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The Industry Standard's 2nd Annual "Internet Summit" was
held July 15-18, 2000, at the Ritz-Carlton, Laguna Niguel, CA
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"Billionaire Beach Party Does B2B"

by Graeme Thickins
grt@gtamarketing.com

Every 'Net bigwig you could think of, the "e"-litest of them all, headed for the beach to catch this one...the second annual affair, held again at arguably the primest resort property on the California coast. Yes, bigger this year (though an older, more business-like crowd). Yes, sold out again--hundreds turned away, the sponsors said. And, yes, clubbier than you could even imagine. Co-produced by analyst Mary Meeker and VC Bill Gurley, the Summit was well put together (like this group would accept anything less?).

The first topic in this first full afternoon session was The Future of B2B. John Ayers, CEO of $10B Carrier Corporation, spoke on the subject of "How I Saved $100 Million Using E-Commerce." He also had one of the funnier opening lines: "Thanks for inviting me as the token representative of the earnings-based economy." Ayers told us the big benefits for his firm came from web-enabling their suppliers, which has allowed them to take inventory out of the supply chain, increasing turns dramatically. "About 70% of our cost structure is in buying 'stuff'," said Ayers, "and by yearend, 50% of our purchasing transactions will be done on the web."

Following Ayers' talk, four big names in B2B joined in a panel to discuss "Who Controls the Future of B2B?" Are the big consortia of bricks-and-mortar companies we've heard so much about now coming out on top? Don't count on it, said at least two of the CEO panelists. "Heck, 95% of them have yet to even incorporate, let alone do anything!" said Dave Perry, CEO of Ventro. "They've just been getting all the Wall Street Journal headlines." Mark Walsh, CEO of VerticalNet, added: "Spinning out your employees and hoping they'll become 'Net-centric is not easy."

On the other hand, Walsh said that "the days of pure-play 'Net exchanges are over--that bubble's been burst. Some of the 'Net companies will soon be buying the real companies." Perry of Ventro added that, of 1000 'Net marketplace companies now competing, he's betting less than 50 will be around in 4 to 5 years. "The difficulty isn't the technology--it's the culture change," said Glen Meakem of FreeMarkets. "Yeah, and big, rustbelt companies aren't about to let tattooed, pony-tailed Netrepreneurs tell them what to do," added VerticalNet's Walsh.

Will the government be sanctioning some of the new consortia, such as the automakers' Covisint, for antitrust reasons? Yes, the panel agreed. And what of development of B2B or vertical marketplaces in Europe? Mike Long of Healtheon/WebMD said his firm will easily export their concept, and had already done so to Japan. All the others were positive, with Walsh adding: "Europe is a great pattern recognizer, and they've seen this movie." His firm is doing well in Europe, he said, with committed partners. FreeMarkets' Meakem added that Germany and the UK are well ahead of France.

In an interview of Keith Krach, CEO of Ariba, following the panel, Bill Gurley congratulated him on his firm's just-released quarterly results, which showed a 600%+ increase in revenues. Krach said they did it by "executing well, and so did our customers." Like Cisco, he said, who's saved hundreds of million of dollars so far, and is happy to talk about it. He and his team of seven have come quite a way since September '96, he reminisced, when they raised $6 million in two days. "We didn't even do a business plan, because we knew the VCs wouldn't believe it, anyway."

Asked his view of how 'Net markets will succeed, Krach says it won't necessarily be the big, traditional companies who will succeed. "Who are the CEOs of these consortia?" he asked. "It boils down to leadership -- committees can't run them." Also, he noted that some successful exchanges could even be non-profits, like Visa and MasterCard.

Krach said Ariba's key differences from CommerceOne are that they'll be the defacto standard platform, their significant network, and they're not in the consulting business. Recent wins including BMW, VW, and Dana Corp., he said, more than make up for losing the Covisint deal to their arch competitor, Commerce One.

The biggest limiting factor to Ariba's growth right now, said Krach, is "leadership bandwidth." So, they look real hard at the people part of acquisitions. And they just passed on a strategic acquisition because it would have "slowed them down." The major benefit the market realizes from their technology, Krach says, is reducing the average cost of an order from about $150 for buyers and $90 for suppliers, to less than $10 per order via the 'Net.