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Executive Business Panel Digital Marketplace

Executive Business Panel Digital Marketplace December 2000 Based on responses form 105 high level business executives of large and mid-sized companies ($300M+ in annual sales) as well as new entrants. Perceptions of Digital Marketplaces. Importance.

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Executive Business Panel Digital Marketplace

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  1. Executive Business Panel Digital Marketplace December 2000Based on responses form 105 high level businessexecutives of large and mid-sized companies ($300M+in annual sales) as well as new entrants.

  2. Perceptions of Digital Marketplaces

  3. Importance • Five-out-of-ten business executives participating in the e-business space perceive digital marketplaces as critically important to B2B positioning over the next 12 months. Importance of Digital Marketplaces As a Means of B2B Competitive Positioning (1=Not at All Important, 10=Critically Important) Mean Current In 12 Months 6.1 6.9

  4. E-Business Strategy • One-third perceive digital marketplaces as critically important to their companies’ e-business strategy with retail industry often perceived as most affected. Retail Financial Services Communications Internet/Technology Automobile All Industries Other* Importance of Digital Marketplaces to Overall E-Business Strategy Mean 6.4 Industries Most Affected by Digital Marketplaces (Unaided, Multiple Response) * Other includes insurance, manufacturing and computer industry, etc.Each of the “other” counts for less than 5%.

  5. Comparative Differences • Perceptions of digital marketplaces are similar to those six months ago. Both now and six months ago: • Between 3 and 4 out of 10 view digital marketplaces as critically important to B2B competitive positioning. • Between 3 and 4 out of 10 indicate digital marketplaces are critically important to their overall business strategy.

  6. Experience With/Plans For EstablishingDigital Marketplaces

  7. Establishment of Digital Marketplaces • Six-out-of-ten large and mid-sized businesses involved in e-business have participated in the establishment of currently functioning digital marketplaces and one-half plan to establish digital marketplaces in the next 12 months. Have Established/Expect to Establish Digital Marketplaces Current In 12 Months Finance and Services industries more likely than other industries to establish digital marketplaces on their own. On average, those currently participating in establishing digital marketplaces participate with 3 others. Those who are planning to expect to participate with 6 others. Alliances in Establishing Digital Marketplaces Current

  8. Establishment of Digital Marketplaces • One-third indicate establishing their digital marketplaces as a competitive response while one-quarter indicate being first to market. Have Not Established Competitive Response First to Market Other* Leadership Position in Establishing Digital Marketplaces * Other include variety of efforts, etc.

  9. Return on Investment • One-third report having realized an average of 29% ROI on their digital marketplaces. Realization of ROI on Digital Marketplaces Realization of ROI somewhat higher for Telco/High Tech industry. • On average, 29% ROI has been realized. • For those who have not yet realized an ROI, on average, they project 13 months from inception before a ROI is realized.

  10. Current Participation • Nearly one-half of companies currently offer products or services in digital marketplaces other than their own. 0 1 2 3-5 6-10 More Than 10 Firms Offering Products or Services in DigitalMarketplaces Other Than Their Own % Yes # of Current Digital Marketplaces Including Their Own Executives estimate that 10% of their total B2B sales transactions currently occur through digital marketplaces, expecting to nearly double to 18% in a year.

  11. Procurement Participation • Two-thirds of companies currently procure from digital marketplaces. Firms Procuring Products or Servicesin Digital Marketplaces % Yes # of Current Digital Marketplaces for Procurement 0 1 2 3-5 6-10 More Than 10

  12. Purchases in Digital Marketplaces • Most are purchasing products, including hardware, from digital marketplaces. Buying in Digital Marketplaces (Multiple Response) Products Hardware Services Other* Do Not Buy One-half have purchased telecom products or services. The most frequently mentioned products and services include wireless services and ISP. * Other include raw materials, information and office supplies, etc.

  13. Digital Marketplace Value • Nearly three-quarters of executives see value in their current digital marketplace experience with nearly one-quarter indicating it as extremely valuable. • “It has created even more competition, driving costs, and ultimately profits down.” • “Because we are still new to it.” • “The nature and the market hasn’t adapted to the digital marketplace. Not important to our customers.” Value of Current Digital Marketplace Experience (1=Not at All Valuable, 10=Very Valuable) Mean 6.2 Reasons for Value: Selected Verbatims Lower Value Higher Value • “Learned a lot of technology, taking it in a different direction.” • “We are a global bank, the digital marketplace is critical for us.” • “The momentum for embracing digital marketplace is no longer a test, it is a reality.” • “Convenience, competitive bidding.” • “It starts to evolve to the point that we can get more information and save time and money.”

  14. Future Participation • Almost all expect to be offering products or services through digital marketplaces one year from now. 0 1 2 3-5 6-10 More Than 10 Expected Number of Digital Marketplaces Your Company Will Be Offering Products or Services, Including Your Own. Manufacturers more likely than other industries to expect to offer products in just 1 digital marketplace.

