In time, a new breed of software and solutions companies will emerge to automate and redesign specific inter-enterprise business processes. As these new companies develop a solid base of customers, they can then start connecting those customers with suppliers to create a marketplace. By that point, most of the suppliers and buyers would be on the same platform, and it would be easy and useful to connect them.

Solving the Right Problem

Some B2B exchange companies are getting the message and have repositioned themselves as enterprise software and services companies. They are de-emphasizing their market-making functions and strengthening their process-enablement functions. Consider Celarix, a Boston-based startup founded in 1998 by two of my former students. Celarix operates in the area of collaborative logistics. In its early days, the founders debated what Celarix should look like when it grew up. They realized that the company could emphasize two general areas in its business: An exchange that would match logistics vendors with their Global 2000 customers, and software that would allow enterprises to streamline their global logistics by monitoring all their transportation vendors and shipments in one place. Two years ago, Celarix felt that the logistics marketplace was the more attractive opportunity. But reality lay in the other direction. The company now focuses on selling software and services like systems integration, trading partner verification and transportation contract administration. Celarix now sees the logistics marketplace as a byproduct of the software and solutions business, and not its main focus.

Instill, a California-based B2B startup, which I advise, learned the same lesson. Instill provides supply chain solutions for food service industry giants like Sodexho Marriott, Subway and Tricon. Two years ago, Instill felt that it could create a lucrative purchasing hub called Foodscape that would allow transactions between food service providers and suppliers. Today, Instill sells supply chain management software and related services to food service providers. Its software solution includes procurement management, analytics for purchasing management, contract management and collaborative planning. Instill looks a lot more like a software company than a marketplace.

There are business processes besides procurement that can be enabled by B2B software. Consider marketing and new product development, which have been largely untouched by the enterprise software revolution. A host of exciting new companies are creating software and services for improving these processes. In the area of enterprise marketing automation, companies such as Aprimo, Emmperative, Kickfire and Notara are building platforms that allow marketing executives to plan and analyze the results of their marketing programs, allocate budgets and implement campaigns. In the area of new product development, companies such as MS2 are helping product management teams automate the process of defining, designing and marketing new products. Like the companies that focus on supply chain management and procurement, these startups are tackling a specific business process to enable collaboration?not transactions?and selling their products to individual enterprises?not entire industries.