Until recently, streamlining sales online was a mantra largely aimed at those on the buying side of the equation. The high-powered e-procurement engines built by Ariba (ARBA ) and Commerce One (CMRC ) allowed companies to quickly shop for the lowest prices. And with flashy claims of returns on investment in the mid-double digits, e-procurement companies snagged both major clients and media attention. Big companies ranging from General Electric to Nike all rushed to install the software. Meanwhile, sellers scrambled to link their systems with those of the buyers, spending untold IT dollars to meet demands of the new e-procurement programs.
But it appears the worm is finally beginning to turn. The reason: Some versatile software packages now being sold by Trigo Technologies, Ironside Technologies, and NetVendor, along with applications by big guns such as Oracle (ORCL ) and IBM (IBM ), allow sellers to more easily communicate with a variety of e-procurement systems. That, in turn, gives sellers better control over inventory and pricing, and allows them to more easily automate transaction flows.
The market for these sell-side products, analysts predict, could be big. How big? No one knows for sure, but any company with more than $100 million in annual sales is a possible customer. "Companies that have implemented applications from Ariba and Commerce One alone [represent] 800 companies out of the Fortune 1000," says Russ Henry, vice-president for marketing at Trigo.
Driving adoption is a clear imbalance in power, as buyers now hold all the cards in the business-to-business (B2B) realm. "The big problem out there today is, buyers are wanting to conduct business with suppliers online, but it's a very unbalanced equation. The buyers have these tremendously powerful applications from the Aribas and the Commerce Ones of the world, and suppliers are scrambling to figure out how to sell to them," explains Thomas Reilly, CEO of Trigo, based in Brisbane, Calif.
Take the case of Staples. The large office-supply company, which posted $10.7 billion in sales in fiscal 2001, has won industry kudos for its Web site, Staples.com. It quickly embraced the proliferation of e-procurement systems such as Ariba and Commerce One. But for all its online savvy, Staples figured out it had a big content problem.
To help customers and partners set up online sales catalogs, Staples was constantly scrambling to publish product descriptions, prices, and images onto its Web pages, using a helter-skelter variety of software and e-procurement systems. "We took product contents and images and pulled them out of one database, and then took pricing and pulled it out of another database. Then we handed it off to an IT person to format it. We had three different people in three different departments working on any file that we were going to send out to customers," recalls Anne-Marie Keane, a vice-president for B2B operations at Staples.
To simplify this process, Keane contracted with Trigo for an application that allowed Staples to push product descriptions, prices, and images out to potential partners using any number of e-procurement configurations with fewer hassles. Staples won't reveal how much money it saves using Trigo, but Keane says it has resulted in considerably less expenditure on IT manpower. "It allows us to really streamline a process that was very manual," says Keane.
By better connecting with e-procurement systems, this sell-side software reduces the need for employees to rekey orders from one program into another. And the programs also restore crucial inventory control. "If you only have so much inventory on hand, you may shortchange customers that could be your most profitable customers," explains Laurie Orloff, an analyst at Forrester Research.
Many of the supposed benefits of these new programs are exactly those promised by traditional vendors of so-called enterprise resource planning software, such as SAP and JD Edwards. But those inventory-control and -management programs proved notoriously hard to operate and implement. The newer systems, the companies claim, can be up and running in days and easily piggyback on existing systems.
The response from customers such as Keane is strongly positive. "We had some customers tell us they had seen a 62% reduction in transaction costs," says Trigo's Henry. Production Tool Supply, a Warren (Mich.) industrial-tool supplier with $200 million in annual gross sales, managed a 50% reduction in cost per sale with Ironside's order-management system. PTS has also managed to implement same-day shipping of all online orders entered by 6:00 p.m.
"We have seen our customers have their entire sales-distribution models change, so that they are taking orders from Ariba and Commerce One platforms from 11 p.m. to 5 a.m. in the morning, hours when they can't afford to staff their call centers," says Bill Lipsin, CEO of Ironside.
Ironside now has 200 paying customers, up from 60 two years ago -- many of them paying hundreds of thousands of dollars to implement its system. Trigo, NetVendor, and others are seeing similar growth rates. And the bigger companies are honing their sales staffs to better attack this market. Sure, misfires will occur in sell-side software, as with any broad implementation of complex programs. But judging from early customer reports, it's no longer a buyer's market in B2B land.
By Alex Salkever in New York
Edited by Douglas Harbrecht