Trying to make e-markets work

Two emerging players believe that their offerings could deal with the one big problem that no-one has solved: how to get people using e-markets.

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By  David Ingham Published  July 13, 2002

|~||~||~|Call them e-marketplaces, e-markets or virtual trading exchanges, the one thing any online business to business (B2B) effort needs to work is active users. However, how to persuade companies to sign up and start doing business online is the challenge that has faced operators of e-marketplaces from the start.

Two fledgling initiatives, one with its base in Oman, and one pan-Gulf effort, believe they may have found solutions to this particular problem.

OmanTradaNet (OTN), which has been in development for around eighteen months, switched on around two months ago and had around 100 companies signed up as of mid-June. The company is currently meeting with potential business partners and users about the possibility of bringing OTN’s electronic trading system into the UAE.

The other initiative is SouqAlKhaleej.net, due to launch in October, which claims that it will be the first e-marketplace to truly facilitate cross border e-commerce in the GCC, rather than focusing on one geography. This initiative enjoys the official endorsement of the Federation of GCC Chambers of Commerce, the umbrella organisation for the GCC’s 30 individual chambers of commerce.

Alan Livingston, the CEO of OmanTradaNet, says that his project is succeeding in Oman, and should do in the UAE, precisely because it doesn’t function like a classic e-marketplace. Rather than build a market and wait for companies to come and use it, Livingston explains that the OTN strategy has been to identify what he calls ‘hubs’, major entities, private or government, that carry out large amounts of procurement. Once these hubs, of which Livingston says there are around fifteen in Oman, are signed on, their suppliers, mostly small to medium businesses, tend to follow.

Once connected, however, those companies do not then start buying and selling in a virtual market according to the classic e-marketplace model. Instead, the ‘hub’ company will send out an electronic request for quotation (RFQ) form to the OTN system, which then routes the RFQ directly into the supplier’s ERP system, or (if the supplier doesn’t have ERP) to a secured Web site. The supplier can then enter their quote into the electronic RFQ form and return it to the ‘hub.’

Rather than building a marketplace, OTN is facilitating direct electronic communication between companies and their suppliers. It’s a system that is remarkably similar to good old fashioned EDI, except it runs over the internet instead of expensive proprietary networks.

The system even uses technology developed by EDI pioneer, GE
Information Services. “EDI is thirty years old; now we’re making that process available to anybody,” says Livingston.

Early users of OmanTradaNet include Muscat Municipality, which orders large amounts of stationery, and Tarmac Alawi, a major construction firm. It’s currently free to join OmanTradaNet and a fee of up to OR1.3 (around Dhs/SR13) is charged for each transaction, the price depending on the volume of transactions conducted.

There is a variable cost involved in connecting a company’s IT system to OTN, but the intended end benefit is a significant reduction in the cost of carrying out a purchase. Asked how much, Livingston says that a large user of the system can expect to spend $15 per transaction, rather than $40 or more to do a transaction manually.

All of what has been described above works if a company has a computer, but the vast majority of companies in Oman don’t even have a personal computer. Livingston says, however, that he still can, and wants to, include these companies in OmanTradaNet.

So how is he going to do it? He says that these companies will receive notifications on their mobile phones that an RFQ is in the OTN system. The company can then access and respond to the electronic RFQ from the nearest internet café or available PC. Because the quality of internet cafes in Oman is variable, OTN has been training selected cafes in how to offer the system and has badged them as ‘E-centres.’

The company, whose key backer is Oman’s Zawawi group, is eyeing an autumn launch in the UAE, possibly under the name UAETradaNet and probably in partnership with a UAE company. “We’ve identified key hubs and it’s clear there is a requirement for what we are offering,” says Livingston.

The other emerging player, SouqAlKhaleej.net, is eyeing an October launch, and it is also loathe to call itself an ‘e-marketplace’ a phrase that no-one seems to want to be associated with any more. Abdullah Samhan, CEO, claims that SouqAlKhaleej.net will stand out on two counts: it will be the first e-marketplace with GCC reach, rather than a one country focus; and it includes services that other e-marketplaces don’t offer.

SouqAlKhaleej.net’s reach is a result of its official endorsement by the Federation of GCC Chambers of Commerce, which will promote the marketplace to the 500,000 companies registered at the various chambers. This, Samhan argues, will help give the marketplace the high level of participation that current players lack. “This is the first regional business to business project, and the first regional project under an official umbrella,” Samhan told Arabian Business.

Big name backing alone won’t guarantee SouqAlKhaleej.net’s success, however. Samhan claims that the marketplace will also includes features and services missing from previous regional efforts.

Samhan focuses in particular on electronic document transfer and digital certificates, vital but often overlooked parts of doing business online, he says. Samhan’s argument is that there can be dozens of documents involved in a commercial transaction, particularly when it is cross border, but current e-marketplaces don’t take this into account. SouqAlKhaleej.net will allow those documents to be transmitted electronically and in a secure manner, approved with a digital signature.

That assumes, however, that governments will issue key documents electronically and that banks will accept electronic documents and digital signatures. Samhan says that banks will agree and whilst governments might be harder, “chambers are convinced, so it will be easier to convince governments.”

However, whilst it might be possible to put in place the infrastructure required to do business online, there’s no guarantee that the 500,000 companies under the Federation of GCC Chambers of Commerce want to trade online. What SouqAlKhaleej.net hopes is that the prospect of cross border GCC trade and the Federation’s endorsement will overcome the resistance of companies. Samhan’s ambition is to eventually link SouqAlKhaleej.net into international e-marketplaces, opening up the whole world to those 500,000 companies.

The one thing both SouqAlKhaleej and OTN seem to agree on is that marketplaces need participants to work and need them fast. In terms of geographical focus and the way their offerings work, the two are taking very different approaches. ||**||

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