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Electronic Commerce (EC) Classes of Solutions for Purchasing

Author(s):

Pam Promisel
Pam Promisel, Senior Principal, American Management Systems, Inc. (AMS), Fairfax, VA 22031, 703/227-5814, pamela_promisel@mail.amsinc.com.
Patti Hegland
Patti Hegland, Senior Principal, American Management Systems, Inc. (AMS), Fairfax, VA 22031, 703/227-6988, patti_hegland@mail.amsinc.com.

83rd Annual International Conference Proceedings - 1998 

Abstract. In the past 18 months a variety of software companies have announced new divisions or new products dedicated to addressing the Business-to-Business Internet Commerce Procurement System market. Some of these companies are established names in the industry and some are venture capital funded 'start-ups'. While the solutions that each of these companies have developed have a majority of the same basic components, their overall implementation strategy differs - sometimes significantly.

In an effort to describe the different strategies with which companies are attempting to automate the MRO purchasing process, AMS has developed 4 'classes of solutions'. While these 'classes of solutions' are not mutually exclusive (arguably some products can fit into more than one), they are intended to present a high-level view of the business strategy of today's most viable products. Each of the 4 'classes of solutions' is described below.

Relationship-based Solutions. While one of the benefits of all Business-to-Business Internet Commerce Procurement Systems is the volume discounts derived from consolidated purchases with key trading partners, systems in the Relationship-based class of solutions leverage the relationship between buying organizations and strategic suppliers to the fullest extent. By striving for the ultimate Business-to-Business Internet Commerce business strategy -- linking a buying organization's system(s) to strategic supplier system(s) via the Open Buying on the Internet standard --, Relationship-based solutions offer the greatest opportunities for process efficiency and cost savings.

Transaction-based Solutions. Similar to the traditional EDI business strategy, Transaction-based solutions provide fee-based Purchase Order processing. These solutions typically provide a central location for the storage of catalog information from a variety of different suppliers, a user-interface through which buyer organizations can browse product catalogs and create Purchase Orders, and a transaction engine to monitor activity and charge the appropriate party based on order volume.

Other than charging transaction fees, these solutions are unique because of the variety of possible implementation models. As the market has begun to mature, several large Internet Service Providers (ISP) and telecommunications firms have formed practices around co-locating major Transaction-based solution system components. By co-locating the catalog storage and transaction processing portions of these types of solutions, firms like MCI and America Online can provide the buyer-interface on a subscription basis.

Interface-based Solutions. Interface-based solutions place the responsibility of catalog maintenance on the buyer-organization. For each supplier from which buyers want the ability to order products, an import strategy (e.g., interface program, online update software) must be developed and maintained to convert and import supplier product data into the buyer's catalog database. While this process may present maintenance and resource issues, it also provides buyers with greater flexibility (the ability to search across multiple supplier catalogs with a common user interface) and greater control (the ability to configure the intranet technical infrastructure on which the system is implemented).

Enabling Software. In addition to off the shelf Business-to-Business Internet Commerce Procurement Systems, there are several companies that have developed Enabling Software for Internet Commerce. Enabling Software, in this context, refers to a software infrastructure that provides pre-built application code in the form of building blocks that allows developers to easily tie together disparate data sources, legacy systems, and new Web-based functionality into a cohesive system. With robust Enabling Software packages, application developers begin projects with an open, scaleable, and pre-built foundation on which to custom-build application functionality in a variety of different business environments.

What makes these Enabling Software packages valuable in the Business-to-Business Internet Commerce Procurement System market is that some of them have begun to provide application-specific frameworks in addition to a software infrastructure. For example, some products provide an online catalog framework (e.g., the 'nuts and bolts' of an online product catalog) with their core software. This extends the 'head start' that application developers have when building a custom Business-to-Business Internet Commerce Procurement System with these tools.

The Strategy. While some of the companies that have developed Business-to-Business Internet Commerce Procurement Systems have the Sales and Professional Services resources required to market and implement these solutions, others that are venture capital-funded 'startups' typically do not. Regardless, because of the lack of industry experience in implementing enterprise-wide Web-based transactional systems, the majority of these vendors are following a similar 'go to market' strategy3/4strategic partnerships with system integrators.

By partnering with large system integration firms that have substantial enterprise system implementation and project management experience as well as industry and leading-edge technical expertise, Business-to-Business Internet Commerce Procurement System software companies are strategically positioning themselves in key vertical markets. The goal for these software vendors is to leverage the existing market penetration that system integration firms have established in their 'premier' vertical markets.


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