15 November 2001 | Robin Parker
Online marketplaces are dying out because the risks they pose outweigh the benefits to suppliers, a procurement service provider has claimed.
James Bayley, co-founder of SwanBayley Purchasing, told delegates to an e-procurement forum in London that the infrastructure of e-marketplaces was fundamentally flawed. "Because the market is so broad, e-marketplace vendors make money from sites that fail, not from their own success."
Bayley questioned why suppliers should surrender their product, price or customer data to marketplaces, or allow purchasers to coerce them to cut margins. "It's easier to screw suppliers in difficult economic times, but they have long memories. You'll pay on the upturn."
In contrast, purchasing service providers are a neutral value proposition, giving buyers the necessary tools to control tenders and model contracts, while sharing costs equally with suppliers, Bayley said.
Speakers at the forum were largely sceptical of reverse auctions. John Adamson, joint managing director of e-business vendor Tranmit, said that adopters concentrate too strongly on cost-savings. "It's a negation of the procurement professional's practices."
Adamson urged purchasers considering e-procurement to turn conventional thinking on its head and automate payment processing first. "It's a low-risk process," he said. "E-procurement should be the bonus, not the critical part of e-business strategies."