So Joe Procurement from Acme Chemicals wants to score a thousand pounds of polypropylene. In the old days, he'd have his broker pals ring up suppliers around the world until they found the best deal. Calls: 30 or 40, many international. Transaction time: one week. Cost: hundreds or thousands of dollars.
Moses Ma, founder and CEO of the e-commerce software start-up BusinessBots, thinks he has a better way. Sitting in BizBots' San Francisco office, he types in a polypropylene order on his JAM (Java Agent-Enabled Marketplace) prototype for the chemicals industry. A moment passes; then JAM matches Ma's buy order--price, purity, etc.--to a compatible sell order in its order book, and, boom, the deal closes. Phone calls: zero. Time: five minutes. Cost: maybe 10 bucks. "Theoretically," Ma says, smiling, "it makes sense to do everything this way."
The next e-commerce wave is hurtling down on the Web. It's called the e-market; it's coming soon to an industrial-era sector near you, and Ma may turn out to be its avatar. "Moses' intellect operates on a plane well above mere mortals'," says Joel Friedman, a managing partner at Andersen Consulting, which last month agreed to develop and sell e-market software and services with BizBots. "And we think he might have built a better mousetrap."
Here's the pitch: capitalism thrives on the reduction of friction, and the Web is the most effective friction reducer since the assembly line. The dot-com revolution hit first for consumers; as soon as Amazon, for instance, put millions of discount books within buying reach of anyone with a modem and a credit card, ordinary bookstores had to change or die. "E-markets have had a very significant impact," says Tim Minahan, an e-commerce analyst for the Aberdeen Group. "And you're going to see that on the business side as well."
Indeed, the fear of "getting Amazoned" is fueling a boom in business-to-business e-commerce, a $131 billion-a-year industry that Forrester Research projects will skyrocket to $1.5 trillion by 2003. Colossuses such as GE and Cisco have led the way with "procurement marketplaces": in-house purchasing systems to streamline transactions with their suppliers.
Now start-ups such as Ariba and Commerce One--both of which just enjoyed successful IPOs--are launching "vertical marketplaces": bulletin-board and auction-oriented sites that render intra-industry transactions faster, cheaper and smarter by gathering buyers and sellers into one virtual locale. There's Metalsite.com for steel products; Fastparts.com for electronics; PlasticsNet.com for plastics; Solidwaste.com for...well, you get the picture.
"A year ago, we were getting lots of sideways glances," says Jon Corshen, V.P. of product marketing for Tradex, based in Tampa, Fla., which built the Metalsite vertical market and NTT's internal marketplace, among others. But eBay's rousing success last Christmas solidified the idea's legitimacy. "Since January," he says, "you can't stop hearing about marketplaces. People are figuring out that if you're just sitting there with a Rolodex, you may be at a disadvantage."