  15. Comparative Differences • Companies are more likely to offer and procure products or services via digital marketplaces than 6 months ago: • 45% indicate that their firm currently offers products or services in one or more digital marketplace established by other companies while 31% indicated the same six months ago. • 66% of respondents indicate that their firm procures products or services via digital marketplaces versus 48% indicating the same thing six months ago.

  16. E-Procurement

  17. E-Procurement • Most see procurement as an on-ramp for digital marketplaces. Procurement an On-Ramp for Involvement in Digital Marketplaces

  18. Strategic Sourcing Initiative • Broad range of benefits experienced from strategic sourcing. Benefits Experienced From Strategic Sourcing Mean Reduced Spending for Products & Services Improved Supply Chain Efficiencies Reduced Inventory Improved Planning Lower Process Costs Enhanced Supplier Relationships Increased Visibility in the Supply Chain 5.7 5.5 5.3 5.6 5.5 5.2 5.3

  19. E-Procurement • Two-thirds have or plan to have an e-procurement system. Most plan to buy rather than lease. Currently Have/Plan to Have an E-Procurement System Buy or Lease an E-Procurement System

  20. Budget for E-Procurement System • There is a high uncertainty on budgets for e-procurement systems. E-Procurement System Budgets Less Than $250,000 $250,000-$500,000 $500,000-$999,000 $1 Million-$4.9 Million $5 Million or More Nothing Don’t Know

  21. Barriers to Success for E-Procurement • Cost, supplier adoption and a lack of internal skilled resources all seen as potential barriers to successful e-procurement. Perceived Potential Barriers to Success for E-Procurement Cost Supplier Adoption Lack of Internal Skilled Resources Greater barriers perceived by retail/wholesale industry.

  22. Issues and Challenges

  23. Top-of-Mind Challenges for Digital Marketplaces • Variety of challenges for digital marketplaces noted with customer value, service delivery and marketplace establishment most frequently mentioned. Perceived Single Greatest Challenge Customer Buy-In/Value Service Delivery Getting Established Security Changing Business Processes Profits Standardization Skilled Support Competition Costs Systems Customer Service Other* Don’t Know * Other includes keeping up innovation, depth of service and research, etc.

  24. Ranking of Potential Challenges for Digital Marketplaces • Upfront investment most frequently ranked as top challenge. Mean Potential Challenge Ranks Upfront Investment Long-Term Viability Training Technology Infrastructure Partner Relationships 66% 41% 41% 29% 21%

  25. Perceptions of Current Number of Digital Marketplaces • Respondents split evenly in their perceptions of whether the current number of digital marketplaces is too high, too low or just right. Perceived Number of Digital Marketplaces to Meet B2B Trading Needs Too Many Too Few Just Enough

  26. Consolidation Affecting Overall Success • One-half indicate consolidation likely to increase success of digital marketplaces. How Consolidation Likely Affects Overall DigitalMarketplace Success as B2B Trading Hubs Greatly Increase Success Somewhat Increase Success Not Affect Success Somewhat Decrease Success Greatly Decrease Success

  27. Consolidation Affecting Company Participation • Consolidation likely to have only minor impact on participation. • “Biggest obstacle paying someone to coordinate details.” • “Customer doesn’t know which one to choose.” How Consolidation Likely Affects Your Company’sParticipation in Digital Marketplaces Greatly Increases Participation Somewhat Increases Participation Does Not Affect Participation Somewhat Decreases Participation Greatly Decreases Participation Selected Top on Mind Verbatims Greatly Decreases/Decreases Greatly Increases/Increases • “Consolidation would make more consistent standards and make it easier to deal with over 1500 suppliers.” • “I view consolidation to lower cost and better service.” • “It would create more possibilities and the suppliers would have to come under somekind of standardization.”

  28. Value Added Services

  29. Top-of-Mind Critical Value Added Services • Customer service, ease of use/flexibility and reliability noted as most critical value-added services for digital marketplaces. Value Added Services Critical for Digital Marketplace (Multiple Response) Customer Service Ease of Use/Flexibility Reliability Economic Efficiency Security Integration Efficient Supply Chain Customization Other* None/Not Sure * Other includes logistics, product viability and automation, etc.Each of “other” counts for less than 3%.

  30. Value-Added Services Importance • Logistics, back office/ERP, buyer/supplier adoption and inventory management rated the most important value-added services. Importance of the Following Value Added Servicesto the Success of Digital Marketplaces Logistics Back Office/ERP Buyer/Supplier Adoption Inventory Management Management Reporting Trade Center & Industry News Payment/Settlement Call Center Services Financing/Banking Call center services perceived more important by the finance industry.

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