2 B or not 2 B – The real issues in B2B
Commerce in India
.....More than infrastructural issues,
the real obstacle for the rapid proliferation of E-transaction
has been a superficial understanding of business processes
and organisational objectives and the needless employment
of flamboyant solutions.....
Over a trillion dollars of B2B Commerce
is expected to fructify through the web shortly. However,
as on date, reality has not matched this expectation
in India. The perception is that issues surrounding
cyber laws, bandwidth, payment gateways and the like
are obstacles. While this is partially correct, there
are issue of far reaching consequences, which have neither
been identified nor focussed upon and these hold the
key to success.
The automotive industry is ideal for
analysis, as it possesses all the elements in a total
transaction cycle. Herein, components and inputs ranging
from gearboxes to gum bottles are contracted on the
basis of an annual or possibly monthly tender. This
is followed up over a shorter timeframe with actual
order schedules. The transmission of the contract or
purchase order and schedule information from customers
to suppliers and the transmission of invoice information
from suppliers to customers constitute key data exchanges.
In addition, there are other downstream activities related
to payments, based on actual receipt of goods. All these
occur over a protracted period. Such exchanges are voluminous,
repetitive and very basic. Let us analysis the web process
from this background.
Sellers would congregate at the buyer’s
website, which has all the ingredients to complete the
entire transaction cycle. The buyer would list his requirements,
inviting bids. Intending suppliers would submit their
offers on the web. The contract will be awarded and
a purchase order would be generated and sent to the
seller. There would be provisions for triggering payment
related activities such as authentication and bank clearances.
Welcome to the real world. Orders follow
tortuous negotiations, which, screens and menus cannot
substitute. Decisions on safety oriented items like
brakes are based on multiple criteria such as technology,
quality, reliability, price, systems and assorted subjective
While the buyer has simplified his
process by ensuring that all his partners adopt the
standardised process stipulated by him, the partners
are left to figure out how they would deal with multiple
buyers and their assorted systems. It is not easy for
any computer department to access multiple sites and
operate fundamental processes in customer-wise fashion.
Further, he may have to contact one site for orders
and perhaps a bank’s site to pay the party. The
middle-ware to handle these are not in position.
The economy realised by utilising a
free medium, the Internet, is sought to be nullified
by a transaction fee, levied to recoup investment in
the webmall. Participants will see this as illogical.
Sellers are uncomfortable with the
idea of buyers hosting the sites. Intervention of a
third party also does not help because business boundaries
extended to other communities such as customs and banks.
Each of them may be tied up with someone. As on date,
there is no guarantee that these individual outfits
can interact with each other seamlessly.
Authentication of partner identifies
and automatic triggering of payments are essential ingredients
in a cusumer type of buying. Their role in repetitive
transactions is unclear. Also payment being a part of
the internal processes must be integrated internally.
The character of buyer seller interaction in the industry
is such that all the transaction of the cycle from tenders
to payments take place over a period of time and cannot
be oversimplified and compressed through clicks.
Thus, there is a mismatch between the
expectations and perceptions of the three entities,
the buyer, the seller and the vendor. The buyer wishes
to standardise and simplify his process and make the
seller pay for the webmall. The seller wishes to avail
of the economy of the net avoid customisation of the
interaction process by buyers. In between, the vendor
is pushing a common solution for shoes, ships and spark
plugs. Perhaps, due to unfamiliarity with grass root
and operational realities, some IT vendors focus on
sledgehammer solutions where nutcrackers would do. The
Walkman was a hit not because it was a hitech marvel,
but because SONY understood and fulfilled a basic need.
Definitely there are areas, which lend
themselves admirably to the new approach. The purchase
of items which are commodities and hence vendor neutral
is one area. One-off transactions such as disposals,
is another. It may extend to other areas, but it requires
time. In their current form, portals, exchanges, malls
and marketplaces are not yet ready to sustain normal
mass scale repetitive activity, as in the manufacturing
business. Why not look at a simplified model, which
can address all these issues and more.
The solution is just a mail agent.
It must access the transaction, compress it, encrypt
and dial the data out automatically to the final destination
in a batch or online mode through the Internet like
e-mail. An acknowledgement is essential. On the contra
side, it must receive incoming documents through the
Internet and perform the reverse actions. Industry must
agree for a document standard. If these rudimentary
functions are performed flawlessly, the essentials are
in place. Participants will be able to operate individually
without regimentation and without excessive charges.
If all this looks far fetched, check
with Detroit. After attempts at individual forays into
e-transactions, the Big Three (GM, Ford and Chrysler)
have floated a common buyer marketplace. The modality
of operation of this entity has not been made clear.
The first experiments to be conducted will be cleaning
materials and nuts and bolts, the atoms of auto manufacture.
Delphi and Dana Corporation, two of the largest suppliers
are stated to be feeling uncomfortable and are exploring
ways to have their own supplier market place. Is anything