February 2002

BT Ignite has gained a firm foothold in e-procurement, drawing partly on its relationship with Commerce One, but it has avoided the public marketplace route

Although predictions of market growth in the business-to-business e-commerce sector remain fairly constant, individual players have had a rough ride. Neither Commerce One nor Ariba - the two leaders in electronic marketplaces - has been turning in the profits that were expected a couple of years ago, and the anticipated popularity of public marketplaces has not really materialised.

However, both these companies have had conspicuous successes in their relationships with individual customers and resellers, and among the more promising on UK shores has been one between Commerce One and BT Ignite, BT's large, multi-stranded solutions business.

 

BT Ignite's relationship with Commerce One has built up steadily over the past couple of years, and was cemented last August in a deal under which BT sells and supports the Commerce One Enterprise Buyer Desktop Edition. This is an e-procurement product aimed at slightly smaller users than the parallel Professional (although scales are relative of course).

So what is BT Ignite's take on the e-procurement market now? Abimbola Oshisanwo (just plain "Bola" to all his colleagues), the head of Ignite Marketplace Solutions, draws a clear distinction between open and private marketplaces. "Some of the suppliers we work with were wary of e-procurement to begin with, but were reassured when they were told that marketplaces were not open. There's still a one-to-one relationship with customers, and that continues to be highly valued."

Private marketplace

This is why BT Ignite has focused all along on private marketplaces, where price information is not made public. The only type of open trading it runs is online auctions, which in any case are mounted by individual buyer organisations, and could be either open or closed. "And you could look on them as simply a device to facilitate tendering," Bola says.

"Low price is sometimes the objective of auctions, but usually there are multiple variables. The buyer's primary requirement might be high quality or service levels, or prompt delivery."

On the buy side, he accepts that companies see clear differences between using e-commerce to acquire non-core products (so-called MRO items) and using it for essential raw materials. "Some are nervous about using e-procurement for strategic purchases," Bola says. "They are more comfortable starting off on non-core procurement, and then extending gradually to other products."

As an example he cites Bass, which began by using BT Ignite's e-procurement system to purchase products such as computers and stationery, but is now also using it for consultancy, marketing services and HR. "They're getting much better management information as a result."

There can also be a clear-cut price saving in administration, Bola points out. "We use e-procurement ourselves at BT for buying stationery. Previously we used to print 9,000 copies of a 123-page catalogue listing products specifically for our organisation. Now we distribute that information electronically."

BT Ignite offers users three routes to implementing e-procurement. They can buy a software licence outright and run the system themselves behind their own firewall; they can buy it but allow BT to host it; or they can share a fully-bespoke "instance" of an e-procurement system run by BT.

"The ASP (application service provider) approach provides an easy entry route," Bola says. "It gives users a clear way of working out their return on investment. But there are limitations; for instance it's harder to integrate an ASP service with the user's back-end systems."

Steadily increasing

When we talked to BT Ignite the company was working with about 235 suppliers and 18 buying companies, and we understand the total is steadily increasing. Some of the suppliers work with more than one of the buyers. Most of the buying companies are in the FTSE or Fortune 100 lists, and include organisations such as Akzo Nobel, Bass, Boots and Powergen.

Although BT Ignite continues to explore other best-of-breed applications, its relationship with Commerce One is close; the two organisations run a joint sales operation, and share in the risks and rewards of their collective activities. In fact BT has a stake in Commerce One, and is represented on its board. It's also a practical relationship, Bola says. "Their product is very flexible. Use of XML makes it easy to plug in other applications." In the future, he thinks this capability could be useful for adding tracking capabilities.

At the moment, such logistics-related facilities play only a limited role in the e-commerce offering. "You don't really need to offer a fulfilment capability when you're dealing with standard MRO products," Bola suggests, but he adds: "We'll be looking into it over the next twelve months." Likewise the organisation will be looking at e-payment and e-credit systems and factoring, he says. "The real art is how and when you introduce these services."

Initially, most of BT Ignite's customers were UK-based, but now there is more of a pan-European perspective. Already it has three US-based customers and two continental ones. It is keen to establish a solid continental presence, and has started operations in Holland and Germany. It also runs a multi-lingual help desk. "When we offer a service, we want to put real support behind it."