Big Picture: You’d think a fragmented $500 billion global industry, rife with brokers, intermediaries, and middlemen, would be ideal for B2B exchanges. And you’d be wrong. There’s not a ton of activity on paper exchanges yet. Consortium and independent exchange models are both alive — and won’t collide anytime soon. Example: PaperExchange head Duane DeSisto claims his company has had friendly talks with rival ForestExpress to set industry standards. “It’ll be a long time before we knock heads,” he says. “I don’t see us competing on a day-to-day business for a while.” Managers at International Paper must agree. The industry giant has invested in both exchanges.
Details: Consortium. Launch plans announced March 2000.
Skinny: Spokesman describes site as independent exchange. But has $51 million in direct equity funding from paperweights Georgia Pacific, International Paper, Weyerhaeuser, Mead, Boise Cascade, and Willamette. Seems like a consortium exchange to us … An XML site, ForestExpress’s platform based on technology from CommerceOne/SAP, Corio, and Moai Technologies … Supposed to go live in January. Didn’t. As of press time, still in pilot phase … Company executive says revenue will “probably” be based on subscription and/or transaction fees. Plans yet to be finalized. Your move.
Details: Independent. Launched 1998. Relaunched November 1999.
Skinny: Controlled by ICG, which acquired 83 percent stake in August … Unlike potential rival ForestExpress, PaperExchange is alive. Has 5,500 corporate members; 7,000 individual members in 105 countries. Of course, becoming member not an ordeal — fill out online form and you’re in … Levies 3 percent sales commission on suppliers … AMR’s Eriksen, pointing to shelved IPO, claims site is struggling … Business model seems to be morphing, but spokesman says strategy has always included nonexchange services, such as hosted applications. “You have to be more than an exchange to survive,” he says.
Energy: Petroleum Exchanges
Big Picture: Thanks to deregulation and consolidation, the energy market defies neat categorization. Petroleum is often lumped with chemicals, The natural-gas sector sits between the oil and utility industries. Further, the market has a full array of supply-chain and commodity exchanges. For the moment, consortium and private energy E-marketplaces dominate the energy sector. But some hubs have managed to strike a nifty balance. That is, they have maintained their independent exchange status, and yet procured the backing of some heavy hitters in the energy business.
Details: Consortium. First transaction conducted September 2000.
Skinny: Trade-Ranger founded by 14 major oil players — including Shell, Amoco, and Dow. Those backers represent about a quarter of oil industry’s annual supply-chain procurement ($125 billion) … Currently, exchange owners have no plans to take Trade-Ranger public … “Launched” last fall, site still hasn’t gotten off the ground. NASA should have tried this. Would have gotten to the moon much sooner … Technology providers for Trade-Ranger include CommerceOne and i2.