Introduction|~||~||~|The business-to-business (B2B) exchanges you may be used to hearing about have little relevance to the channel at large. Vendors such as Commerce One and Ariba have presented case studies of enormous cost savings by customers such as the Ford Motor Company and Texaco to demonstrate the major role a B2B exchange can play in the process of streamlining a company’s supply chain. However, though these tales are impressive, it is hard to see how those models can be scaled down to a level where local resellers can benefit. Nonetheless there is almost certainly one in your future. The chances of resellers in the Middle East associating themselves with the B2B exchanges in the region seem to be solely dependent on whether or not they are aiming for long-term success. To put it simply, there is a mechanism being built today which will give you access to a broader base of customers than you might currently believe possible.And the beauty of a B2B model such as Tejari.com, the most active of B2B exchanges in the region today, is that those customers are also able—and according to the definition of the business model, almost certain—to search out resellers when they are ready to buy. Consider the impact on your revenues when you have a captive audience, and couple that with a tumbling cost of sales when your customers are coming to you. That is the role of Tejari.com.||**||Opening new markets|~||~||~|The argument speaks for itself. “One reason [people join a B2B exchange] is opening new markets for themselves… At the moment, you have a seller running around sending a fax, [who has] to go and fish for contracts. And on the buyer side you have someone who has to spend half of his day preparing for a meeting, looking at evaluations and things like this. This sometimes limits people to looking at three suppliers for a tender rather than ten, because [they] have so much mass of paper. I know people can definitely gain at least 10% in efficiency when they connect to this,” Shaikha Lubna Al Qasimi, managing director, Tejari.com told ITP journalists recently.“You can also reach markets in a tendering cycle for an auction by having ten suppliers competing for that. Let me give you an example of a government [tender]. Normally, a Ministry will send out a request for tender, three companies will come on board and tons of paper is generated. Then they go for a week or two to evaluate this and when they do there’s no second chance for that second supplier. [With a B2B exchange], you can put it out in an auction where you have ten suppliers. You have more than one chance for a supplier to re-bid, hide their name and put the price there, and see how much gain you get from suppliers seeing someone else’s price. The supplier has that one chance the first time he submits, but they never get second chance on a typical tender. But when you’re in [an online auction] and you have that opportunity and think ‘I still have a little bit of margin’ … the supplier gets a better chance that way,” said Shaikha Lubna.Those potential benefits have been understood by UAE-based IT suppliers such as Alpha Data, Emirates Computers, and Seven Seas Computers, but there is an obvious added benefit to joining an Web-based exchange: globalisation. At worst, companies can expect to gain customers in other parts of the region. All three of these major suppliers of computers and solutions have become members of Tejari.com’s supplier/buyer network. According to an Alpha Data statement, its decision to join is specifically related to its desire to expand “beyond the UAE while strengthening its relations with the public sector.”||**||The players|~||~||~|“Becoming a member of Tejari.com was a straightforward decision for Alpha Data. We’re a technology-centric company that recognises the benefits that online B2B trading will bring our organisation. Alpha Data believes that we will increase our internal buying efficiencies while reaching a larger market online through Tejari.com,” said Fayez Ibbini, managing director of Alpha Data.Emirates Computers’ motives echoed those of Alpha Data—the Abu Dhabi-based supplier said that the relationship with Tejari.com will allow it to sell its goods via the Internet to a global market, with all of its logistics handled from Dubai.According to Emirates Computers president Hani Harik, by trading on Tejari.com, rather than continuing with its traditional, paper-based form of trading, Emirates Computers expects to greatly increase the number of goods that it sells.A major factor for Alpha Data, Emirates Computers, and Seven Seas Computers however, is also the close relationship Tejari.com has with the Dubai government. Seven Seas is clear that its second primary objective in joining Tejari.com—besides the same regional market expansion hopes shared by the others—is greater market reach and participation in the public sector’s e-procurement initiatives. “Partnering with Tejari.com will improve the efficiency of our go-to-market strategy, especially with clients such as the departments within the government of Dubai,” said Mehboob Hamza, director of strategy and people for Seven Seas. ||**||Reduction of lead times|~||~||~|Jacky’s Electronics sees its membership of Tejari.com as an opportunity to display over 1,000 products from electronics to household items and from personal use products to office IT equipment through an online storefront within the exchange’s structure. The captive market of customers looking to source all aspects of their business requirements within Tejari.com—which is ultimately the aim—gives Jacky’s Electronics boss Ashish Panjabi reason to believe that ultimately, the company will see a great deal more business than it does traditionally. Besides increasing sales, Panjabi says that the reduction of lead times, brought about by the direct interface with customers and the online auction process will also slash costs. “We see many long-term cost savings in adopting the e-business model of Tejari.com because we will be able to reduce lead times when serving customers by speeding up the tender process,” he said.Those savings are obviously another major benefit to participants. A quick poll of some smaller resellers at press time indicated that many had little clear knowledge of their long term financial situation. Successes are measured one day to the next, with no specific understanding of the cost of doing that business transaction. According to Sheikha Lubna, Tejari.com currently charges no per-transaction fee for deals done online, which coupled with the obvious cost savings in time spent and the lack of paperwork required could already serve as a cost saver to your business. ||**||The revenue model|~||~||~|The revenue model which Tejari.com prefers is a quarterly subscription, ranging from $200 to $10,000 depending on the size of the business—a policy which could open the doors for smaller players to get involved. Arriving at that per quarter cost comes as a result of what Tejari.com calls ‘profiling.’