This relentless focus on integration is starting to pay off. In July, e-Steel inked a three-year, multimillion-dollar partnership with Australian-based Broken Hill Proprietary (BHP) Co.’s steel business—the 19th largest steel producer worldwide—to build a custom network powered by e-Steel technology. Initially, the network will be open to BHP’s Australian customers and later expand to key markets internationally.

Integration at the Core

Strategically focusing on integration is a good move for e-Steel. By many accounts, revenues from B2B e-commerce are poised to balloon to the hundreds of billions, maybe even trillions of dollars over the next few years. But experts say those rosy forecasts are predicated on making integration a core capability of B2B exchanges. "Within two years, B2B e-commerce will hit $900 billion, but that’s peanuts compared with the size of the economy," notes Tom Harwick, research director for supply chain management at Giga Information Group in Cambridge, Mass. "It’s going to grow to a much bigger figure by 2005, based on the assumption that integration happens. If it does, B2B will be the preferred way of doing business. If it doesn’t, growth will almost certainly stall."

All the hoopla surrounding B2B’s potential has fueled the perception that a lot of the integration work has been done. Not so, say the experts. According to a June 2000 report from Forrester Research, only four out of the 50 large companies surveyed that are involved in e-business have integrated their back-office applications with electronic marketplaces, although most (85 percent) have integration plans in development. Then there’s the notion that building bridges between an exchange and customers’ back-end systems will be relatively straightforward. Far from it, when you consider Forrester’s findings that 70 percent of companies plan to participate in more than one marketplace, most targeting between four and five. "Unless you talk to the people who are really in it, there’s a perception that more integration has been achieved than what has happened to date," says Giga’s Harwick.

Integration issues have taken a backseat because most of the freshly minted exchanges believe they first need to focus on building up membership and liquidity in terms of the number of transactions. And that process has just begun. Forrester’s research shows that only 36 percent of all e-marketplaces have done more than 100 transactions a month. "The real issue is that there’s not enough traffic through the sites yet, so the motivation isn’t yet there [to focus on integration] on the part of the companies that build marketplaces and the companies that join them," says Simon Yates, a Forrester analyst and author of the report, "B2B Integration Road Map."