Online catalog protocol in air
Backers of the Open Buying on the Internet protocol are meeting to finalize it, but analysts say it may be too complex.
So far, companies writing e-commerce software for the business-to-business market are paying lip service to OBI, saying they will support the specification, which exists in version 1.0 today.
"If somebody can come out for an easy way for suppliers to talk to buyers, they' re going to make a fortune," said Erina DuBois, an e-commerce analyst at Dataquest.
The OBI initiative comes as Visa, an OBI Consortium member, and Thomas Register, a business directory firm, released a new survey of corporate buyers saying the number of companies who plan to use the Internet for most of their buying is expected to double this year, to nearly 21 percent.
The online survey queried some 2,000 corporate purchasers in manufacturing, engineering, government, wholesale, and retail. Internet purchasing will reduce the number of firms that rely primarily on the phone, the survey found. Email use also is expected to rise significantly.
Today, 40 percent of respondents said they make purchases via the Internet on a daily basis, but the average monthly spending remains under $1,000.
Peter Roden, executive director of the OBI Consortium, the group pushing the specification, says the effort isn't creating new standards, just applying existing standards to online procurement.
But e-commerce analyst Torrey Byles puts the cost of implementing OBI at $100,000 to $1 million per company--high enough to dissuade all but the most ardent.
"That's just to get the software and digital certificates and security features built," said Byles, who runs his own consultancy out of Half Moon Bay, California. "Then it costs a single person-year to maintain it--that's $85,000 to $125,000."
But Roden contends those costs reflect going from no online commerce operations to becoming Internet commerce-ready, not the costs of OBI compliance itself. He predicts that e-commerce software vendors will build OBI compliance as a standard feature in their software.
However, Forrester Research analyst Stan Dolberg says e-commerce vendors aren't embracing OBI with any enthusiasm.
"It's something they need to know about, but it's not shaping their activities in any significant way yet," Dolberg said. Still, vendors backing OBI include Ariba, Microsoft, Oracle, CommerceOne, and Open Market. Netscape Communications and InteliSys already ship OBI-compliant software.
OBI has been pushed by American Express and Roden's e-commerce consulting firm SupplyWorks. Visa and MasterCard, which like American Express offer corporate purchasing cards for procurement, also back OBI.
Nonetheless, OBI addresses a real problem for buyers and especially for suppliers that use online catalogs to reduce costly paperwork.
"Supplier companies are being requested more and more by their large customers to build a custom Web interface to the supplier's catalog. Suddenly the bigger supplies are being inundated with all these special requests for custom interfaces," Byles said.
"In an ideal world, if everybody were OBI-compliant, any buyer organization's OBI server could just talk to the supplier's OBI server," thus cutting customization costs, he said.
Many software vendors backing OBI are already building software to automate purchases of nonessential supplies for businesses--office supplies, travel services, temporary help, and the like.
The software generally requires stitching together a custom catalog--with negotiated prices for a specific customer--and tying that special catalog into a workflow or approval process within the buying company. Often it also ties into existing electronic data interchange (EDI) systems that use secure private networks for manufacturers to send requisitions to suppliers using standard forms.
OBI outlines a standard way to build that software, but it relies in part on EDI standards. OBI also requires digital certificates, electronic identity cards issued by banks or employers for online commerce, which today are not in widespread usage.