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Commentary: Big online exchanges are well suited for success

The Federal Trade Commission and other regulatory bodies represent only one of a number of uncertainties for the new business-to-business exchanges.

By David Hope-Ross, Gartner Analyst

The Federal Trade Commission (FTC) and other regulatory bodies represent only one of a number of uncertainties for the new business-to-business exchanges.

Although the FTC may be able to constrain some exchanges' activities (especially in the area of price determination), it is unlikely to obliterate such marketplaces entirely. Even under very strict regulation, marketplaces could potentially develop very valuable services, such as translation between commerce messages based on different standards, and providing catalog content.

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IBM links with tech giants for industry exchange

Whether business-to-business exchanges can fully begin operation before the government indicates its position depends on what is implied by fully operational. Marketplaces are already engaged in limited sets of services such as auctions, spot buying, and maintenance, repair and operations (MRO) procurement. However, Gartner expects that it will take marketplaces several years to realize more-advanced collaborative capabilities that extend significant savings to all supply chain participants. For example, very few marketplaces will likely provide collaborative planning forecasting and replenishment, or CPFR, before 2005, giving the FTC and other bodies plenty of time to enact new legislation, or monitor for monopolistic practices, unfair trade practices or price collusion.

Although the FTC has taken an interest in the activities of Covisint, the automotive exchange set up by General Motors, Ford Motor and DaimlerChrysler, Gartner believes that bigger issues face Covisint and other large marketplaces. The issues include developing collaborative commerce capabilities, developing sustainable revenue models, enabling supplier participation, and generating consensus on business priorities and executive leadership. Neither Covisint nor the exchange announced by IBM, Nortel Networks, Matsushita Electric and five other companies has provided a good explanation of how these challenges will be resolved.

However, Gartner expects that the business-to-business exchanges funded by big players, such as the partnership between IBM, Nortel and Matsushita, stand the best chance of surviving.

Entire contents, Copyright ? 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.