B2B? Watch your Mouth!

by Rob Spiegel

There was a precious time then business-to-business (B2B) ecommerce was the sweet darling of Internet-based business. Sure, Amazon.com has a great brand name, but B2B was going to change the very nature of how business would be conducted in the future. Proponents scoffed at consumer e-tailers while pointing to the auto-exchange, Covisint, which is projected to handle some $750 billion in goods annually at some not-to-distant point in the future. And if Covisint saves automakers just 10 percent on procurement, well goodness, that adds up.

Yet the promise of B2B ecommerce is now considered bogus in many business circles, actually in most business circles. B2B has been called a false economy, the heart of irrational exuberance, a fool's gold that leads to broken dreams and crushed dreamers. A surprising number of seemingly bright and sincere executives hold B2B ecommerce responsible for the very downturn itself.

Oddly, there is considerably less contempt for the area of ecommerce that really has shown consistent signs of weakness, mass-market e-tailing. These executives don't scoff at Expedia, eBay or Amazon.com with the same venom they bring to online exchanges or supply chain management solutions. Yet if you examine the list of 600 or so failed dot coms this year, the greater number come from the world of consumer-based ecommerce.

The quiet secret not often discussed is that B2B ecommerce continues to show remarkable signs of both present and future success far beyond consumer Net sales. Consumer e-tailing has some success stories, but most fall into the area of specialty sites that sell to consumer segments with intense special interests such as hot foods, fly fishing, heirloom gardening or extreme sports. These sites live stealth-like below the contempt radar. Most of these special sites, when noticed, elicit admiration.

The bile of contempt is saved for B2B, the area of ecommerce that will almost inevitably live up to its transformative promise - in time. And the very executives who look on B2B with such disdain are actively in the process of implementing e-business systems in their companies to assist with logistics, supply chain analytics, inventory management, design collaboration, Web-based conferencing, reverse auctions, customer relationship management, indirect procurement and spot purchases.

So why the heartfelt disdain? Part of the negativity is simply the result of the audacity and arrogance of the young Internet entrepreneurs. The dot coms showed up in virtually every business sector, announcing they had arrived to turn the industry on its head, all without any depth of experience in the industry. For all their audacity, they were rewarded with sky-high IPO results after just a few quick months. Suddenly these interlopers were valued higher than the decades-old industry stalwarts. If the young dot com smarties had half a brain, they would have purchased some of those traditional dinosaurs. In their arrogance, they didn't see the value of the dinosaurs. Steve Case of America Online was one of the few with the wits of nab a traditional industry leader, Time Warner, while AOL's stock was soaring. Executives of traditional companies had good reason to fear these upstarts. There was a moment when an upstart could become your new boss.

Most of the dot com arrogance is gone, and with it went the swaggering entrepreneurs. Now it falls to the dinosaur companies to implement the transformation. And do it they will, even while they trash the concept of B2B ecommerce.

I recently attended the annual executive conference of the National Electronic Distributors Association. The dot coms that two years ago came to disintermediate and destroy these distributors are now "dot gone." In their place are humble software companies that sell e-business functionality to the industry dinosaurs. The leaders of these software companies are former distribution executives whose start-ups were funded by the very dinosaurs they now serve. Better to buy B2B solutions from a former colleague than a whiz-kid college dropout who knows nothing about your industry.

The executives in this industry won. They're eating their cake. They vanquished the un-scrubbed dot coms and are now happily hiring their former colleagues to transform their companies. Yet the bitter disdain over B2B persists. It likely stems from the quiet anger over the reality that the young no-nothings almost captured the age-old industries.