series of key enablers: • Supplier adoption: Realizing benefits is making a comeback with a “return to requires suppliers to deliver electronic timesharing.” Where companies used to • Intranet-enabled processes to reduce the content and e-commerce-enabled share time on mainframes due to cost, they cost of buying and selling through the processes and interfaces, which in many will now adopt outsourced procurement use of automated workflow, electronic cases simply do not exist today. enablement to reduce cost and complexity. catalog access, ordering, and more A variety of outsourcing alternatives will • Enterprise resource planning systems Despite these barriers, an increasing num- allow organizations to buy services that integration to provide critical informa- ber of organizations are able to build the will facilitate management of supplier rela- tion, enable workflow, capture critical procurement strategies and migration tionships, buyer relationships, informa- information, link with general ledger plans to deliver badly needed bottom-line tion, and transaction services. and financial systems, and generate man- relief. So what should you do? If you are agement information reading this white paper, you are likely to • Technology infrastructure to provide the Option #3: Transformed B2B Markets – be interested in what one of our clients networks and connections to allow infor- Best Practices Procurement refers to as “figuring out how you can take mation to flow seamlessly within and Many organizations want to move to buyer- the dollars off the table and put them in the outside the enterprise centric solutions, but they find themselves pocket.” While this can be done, one can- • Change management to initiate funda- in “e-procurement gridlock,” stuck with not underestimate the challenges associat- mental behavioral and organizational traditional procurement inefficiencies due ed with enterprise-wide change. Our change required to realize and sustain to “disablers.” Perhaps by waiting, some strong recommendation is that organiza- benefits buying organizations believe that alternative tions diligently try to understand which of solutions will come along that may cost less the scenarios can deliver the most value While this is a logical migration path taken to implement and deliver benefits sooner, and do so the fastest. Based on this effort, by many of the early adopters, it requires and they may be right. they can put in place a B2B procurement organizations to commit millions of dollars A number of solutions now are being strategy focused on answering where, to roll out these solutions enterprise-wide. introduced that allow organizations to out- when, and how the benefits can be real- Moreover, a number of barriers and “dis- source technology and process manage- ized. For new businesses, the decision is ablers” typically stand in the way of suc- ment. Requiring buyers to have a browser which benefits do you want to deliver to cessfully implementing these programs: and Internet access, these sites provide buyers or suppliers. Those answers will access to approved commodities and sup- determine marketplace strategies and allow • Financial commitment: Organizations are pliers at contracted prices or an efficient them to effectively facilitate e-commerce challenged to fund the initiative, given the channel for the inevitable spot buys. In adoption and benefits realization for buy- large up-front license, customization, addition to these services, a number of ers and suppliers of all sizes. installation, and integration costs. industry-specific catalog hosting sites, auc- • Politics of procurement: Even with a go- tions, exchanges, and bartering systems are Acknowledgement ahead, organizations implementing beginning to take hold. All of this presents Special thanks to a great core team includ- shared services procurement are chal- new opportunities to reduce prices and ing Mark Basile, Margaret Bawden, lenged to wrestle control away from process costs by paying for the service per Christopher Brousseau, Jay Holata, Mike decentralized buying organizations. transaction instead of large up-front sub- Princi, and Ed Starr whose contributions • Market confusion: Given the variety of scription or software licensing fees. have made this white paper possible. solutions and alternative business mod- els, organizations can spend months in Final Thoughts and Copyright© 2000 Andersen Consulting LLP the request-for-proposal or request-for- Recommendations information vendor churn, often with Andersen Consulting believes that busi-

http://sprague.ASCET.com 7