Key Learnings

THE B2B PORTAL PHENOMENON
Fresh Rouge and Lipstick on an Old Hog?
While the notion of a B2B portal is relatively new, its underlying concept is not. Electronic business-to-business linkages have existed for decades. As these systems become more Web-centric, the "portal" concept has simply helped define the new application interface that will be used by business end users.

B2B portal sites differ from B2C portal sites in terms of business interaction efficiency. B2C portals thrive on low costs with more transactions, no barriers to entry, and ad-hoc e-commerce. B2B portals thrive on fewer transactions with higher margins per transaction, pre-negotiated service sign-ups, and high barriers to entry in vertical markets. In contrast to B2C relationships, B2B relationships are driven by pre-existing agreements or agreements set up prior to commencing transactions. While brand in B2C matters, trust in B2B will be paramount.

The difference between extranets and B2B portals is that extranets are based on one-to-many relationships and B2B portals are based on many-to-many relationships. As B2B portals establish themselves in vertical niches, they will integrate links into extranets or enterprise information portals. Corporate intranets will have an industry's B2B portal links embedded in them and offer the ability to customize and add links to new B2B sites, including the intermediaries that inevitably will emerge in B2B interaction.

EVOLUTION OF B2B PORTALS
An Inch Wide and A Mile Deep
Vertical market expertise (e.g., product knowledge and effective marketing techniques) will be sought out and secured by B2B portals to establish competitive advantage. This expertise will both establish premier B2B players and prevent broader B2B opportunists (e.g., VerticalNet) from becoming the trusted jack of all trades. While B2B success will be driven by vertical market expertise, it will be secured by aptitude in conducting e-business.

Community is more important to small businesses in B2B than large businesses. Large businesses do not want customers talking to each other, but small business communities encourage group procurement, a critical factor to small business B2B success (i.e., by consolidating procurement, a network of small businesses can remain competitive on price, quantity, etc.) B2C Portals (Yahoo!, AOL) provide fertile Web soil for small businesses to grow a buying/selling community.

IMPACT OF B2B ACTIVITY ON E-COMMERCE
Size Doesn't Matter
Much as the Internet de-emphasizes geography in B2C e-commerce, so too will it de-emphasize company size in B2B interaction. Small businesses will be able to reach scale more quickly in B2B portal environments as they enjoy the efficiencies of larger corporations without making considerable infrastructure investments. The ability of small businesses to quickly research and obtain both goods and services will enable them to appear as large companies to their customers. Traditional corporate headaches such as HR, payroll, and finance will be outsourced by small businesses to B2B portals looking to offer value-added services. Finally, on the Internet, no one will know if you are a large business, small business or a consumer.

B2B portals will catalyze and accelerate the move towards truly efficient pricing online. Connecting buyers and sellers in real-time will result in the utilization of current market pricing models. Prices will more closely reflect supply and demand in the marketplace and less closely reflect internal cost structures. As relationships get locked down in early stage B2B development, current distribution channels will be displaced, not augmented. Many industries are simply vulnerable to Internet-based efficiencies and in a business-to-business context, greater efficiency will ultimately win out over offline business brotherhood.

KEYS TO SUCCESS IN B2B INTERACTION
Trust, Auctions and a Ton of Refrigeration Space
B2C brand will draw in small business, but B2B security and reliability will draw in big business. Trust becomes vitally important in a world of B2B portals determined to connect blind buyers and bright-eyed sellers. Further, the bar for customer service in B2B starts higher than where B2C customer service stops. Where B2C success is driven by a one-to-many relationship, the many-to-many nature of B2B relationships means B2B portals must build a more powerfully interwoven collection of content, community, and e-commerce, pumping customer service generously as its lifeblood.

Auctions, bandwidth, and XML will be three significant B2B technology catalysts. Auctions and/or dynamic trading environments (e.g., Priceline.com model) offer businesses the ability to 1) salvage excess inventories and 2) realize limited run production efficiencies. Bandwidth will play a central role in facilitating exchange of rich transaction-related content, from CAD/CAM drawings to videos of Toyotas on the production line. XML-based vertical market languages will emerge as lowest common denominators for business-critical data exchange in those vertical markets. In addition, cookie cutter consumer portal formulas will not succeed in B2B as successful B2B players need to integrate themselves deep into each of their customers' information systems with all of the accompanying support.

A range of category killers sit at the horizon of the B2B phenomenon. Everything from perishables (per the Priceline.com model) to anything provisionable via networks (oil, gas, electricity, bandwidth) to soon-to-be obsolete items (e.g., computers, clothing) will fast find representation at B2B portals. "Traditional" e-business category killers of shipping and warehousing will continue to thrive next to "new" category killers such as refrigeration space. In addition, while content and community are important to any successful vertical, the stickiest application will be integration of a business vertical portal into a business' customer and vendor relationship. Specifically, the ability to be a market maker aggregating customer demand and vendor supply will be critical to B2B success.

QUOTES OF THE NIGHT:
"On the Internet, no one knows you're not a business."

"Each industry has the same needs: content, commerce, and community, just like every person needs to eat, sleep, and have sex, therefore, I'm long on VerticalNet."