Tuesday, June 04, 2002

Public B2B marketplaces will rise again. At a recent IT for Management Conference at the UC Irvine MBA school, a panelist from a local high tech manufacturer made a strong case for private marketplace exchanges (i.e. those owned by a single dominant participant) over public marketplaces (i.e. independent, or those owned by a consortium of dominant players). Although we agree that private marketplaces are currently enjoying the pendulum swing away from all things dot-com, we believe this is a temporary situation. Private marketplaces put too much demand on the majority (i.e. those other than the marketplace owners). For example, a supplier cannot bear the expense of developing and maintaining custom interfaces to the private marketplace of each of its major customers. To the credit of one old-line industry, the automotive OEMs have had the sense to operate a single public marketplace, Covisint, on behalf of the entire vertical industry. This greatly reduces the demand placed on automotive suppliers. We believe that eventually many other industries will follow suit.

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