B2B Landscape Set to Change

Two of the three new e-business integration players roared to the top of this year's Best of Breed list, with Microsoft (www.microsoft.com) taking first place and IBM (www.ibm.com) second. The third new player on the elite list is HAHT Commerce (www.haht.com), which touched down at number eight.

Microsoft hit the top of the list with a powerful industry recognition factor of .26 and a solid customer-experience rating of 5.62. Driven by its industry recognition, Microsoft scored a powerful RFP Index of 1.46, besting second-place, newcomer IBM by almost three to one.

IBM is poised to go further up the list in years to come, however. In addition to having a customer-experience rating that actually beat leader Microsoft by a hair, IBM recently segmented its business-to-business integration products into three options based on customer requests.

The first level of WebSphere Business Connection Express starts with basic Web services. The Standard and Enterprise versions add functionality to support more transport and protocol options, as well as more partner and process connections. "As IBM strengthens its position on the business-to-business side, we expect veterans such as Sterling Commerce (www.sterlingcommerce.com) and Global eXchange Services (ww.gxs.com) to take major notice," according to AMR Reserach (www.amrresearch.com) analyst Kimberly Knickle. "For end users, it means more pressure on the vendors to provide simpler Internet-based options at lower prices," she says.

However, the future direction of Global eXchange Services is uncertain. In June, technology buyout fund Francisco Partners (www.franciscopartners.com) announced its acquisition of GXS. Nonetheless, the company is expected to maintain its Integration, Interchange and Marketplace product lines.

Despite coming in at number three on our e-business integration list, analysts feel that Sterling Commerce (www.sterlingcommerce.com) has a big challenge in 2003: getting the word out that it does more than electronic data interchange (EDI).

AMR Research analyst Eric Austvold says Sterling Commerce should be at the top of anyone's list when considering integration. "Sterling's biggest problem is awareness," Austvold says. "Most technology buyers are surprised to discover that Sterling offers more than EDI. Sterling's marketing department needs to kick into overdrive to get the message out: this is not your father's EDI vendor."

Web Startups Struggle

Meanwhile, the past two years have not been kind to Internet startups in the business-to-business market. On this year's list there is only one pure dot-com, FreeMarkets.com, which ranked tenth. According to a recent study of eight industries, only 43 percent of independent exchanges survived between April 2000 and July 2002. "Business-to-business exchanges thought they had a great value proposition, but actually misdiagnosed their advantage versus existing ways of doing business," says Adam J. Fein, president of Pembroke Consulting, which conducted the study with the University of Pennsylvania's Wharton School.

The study estimates there were 1,500 business-to-business exchanges operating in 2000. Now, fewer than 700 remain. And the study suggests that number could dip below 200 by the end of next year if the current shakeout continues. "Business-to-business exchanges were late movers, not first movers," Fein says. "They couldn't replace long-standing relationships in the supply chain between customers and their distributors."

Movement in the Marketplace

To keep up with the changing marketplace, QRS (Tradeweave) (www.qrs.com) simplified its product branding by dropping Tradeweave from its name. The company also consolidated its products into five groups: Exchange, Catalog, Merchandise, Sourcing and Showroom.

The number eight player, HAHT Commerce, is considered by many to be one of the strongest at J.D. Edwards (www.jde.com) and SAP integration. HAHT Commerce gained a foothold in the CPG market through a series of acquisitions in 2002.

In March, SAP combined its SAP Portals and SAP Markets subsidiaries into a single entity, MySAP Marketplace (www.mysap.com). The new company took the fifth spot on our list this year, compared to last year's number two finish in the E-marketplaces category. "As the trend towards private exchanges has grown, the need for companies to combine their marketplace strategies within an enterprise portal framework is demanding a more integrated approach," explains Beth Barling, an AMR Research analyst. The combination makes sense for customers, Barling says, because they now only have to deal with one sales channel.