In the recently published book MetaCapitalism by Grady Means and David Schneider (Wiley, 2000), it is estimated that global capital market value will grow from $20 trillion to over $200 trillion in less than 10 years. The driving force behind this growth will be the business-to-business (B2B) e-business revolution.
Through B2B, companies have a channel for conducting business transactions with numerous vendors and buyers, improving efficiency and reducing costs. At the same time, these companies also have quick and better access to extensive information about competing products and services, empowering them to make smarter business decisions. It will be those companies that make the best use of this information that ultimately survive and thrive in the new economy.
In this month's column, we will discuss a data warehouse's integral role in the operation of an e-market.
What are E-Markets?
The term "e-markets" refers to online business communities that provide value to members through aggregated purchasing power, supply chain integration, process efficiency and information sharing.
An e-market is built upon e-procurement, the electronic buying and selling of direct (raw materials and finished products) and indirect (supplies and consumables) goods. E-markets also generate revenue through transaction fees imposed on members.
Types of E- Markets
There are two types of e-markets in today's economy:
- Vertical: A vertical e-market focuses on a single industry, from source to consumer, allowing all firm members of that e-market to conduct business through one network.
- Horizontal: A horizontal e-market is organized across multiple industries and may focus upon one common process, such as purchasing or logistics.
Many of the e-markets we see today are vertical, or industry-based, such as Myaircraft.com (airlines), eChemicals (chemical firms) and PharmaExchange (pharmaceutical companies).
Each e- market competes to capture market share and attain critical mass. This competition is forcing e-markets to lower the transaction fees collected from member organizations in order to gain market share.
Data Warehousing and E-Markets
One of the primary goals of e-markets is to facilitate the sharing of information in a standardized format so that it is easily interchangeable among its member organizations. To differentiate its services and stay competitive in the marketplace, an e-market must evolve into an "infomediary," adding value as well as generating revenue through the buying and selling of information. To become an infomediary, an e- market must be able to capture and utilize the information that flows through it.
The efficient management of strategic information will become the primary differentiator of an e-market. An e-market facilitates transactions, which then generate information about the e-market's users. Today, much of the value associated with this information is lost because an e-market does not have the technology to store and analyze it.
To effectively manage an e- market, its member organizations must implement a data warehouse that can integrate, store and analyze information from multiple sources (both internally generated and third-party supplied information). A data warehouse prepares an e- market for the transition from a transaction processor to an infomediary by leveraging its knowledge capital. This knowledge can be used to improve business processes, marketing and sales strategies, and the financial position of e-market members.
At the same time, the information provided by the members of an e-market is very valuable to organizations outside of these online communities. When transformed into an infomediary, the e-market can broker information to individual companies and other e-markets throughout the entire supply chain.
The Risks of E-Markets
As was the case with the first generation of Internet-based consumer retailing business-to-consumer (B2C) today's e-market focus is on being first to market and capturing market share by signing up as many buyers and sellers as possible. Clearly, all of these e-markets will not survive in the long run. Without a data warehouse, an e-market runs the risk of operating under a business model in which the information collected from e-market members is stored in distributed systems that may be incompatible and lack transparent communication capabilities limiting access to this information and thereby suboptimizing these business processes.
Implementing a Data Warehouse
When implementing a data warehousing solution for an e- market, you should:
- Include a data warehouse in your initial e- market development plans. A data warehouse is necessary to maximize the value of an e-market; thus, it must be considered during the initial planning and budgeting of an e-market.
- Develop new and reengineer existing business processes. When implementing an e-market, organizations must consider the business processes associated with the strategic use of the information and the skills that will be required to support them. Some of the business processes affected by data warehouses are performance measurement, targeted marketing, customer segmentation, e-analytics and data mining.
A data warehouse is critical to the success of an e-market. In the new economy, information transformed into knowledge is the key to long-term profitable success; the efficient management of knowledge is a key business differentiator. A data warehouse is the only technology available that can help e-markets effectively store and manage their knowledge capital.
As e-markets continue to evolve and more organizations adopt these business models, the demands for advanced analyses to help track and act upon changes in the marketplace will increase. To the data warehousing professional, this means new challenges: developing improved real-time data management solutions that can instantly update information and finding exciting new ways to deliver these solutions to clients.
To address these challenges, data warehousing professionals must get closer to the business applications that drive the need for information. They need to understand how and why their companies can use this information for business growth.
Contributors to this month's column were Dr. Glenn Stoops, a partner in PricewaterhouseCoopers' Customer Relationship Management and Strategic Change Practices, and Scott Sognefest, a principal consultant in PricewaterhouseCoopers' Global Data Warehousing Practice.
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