Seems like every industry giant these days is forming a business-to-business e-commerce exchange. Industry titans -- and sworn enemies -- are joining forces so the dot-com crowd doesn't encroach on their turf. Death to the middlemen, they proclaim.
Don't believe the hype.
In the last two months, there have been roughly 20 consortia B2B announcements. Every company from the Big Three automakers to Wal-Mart to IBM, Compaq and Hewlett-Packard and the steelmakers have announced B2B ventures.
Here's the question few are asking: Can these industry titans work together?
B2B companies: Can they fend off consortia ventures?
Wall Street thinks so -- at least for now. That's why shares of B2B incubator Internet Capital Group (Nasdaq: ICGE), VerticalNet (Nasdaq: VERT), CommerceOne (Nasdaq: CMRC), FreeMarkets (Nasdaq: FMKT), Ariba (Nasdaq: ARBA) and a host of others have come down from nosebleed heights. Folks, that's one ugly B2B stock chart.
It's not surprising investors are worried about B2B Net stocks. General Motors (NYSE: GM), Ford (NYSE: F), Chevron (NYSE: CHV), Wal-Mart (NYSE: WMT), Proctor & Gamble (NYSE: PG) and Boeing (NYSE: BA) announced B2B ventures. IBM (NYSE: IBM) announced a B2B component exchange just hours after Compaq (NYSE: CPQ), Hewlett-Packard (NYSE: HWP) and Gateway (NYSE: GTW) formed an alliance.
On the surface, it appears the dot-com B2B crowd could be cooked. However, Patrick Walravens, an analyst at Lehman Brothers, said these consortia B2B ventures may not have much of an effect.
Here are a few reasons why:
"Can you imagine the board meeting with these guys?" asked Tim Getz, an analyst with Prudential Volpe Technology Group.
Dell Computer (Nasdaq: DELL) has already asked the question -- it didn't join the IBM or Compaq B2B alliance. Chances are pretty good some of these old economy exchanges will unravel just because the big players won't get along. Sure, Oracle (Nasdaq: ORCL), i2 (Nasdaq: ITWO) and CommerceOne can supply the e-commerce software, but are they going to manage the infighting too?
The antitrust issue -- many dominant players joining forces -- could derail the whole consortia movement.
Of course, some of these old economy exchanges will do just fine once they get rolling. However, many will fail because of the reasons listed above. In his fireside chat last Tuesday, IBM chief Lou Gerstner said many e-marketplaces won't work. "As usual, there's this Net craziness and confusion over B2B," he said. "There's a big difference between sexy announcements and actually driving costs down."
And many industry titans are still in the sexy announcement stage.