In my last post, I offered a new segmentation for B2B platforms, suggesting that these platforms offer some combination of nine basic value propositions. Starting with this post, I’ll discuss each of the nine value propositions in detail, using the same three sections:
- A description of the value proposition
- Examples of platforms offering this value proposition
- Strategic issues that any platform adopting this value proposition faces
Let’s get started.
Value Proposition #1: Supply Chain Automation
The value proposition for these platforms is clear: remove paper and automate processing of documents associated with buying and selling of goods/services. This value proposition cuts across three relatively distinct, but overlapping, supply chains:
1. Financial supply chains concerned with the flow of financial documents related to transactions (e.g., purchase orders, invoices, and payments).
2. Physical supply chains concerned with the physical flow of goods.
3. Indirect and services supply chains concerned with the flow of indirect goods and services (e.g., temp labor, legal, freelance, consulting, outsourcing, office supplies, IT equipment, etc.)
1. Examples of financial supply chain automation players would be:
- the EDI giants (Sterling/IBM, Open Text/GXS)
- SPS Commerce
- e-invoicing players (too many to list, see here)
- payment providers like Paymode
(Please note: I am not including P-card or supply chain finance providers here as they will be covered in the transaction financing value proposition. Also, EDI providers could also be placed in the physical supply chain sub-segment, but they really do surprisingly little in true supply chain management.)
2. Examples in the physical supply chain space would be:
- multi-sided, vertical supply chain management providers (e.g., e2open, itradenetwork,and exostar)
- logistics information platforms (e.g., Descartes, Inttra, Railinc, etc.)
- global trade management vendors (e.g., Amber Road, GT Nexus)
3. Examples in the indirect and services space would be:
- procurement networks (e.g.,Ariba, Sciquest, Coupa, Hubwoo, Perfect, etc.)
- VMS vendors (e.g., Fieldglass, IQNavigator)
- legal and telecom ebilling vendors (e.g, Serengeti, Tangoe, Mitratech, etc.)
- T&E vendors (e.g., Concur, Chrome River)
Strategic Issues Facing Supply Chain Automators:
Supply chain automators face several common issues:
1. Success in supply chain automation depends on transporting large volumes of transactions at attractive prices per document relative to offshore paper processing/scanning. Supply chain automators therefore have to figure out how to make it cheap for participants to get on-board the platform and quickly get their counterparties on board as well. Integration and training must be cheap and easy.
2. Supply chain automators also have to consider whether to charge buyers, suppliers, or both participants. All three models are prevalent in this space as providers try to keep costs commensurate with value.
3. Supply chain automators have to decide what standards (e.g., communication protocols and formats) to adopt, support, and maybe even establish. Ariba, for instance, supported one EDI standard and started the cXML standard. EDI providers also eventually supported multiple standards, including XML.
4. Perhaps the most vexing strategic issue facing supply chain automators is whether to just offer “pipes” that connect buyers and suppliers (with the transported data being consumed by applications made by others on both ends) or to also offer applications on one or both ends of the transaction. Traditionally “pipe-builders” and application providers have tended to be different parties. Pipe builders are great at integration, on-boarding, and secure transport. They are the “telecoms” of this world. Applications providers understand UI, workflow, and increasingly analytics. They are the “Apples” of this world top continue the “telecom” analogy.
The EDI giants stayed with being primarily pipe providers. As a result, they created an opening for many of the new supply chain providers of the 2000s. (To be fair though, they are still immensely profitable and generate a lot of cash.)
By contrast, many of the newer vendors in supply chain automation started as application providers and only later realized that there was a platform/network effect to be gained if they stayed consistent, and in the cloud, on all sides of the platform. (Ariba, for example, was a procurement application first, a network second.) For many of these supply chain automators, the application is great, but the network continues to lag behind. It’s hard to do both pipes and applications but the great companies figure it out.
Next up: value proposition #2: Matchmakers–a largely, but not entirely different world.