Two years ago, business-to-business (B2B) marketplaces barely existed, even as an idea. Today, there are plans to establish thousands of these on-line businesses. New deals—many involving some of the world’s biggest companies—are announced almost daily.
What is the attraction? For buyers, B2B marketplaces promise not only to deliver more competitive prices but also to rid the supply chain of a host of inefficiencies. Hopes are so high that money can be made before even a single transaction has been concluded: the mere announcement that General Motors was to form a marketplace powered by technology from Commerce One caused the latter’s share price to shoot up by 23 percent. GM benefited as well: recognizing that a successful marketplace needs liquidity, Commerce One gave the automaker warrants for up to 20 percent of itself, depending on how much liquidity it brought on-line.1
Amid such optimism about B2B marketplaces, it is easy to forget that they are still in the very early stages of development (see sidebar "What is a B2B marketplace?"). The vast majority of Fortune 500 companies have yet to form or join a major marketplace, meaning that much value is still up for grabs, both for...