Private trading exchanges in e-commerce
Louis Columbus

Private trading exchanges got something of a bad name in the beginning, but some companies have done well with them. How should you evaluate them? This tip, excerpted from InformIT, by e-commerce expert Louis Columbus, discusses some of the criteria.

The early adopters who continue to show the greatest results from implementing private trading exchanges (PTX) have had the fortunate circumstance of learning early from their mistakes and moving fast enough to gain market share. The most well-known of these private trading exchange programs is Dell Premiere Pages, in which Dell provides private trading exchanges for top accounts. It accounts for 80% of the online sales of the PC manufacturer. These are actually self-contained Web sites that provide for stock balancing of spare parts, online ordering of products specific to the account, and even discounts applied to all purchases made by authorized members of the companies. The Dell Premier Pages are often called "stealth sites" because only the companies they are created for see them. Gateway, IBM, Compaq, Seagate, Maxtor, and many other companies are increasingly relying on highly tailored electronic tools such as the Premier Pages to provide greater levels of responsiveness to their customers.

In developing an approach for participating in exchanges, consider these key points. There are also decision points you'll need to focus on when beginning to integrate your applications into a private trading exchange. If you're just getting started with an exchange strategy, these key points will also be useful:

• Decide on your standards for platform independence. One of the most important aspects of creating an exchange is the selection of the standards you want integrated into an exchange to begin with. These standards include XML, J2EE, and RosettaNet (in the case of businesses that have a high-technology focus). You need to define a roadmap for your company to develop a cohesive strategy for implementing an exchange.
• Develop your objectives in metrics. The best private trading exchanges are ones that focus on the measurable. When creating your own PTX, be sure to tie it back to financial metrics and performance of your business. Even if the development of your exchange is for handling routine transactions, the definition of your expectations in quantitative terms is essential.
• Define the network effect for your exchange. Rather than look at an exchange as an unconnected and even isolated part of your business, be sure to fully integrate its functionality to your total business. All functional areas of your business need to be interconnected to the exchange to make it successful.
• Sell-side or buy-side? The focus of your exchange needs to be defined before you actually start building it. Are you focused on the sell-side of your business or purchasing? This is one of the most fundamental questions to ask about an exchange. Your selection of the sell-side actually brings you to the development of an order management, price, and availability application. For the e-procurement or supply side, the focus is on being able to work with supply-side applications.
• Strength of partnerships for vendors. The depth and extent of partnerships the vendors you are considering working with have are also great indicators of performance on the development of your exchange. The ongoing commitment of companies to build partnerships is increasingly important for you to monitor as you build your exchange.

To read the rest of this tip, click over to InformIT. You have to register there, but the registration is free.

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Related Book

Success @ E-Business : Profitable Internet Business and Commerce
Author : Peter Morath and James Teboul
Publisher : McGraw-Hill
Published : Mar 2001