Beyond the exchange--the future of B2B.

TLDR

Internet‑enabled B2B commerce promises cost savings and broader market access, yet its future evolution remains unclear, with value increasingly concentrated among specialists rather than traditional exchanges, leading to consolidation into a few mega‑exchanges. The authors contend that shifts in the financial services sector over the past twenty years offer key insights into B2B e‑commerce’s trajectory. They propose that originators will aggregate complex transactions for mega‑exchanges, e‑speculators will cluster around standardized products, independent solution providers will coexist with mega‑exchanges, and sell‑side asset exchanges will build networks enabling suppliers to trade orders internally. Consequently, firms may find product development, manufacturing, and marketing less critical, while mastering market dynamics becomes increasingly vital.

Abstract

Using the Internet to facilitate business-to-business commerce promises many benefits, such as dramatic cost reductions and greater access to buyers and sellers. Yet little is known about how B2B e-commerce will evolve. The authors argue that changes in the financial services industry over the past two decades provide important clues. Exchanges, they say, are not the primary source of value in information-intensive markets; value tends to accumulate among a diverse group of specialists that focus on such tasks as packaging, standard setting, arbitrage, and information management. Because scale and liquidity are vitally important to efficient trading, today's exchanges will consolidate into a relatively small set of mega-exchanges. Originators will handle the origination and aggregation of complex transactions before sending them on to mega-exchanges for execution. E-speculators, seeking to capitalize on an abundance of market information, will tend to concentrate where relatively standardized products can be transferred easily among a large group of buyers. In many markets, a handful of independent solution providers with well-known brand names and solid reputations will thrive alongside mega-exchanges. Sell-side asset exchanges will create the networks and provide the tools to allow suppliers to trade orders among themselves, sometimes after initial transactions with customers are made on the mega-exchanges. For many companies, traditional skills in such areas as product development, manufacturing, and marketing may become relatively less important, while the ability to understand and capitalize on market dynamics may become considerably more important.