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The Supply Chain Sprint

The Supply Chain Sprint – Industry Trend or Event

Marie Eve Demers

In the fast-paced business-to-business (B2B) e-commerce sector, it is often hard to distinguish the trends from the general orientation. However, a recent market shift is indicating that the future has supply chain management (SCM) written all over it.

Over the last few months, the spotlight has faded on procurement-only e-companies — companies that Steve Butler, senior analyst for B2B e-commerce with New York-based eMarketer Inc., describes as “the shallow front of B2B e-commerce.”

According to Butler, the industry has come to realize that procurement is only the tip of the B2B iceberg. Supply chain management, one of the most complex elements of e-commerce strategy, will generate a lot of business this year. Boston-based AMR Research Inc. recently published a report on SCM which predicts a 45 percent growth in 200l, from $5.4 billion in 2000 to $7.8 billion in 2001 (see chart on page 40). The report, “AMR Research’s Application Spending and Penetration by Vertical Market, 2001-2002,” indicates that spending patterns will shift to SCM and e-commerce applications at the expense of enterprise resource planning (ERP) by 2002, with customer relationship management (CRM) also gaining ground.

“This growth is fueled by users’ interest in extending their business processes and technologies beyond the four walls of their enterprises,” the report reads. “This year, more users will be looking for SCM to improve operations with their trading partners, as more of these users plan to outsource nonstrategic business processes among their partners.”

Butler, who authored eMarketer’s “2001 eCommerce: B2B Report,” recently published “From B2B to SCM,” in which he describes how software giants recently jumped on the supply chain bandwagon, racing against time and each other to position themselves as leaders in the SCM software market.

It all began last fall, when Ariba Inc. of Mountain View, Calif., and Commerce One Inc. in Pleasanton, Calif., took a hit after it was noted that they only provided procurement solutions. “The real story of e-business rapidly became supply chain management,” Butler said.

In his B2B Report, Butler noted that 66 percent of buyers and 85 percent of sellers have placed a priority upon real-time information about order status and production as well as the various levels of integration that help buyers and sellers to coordinate their operations more closely and thereby reduce inefficiencies. This overall market shift is having a considerable impact on the B2B space as multibillion-dollar companies are engaging in alliances with SCM-specialized companies — or simply buying them out.

The story is unfolding almost like a soap opera, Butler said. Ariba (nasdaq: ARBA), which already had an affiance with Dallas-based i2 Technologies Inc., the biggest SCM software company, in January acquired San Jose-based Agile Software Corp., a product life-cycle management company. Then, in mid-February, Agile formed an alliance with Manugistics Inc. of Rockville, Md., an i2Technologies competitor. Manugistics (nasdaq: MANU) that same week announced an alliance with Redmond, Wash.-based Microsoft Corp. and KPMG Consulting LLC. of McLean, Va.

Earlier this month, Pittsburgh-based FreeMarkets Inc. bought Adexa Inc., also based in Pittsburgh, in a deal that allowed the online exchange to enter the SCM space by adding supply chain planning capabilities to its offerings.

Finally, on Feb. 19, Commerce One Inc., a Pleasanton, Calif.-based e-marketplace company, strengthened its alliance with SAPMarkets Inc. of Palo Alto, Calif., a wholly owned subsidiary of SAP AG, by adding four new joint customers.

The electronics industry is carefully observing the battlefield as many high-tech companies are customers. i2 Technologies enrolled big Names such as Motorola, LJMC, Dell Computer, [e.sup.2]open, Siemens, Cypress Semiconductor and Comdisco. Ariba’s customers include AMD, Cadence Design Systems, Dell Computer, Cypress Semiconductor, IBM and Hewlett-Packard.

“With businesses building on the trend of outsourcing by following the Internet-based trading model of companies such as Cisco Systems Inc., there will be an accelerated shift toward a divestiture of capital as companies will no longer need to own a supply chain in order to generate maximum efficiencies,” eMarketer’s report states.

Supply chain management software giants are quickly gaining market share. Other smaller Internet companies may not be at risk while these companies are competing against each other, but according to eMarketer’s Butler, unless these niche players have a secure position in the market, they could eventually be targeted for an acquisition. Moreover, as companies embrace all aspects of B2B e-commerce — procurement, supply-chain management, customer-relationship management and more — no B2B business, whatever its business model, is safe from the battle.

COPYRIGHT 2001 Cahners Publishing Company

COPYRIGHT 2001 Gale Group