“[Profiling is based on] the trading, [and] how much content is on the suppliers’ side,” said Shaikha Lubna.An issue which individual Tejari.com members will have to overcome is the risk of violating agency contracts when trading beyond their traditional markets. For example, were a UAE reseller to win a contract with a company in Kuwait, where that business is protected by means of an existing agency contract, there is the opportunity for friction.Those are issues which members will have to address themselves, according to Tejari.com; in all instances, Tejari.com will act as the enabler only. “The anxiety that we were confronted with in the market was that an agent was saying, “does that mean someone from a different country can sign up and sell the same products here?” We said that we’re not the police, we are creating trust within an existing community of traders. At the end of the day they also have to understand that they are selling the customer relationship they’ve had for years. As long as they understand they are there for the service that they provide, they’ll take their share,” said Shaikha Lubna.For now at least, there are unanswered questions about B2B exchanges, and many of these will remain unresolved until more organisations opt to make use of their services. In the long run however, as more of your customers take to the Web, you may find that no Tejari.com membership equals no big IT contracts for your company. ||**||The Commerce One approach|~||~||~|The Commerce One approachTejari.com’s approach is quite different to that of Commerce One’s. But while Commerce One believes the model it has chosen is the best one for the region, it has yet to push the button which will light up the network and get the region trading, more than a year after it announced the roll-out of its infrastructure was underway. The market has certainly been keen to know what Commerce One (C1) was going to do. When the company first announced its entry into the region it attracted enormous attention. The company was, and still is, a leader in developing business to business marketplaces.Yet as the months have ticked by since its arrival, other B2B marketplaces such as Tejari.com have sprung up around it, and its major rival in the United States, Ariba has set up partnerships in the region. So what is taking so long?The difficulty Commerce One faces is in the partnership model it has chosen. In a rare press interview with another ITP magazine, Arabian Business.com, David Brown, chief executive and Commerce One Middle East (C1ME) founder, said that the company could have switched on the marketplaces months ago. What has been far more important, he argues, and what’s caused the delay, is laying the foundations that will ensure the marketplaces are a success. “We could have launched in May last year, but would we have been successful? The answer is probably not,” says Brown. “There is growing support for the Commerce One Middle East model, which is local marketplaces for local consortiums.”By the middle of the year, there should be a network of country-focused, C1-backed B2B marketplaces operating across the region. Commerce One’s technology will be used to run the marketplaces and the Commerce One Middle East holding company will have a stake of 15-30% in each. The remaining equity in each marketplace will be divided between prominent local private businesses, banks and telecomms companies.By the time you read this editorial, the ownership consortiums for marketplaces in Egypt and Qatar should have been announced. That follows announcement of Kuwait’s ownership consortium in late December. Commerce One says that there will also announcements on the crucial UAE and KSA markets towards the end of the first quarter. Once these consortiums are announced, a period of what the company calls ‘scoping’ follows. After this four week process of market analysis and final technical fine-tuning is complete, the marketplaces go live.The involvement of large local players in the marketplaces is at the absolute heart of the C1ME business plan. Like anyone else, C1 knows that any market, whether it’s in the heart of Riyadh or out on the Internet, only works if buyers and sellers come to it. C1ME’s approach has been to sign up some of the largest family trading groups, banks and telecomms companies in the Middle East as shareholders in those marketplaces. “They have signed up knowing they will use this technology to reduce their procurement costs,” says Brown. The list of names is impressive: In Saudi Arabia, Al Faisaliah Group’s name has been mentioned; Naser Mohammad Naser Al Sayer and Al-Rashid Group are confirmed shareholders in Kuwait; and the names of major telecomms companies frequently come up.It’s finalising these ownership consortiums that’s the reason why C1ME is still yet to launch almost a year after its announcement. “Deployment is the easy part,” says Brown. “The important thing is whether you can achieve the market dynamics. We’ve been making companies unite that are competitors. I think to do that in seven months is remarkable.”The jury is still out on which will prove to be the best approach: Tejari.com’s integrated single-exchange model, or C1ME’s policy of a separate market for each country. Perhaps that will only become clear once buyers and sellers alike agree to take an online approach themselves. Then they will have to choose their favourite.||**||
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