By NICHOLAS NESSON PARIS
Thirteen thousand kilometers separate Silicon Valley and Dubai. That is an awfully long trip, even in business class, but it is one that is being made with greater frequency every day. All that traveling has come as a boon for a few airlines, some individual frequent-flier accounts and three of the world's biggest names in information technology. For Oracle, Ariba and Commerce One, the race is on to seize control of the Middle East business-to-business (B2B) e-commerce market; for the Valley giants and the local B2Bs, like Dubai's Tejari.com, the stakes are extremely high. The winners will secure a foothold in a rapidly emerging, and hugely lucrative, market. The losers risk financial ruin.
The principles of B2B e-commerce are simple and based on sound logic: buying and selling on the Internet is fast, efficient and potentially very profitable. While business-to-consumer (B2C) e-commerce will succeed in places where Internet penetration rates are high and consumers are confident about online security, B2C margins tend to be low, and success depends upon high volumes.
According to Ayman Abousief, a marketing manager at Oracle Middle East, "B2C will gravitate away from mass-market retailers and towards companies like Toyota and Nokia, which can sell their own products on the web. They might do more business," he says, "or they might just do the same business more efficiently."
The real money, say many industry analysts, lies in B2B. Currently, the average B2C order is worth just $75; the average B2B order is valued at $75,000. According to AMR Research, global B2B e-commerce could be worth a staggering $5.7 trillion by 2004, although eMarketeer, another market research firm, puts the figure at a more modest $2.8 trillion. But even if the smaller number proves accurate, that would represent a massive gain from last year's $449 billion in B2B e-commerce.
In the simplest terms, B2B is any business transaction that takes place between two or more companies using digital technology. There are essentially three kinds of B2B marketplaces: a boutique exchange involves one company that buys from and sells to a limited number of member companies. MMI, a Dubai-based food and beverage wholesaler, is a good example of a boutique; using fairly simple and inexpensive Microsoft technology, MMI set up a catalog of its goods and sells them to, for instance, the Spinney's supermarket chain.
The second kind of B2B marketplace is a vertical, or industry, exchange: Enron, the energy company, runs a typical vertical exchange. The last and most ambitious type of B2B marketplace is a horizontal, or open, exchange: Tejari.com, based in Dubai, is the best example of a horizontal exchange in the Middle East. On Tejari's platform, a wide range of companies can buy and sell goods and services through electronic catalogs and Internet auctions.
Theory and reality. B2B is not a radical departure from the old-fashioned way of doing business. The difference is technology. Instead of a handshake, it's a mouse click; instead of a fax or phone call, it's an e-mail; instead of a paper catalog, it's a database; and instead of a wad of dollar bills, it's an electronic transfer. In theory, there is greater transparency and increased competition. And, in theory, time is saved and so is money. Those are the theories. Now get ready for the harsh reality.
B2B e-commerce has been bad for businesses, especially suppliers. A recent report by MRO Software shows that most suppliers see B2B as costly and complicated.
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- Tuesday, June 19 - 2001 at 11:00
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business-to-business e-commerce will soon be worth trillions of dollars. A look at the prospects and major players in the new economy Middle East, including Dubai's Tejari.com.
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Arabies TrendsTuesday, June 19 - 2001 at 11:00 UAE local time (GMT+4)
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This article was updated on Fri Jun 15 2007.
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