Automated Content Exchange -- A Key to Networked Commerce

Introduction

The first generations of electronic commerce were based on direct relationships and centralized architectures. Today, a new generation of electronic commerce is taking shape, based on the open, internetworked essence of the internet, using network architectures, building networks of relationships, and developing new networked business models. Networked businesses face a new challenge -- they need to exchange and manage content, business processes, and transactional data across multiple organizations.

This paper describes the evolution of business models and technology for networked commerce, and describes the key role played by automated content exchange. The paper is intended for business managers seeking an overview of the business and technical evolution of networked commerce, and for technical managers seeking to understand how content exchange requirements will be driven by business evolution. It does not provide detailed coverage of the technical requirements and specifications of content exchange applications.

The Evolution of Electronic Commerce Models -- From Hubs to Networks

Electronic Data Interchange (EDI) was the first form of electronic commerce to be widely adopted. A method for exchanging transaction documents such purchase orders over a private or leased network, EDI often yielded impressive returns. However, EDI implementations require a high level of investment of money and time; they typically take months to complete and cost hundreds of thousands of dollars. Consequently, EDI has been used primarily by big companies to automate the transaction process for high-volume, high-value purchases. It has touched only a small portion of the economy.

The World Wide Web popularized the internet and started an explosion in electronic commerce. It was much cheaper, based on standards, and it reached most businesses and many households in the industrialized world. At first, many people thought that the internet would lead to "disintermediation." Since everyone can go online, and it is cheaper to build a web site than to build stores or hire salespeople, the internet would allow sellers to connect directly to buyers.

The first two models of internet electronic commerce were the sell-side commerce web site, which allowed buyers to shop and serve themselves over the internet, and the buy-side procurement application, which enabled buyers to purchase supplies online.

Some companies that used multi-tier distribution, for example high technology manufacturers, also used the internet to support existing distribution channels. But this was widely viewed as a defensive move -- distributors were supposedly on their way out.

But, as it turned out, the story was only beginning.

Sellers found that as web sites proliferated, buyers would not come to their web sites. Sellers needed to connect with buyers where they are. Sellers discovered innovative ways to reach across the internet to support distribution channels, and to find new channels for distribution, such as affiliate networks and syndication.

Large companies -- and software developers -- who developed internet-based purchasing systems, found that they could open these systems and sell the use of this system as a service to others, creating horizontal marketplaces. Smaller companies in trade associations found that they could use the internet to combine forces and get better buying terms by forming buying groups.

Instead of rendering intermediaries obsolete, the internet created many new roles for intermediaries to play. Some functions that traditional distributors provided are going away. Distributors who specialized in pulling catalogs off shelves, filling in forms, and phoning for prices will need to change or go out of business. But there are many new functions for intermediaries. Vertical communities can assemble valuable industry information to help buyers find services and choose products. Open distributors can meet more of the needs of buyers by pulling together multiple sellers and services. In fragmented markets, exchanges can pull together buyers and sellers, and create markets for products whose buyers and sellers couldn't find each other -- like Beanie Babies and used test equipment.

These new network business models are evolving from existing business forms and growing from seed investments.

The Evolution of Electronic Commerce Architectures -- From Hubs to Networks

The first generations of electronic commerce were based on centralized architectures.

In EDI implementations, a single buyer automates transactions with a small set of suppliers.
In procurement applications, a single buyer automates transactions with a larger set of suppliers
In commerce web sites, a single seller offers products or services to many customers

Today, commerce architectures are evolving from hubs to networks. From many different starting points, companies are expanding their web presence from a single buying or selling location, to networks with many buyers, sellers, and partners.

The internet makes these networks possible, because of its low cost, ubiquity, and standardization. But it takes more than HTML links to do business across company lines. Network businesses need more sophisticated tools to manage the content, business process, and transactional aspects of cross-organization business networks.

Automated Content Exchange -- Enabling Networked Commerce

One element all of these new business models have in common is the need to integrate or distribute rich information among multiple organizations. This requirement is new -- it was nonexistent or less important in earlier electronic commerce models. Since EDI is used primarily to automate repeat purchases, the description of products is thin -- familiar items are selected from a list. Commerce sites require rich information about products and services. This information needs to be created or converted, and managed for web publication and re-use. But this information doesn't need to cross organizational walls.

In the new network business models, rich content needs to cross business lines on a regular basis. This paper describes the evolution of these new network business models, explains how the emerging requirements for automated content exchange are driven by business trends in each of the new models, and discusses the emerging technologies and standards for automating content exchange.



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