Online exchanges – rivalries between systems are subverting the good intentions

It seemed like a good idea at the time; and Carrefour, Sainsbury's and at least twenty other retailers still believe they are on to a Good Thing with GNX, the marketplace (also called a trading exchange or portal) for retailers to use for communicating and collaborating with suppliers. Not only can orders be placed, processed and tracked online, but things like promotion planning and monitoring and product specification and design can also be carried out by any number of relevant parties through one computer system.

This, surely, should reduce time to market, cut costs, result in more appropriate products and therefore higher sales, and strengthen working relationships.

In theory, yes. But – and it's a big but -Tesco, acting like a spoiled schoolboy, decided it couldn't join the same community as Sainsbury's, so it set up its own marketplace, WWRE (Worldwide Retail Exchange). It now claims to have over 50 retailer members.

Another exchange, Transora, is designed to allow consumer packaged goods suppliers to talk to manufacturers and retailers. Whether Transora is complementary to GNX and WWRE or their competitor is a matter of opinion, but any way you look at it, there are now three major exchanges for retailers.

COMMERCIAL JEALOUSY

Retail isn't the only industry breeding exchanges like rabbits; as with GNX and WWRE, commercial jealousy in other business sectors has also led to major competitors refusing to join exchanges together. Take container shipping, for example. P&O Nedlloyd was one of the founders of Inttra, intended to be an industry-wide marketplace; American President Line decided it couldn't play with P&ONL so went to GTG Nexus, along with 11 other carriers. OOCL is going its own way via CargoSmart, which it hopes will attract liner companies not using the other two exchanges.

Almost every industry is going through the same explosion. And while no one denies competition is good – in the right place – think about why exchanges werebom in thefirstplace andhowtheywork.The idea is for everyone in one industry to talk to each other; high levels of security ensure no company can see competitors' data without permission, so participants retain their own terms and conditions, pricing and so on The benefits are meant to come from speed and ease of communication and the ability to share information, helped by standardised technology and a hub in the middle which can help ensure data is transmitted to the right party in a form that the recipient can understand.

Having two, three, ten or a hundred exchanges per industry only complicates things – to the point where it becomes more logical for a company to set up a private exchange with its partners than to join a public one. With so many exchanges competing with each other, which one should a company join? Will it have to join more than one? And aren't XML standards meant to enable any two systems to talk to each other easily without the need for an exchange?

MAJOR CHALLENGES

AMR Research, which specialises in e-commerce, forecast several major challenges for what it calls "consortia trading exchanges" at the end of last year. Among them were the "too aggressive" promise of functionality; cost to integrate back-end systems; need to budget for the total cost of the exchange; supplier recruitment and integration; and immaturity of standard.

Its predictions published in February 2001 forecast that these CTEs are "on shaky ground" and that private trading exchanges are the way to go.

Has no one learned the lessons of EDI communities yet? Marketplaces may have another name and use a different technology, but the principles are the same: companies have to join together to make them work. Big companies should not set up an exchange and bully their smaller suppliers into joining; standards have to be created and adhered to, without the development of sub-sets of standards by companies or industries which think they are different; and anyone wishing to join an exchange must be prepared to spend money to do it right.

Isn't it time organisations took a more mature view of how – and why – they use technology?