It's back to basics. No surprises here: the search for P2P has landed most people in B2B, or business-to-business e-commerce. It's hardly a new concept-B2B, is after all, industrial buying and selling, but in a much more efficient way. Already, many companies-Maruti, Tata Engineering, Mico, Hindustan Lever, and Bharat Petroleum-are doing business over the Net-either by creating their enterprise solution (e-procurement), or by participating in public or private marketplaces.

Stresses Alok Bardiya, Co-Founder & Advisor, Steelrx: ''Unlike b2c, here there's no need to define new markets or change the purchase behaviour of a very disparate group of people.'' That doesn't mean it's smooth sailing for B2B endeavours in the Indian space. Warns A.V. Ram Mohan, President (B2B), Satyam Infoway: ''What's discomforting is the lack of understanding on how to go about it. There's no silver bullet.''

The B2B space has evolved since Glen Meakem proposed to his bosses in GE that the company's procurement could be transformed by making suppliers compete for manufacturers' orders in live, open, electronic auctions. GE was not too keen, so Meakem branched out to create Freemarkets. Since then, companies have experimented with various business models-an enterprise solution (like HLL); a public marketplace (Steelrx), a consortia-promoted exchange (Covisint, the auto exchange) or a private marketplace like Freemarkets or Trade2Gain.

Consultants believe that every big company must participate in one or two public and private marketplaces each. While pharma and auto majors are going for public marketplaces, others like Lucas- TVS and Cummins have created their enterprise solutions, with varying depth and quality. Some industries-like chemicals-are amenable to spot purchasing; an exchange can aspire to become marketmaker.

However, in most industries, buying and selling is a combination of spot as well as long-term transactions. And these relationships take time to build-they are too powerful to be shaken just on price alone. For instance, an auto manufacturer sourcing automotive steel will be more than willing to pay extra for quality. Equally crucial are local market dynamics like credit; exchanges have to find innovative solutions to these issues. Internationally, the so-called neutral exchanges have flopped; some have even approached manufacturers with equity stakes in return for committed liquidity.

The other key trend is the emergence of industry-backed consortia-General Motors' Covisint is being replicated in India by auto, pharma and steel majors. But multiple players and smaller markets will force a consolidation. Says Rohan Ajila, CEO, Indiamarkets: ''Consolidation is necessary to provide the best and most complete offering to the client base.'' Only one or two players in any industry will survive.

The winners may or may not be content-oriented, but they will provide for sufficient trading mechanisms. Adds Mohan: ''B2B is for the long haul. You need robust products. The effort is now focused on developing a good customer profile. So, customer acquisition is the most important thing.'' Indeed, most B2B organisations will have to offer a range of services. Says Gaurav Deepak, CEO, Coolstartups, a technology-focused investment bank: ''Now, pure plays are ramping up their offline infrastructure and actively developing the market.''

The revenue models are also constantly evolving. And the percentage-based transaction-fee model, though good, is fast becoming unsustainable. The transaction feel will come down, from an average 2 per cent to 1 or 1.5 per cent, or even lower. Some, like Satyam's B2B venture, will switch to a flat fee, based on the volume of transaction. Predicts Subroto Banerjee, CEO, Trade2Gain: ''You will no longer have a fixed percentage-based model.''

Besides, there are several issues facing B2B commerce today, from PC penetration levels, security, infrastructure, technology, and mindsets. Suppliers are sceptical; they fear these exchanges are just a means to drive down costs. Big corporate buyers, on the other hand, come in with the mindset that they can always set up an exchange on their own. Then, there are hr issues: the search for empowered employees to make online purchase decisions.

Some of these issues will be addressed in the guidelines for inter-bank fund transfers that the RBI is working on. But, the core factor is the customer's comfort. While there's scope for enterprise solutions and marketplaces with robust transaction features, success will hinge on addressing these challenges. B2B is here to stay. But growth will be incremental, not exponential.

-Ranju Sarkar

First person 
All the right moves

When I look back at the past 12 months, it feels like 12 years. The amount we have packed in, learnt, and grown, both as an organisation and as individuals, was something that I could never have imagined possible in such a short time. Remember, November, 1999 was the period when valuations were the name of the game-and of the b2c boom. We were ones with the difference-we were B2B. We chose a model that could be easily applied to the Indian environment: disposals using the auction mechanism. companies had tonnes of stuff to dispose off, most do not take disposal as seriously as procurement. So acceptability is greater.

While trade2gain.com started out as a horizontal exchange, in the first month itself, we realised the need for focus. This gave birth to the private marketplace. Our services today work like that of any application service provider. At least 80 per cent of our work is offline. We map current processes, then integrate the online with the offline to effect a far more efficient process. However, the customer is extremely demanding. Given a chance, he would love to offload vendor development and management on to an exchange like ours. We, therefore, need to constantly innovate to make his work easier.

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