Wall Street meets Main Street

FOR THE MOMENT, there are clear distinctions between business-to-business trading exchanges and financial services exchanges. But the similarities between these realms -- their underlying technology and business processes -- make them likely to be complementary endeavors.

Foreseeing the parallel opportunities, NextSet Software, a Palo Alto, Calif.-based newcomer, has joined forces with Los Altos, Calif.-based Talarian to resell the latter's messaging infrastructure middleware. The middleware will be offered as a backbone for NextSet's suite of b-to-b trading exchange creation products.

The new agreement with Talarian, expected to yield combined offerings early next year, is a clear attempt to apply lessons learned in the financial services realm to b-to-b trading, said Mark Palmer, vice president of the Americas at NextSet.

International exchanges fare better

The market for business-to-business trading exchanges outside the United States appears to be growing in sharp contrast to the shakeout under way for American b-to-b exchanges, said vendors and analysts. This upsurge in activity rreflects a ramp-up for Internet infrastructures in non-U.S. sectors and confirms that the b-to-b shakeout is "pretty much a U.S. phenomenon," said Laurie Orlov, an analyst at Forrester Research, in Cambridge, Mass.

For example, the WorldWide Retail Exchange (WWRE), an online trading market for retailers and more than 100,000 suppliers, partners, and distributors, showed signs of growth with the addition of 11 new members, including Coop Schweiz, a food retailer in Switzerland; the Coop Italia, the marketing and purchasing division of the Coop Group, based in Italy; Galeries Lafayette, of France; Laurus supermarkets, of the Netherlands; and several U.S.-based concerns, including Toys "R" Us. The WWRE now counts 53 of the world's leading retail companies in its membership tally. The WWRE is basing its headquarters in Alexandria, Va., and plans to open its U.S. offices in January 2001. Last week in Hong Kong, iMerchants, an e-commerce platform vendor, and Intel Semiconductor also agreed to combine efforts in Internet infrastructure and services for b-to-b exchanges among the many Asian-Pacific ventures springing up in many vertical industry categories.

Observers, however, caution against generalizing an exchange's chances based on geography and assumptions about technology adoption. But they note that overseas b-to-b markets have much more headroom than their equivalents in the United States.

"What we're seeking to do is make an inherently nontransactional, unreliable, and low-performance environment a transactional, reliable, and high-performance one," Palmer said.

Also with an eye toward the needs of b-to-b trading, Tibco Software, also of Palo Alto, will announce this week the delivery of open-source code for its much-anticipated Pragmatic General Multicast networking software, co-designed with Cisco Systems.

Multicasting, used in securities trading rooms, cuts down on network traffic by sending a message just once from a server rather than broadcasting a copy on a point-to-point basis.

Real-time, reliable multicasting is the first of three great steps that need to be taken to bolster b-to-b e-commerce, predicted Vivek Ranadive, founder and CEO of Tibco Software, which serves global securities trading rooms.

Adding intelligence to multicasting via subject-based addressing will be the next step, "and then making it highly personalized will be the third step," Ranadive said. The goal is to "to give people what they want, when they want it, and in the manner they want it," he said.

Exchanges will also need to provide the time stamping and validation of data against a central database, as well as to offer document exchange supported by workflow and safeguards for data integrity, said Albert Pang, an analyst at IDC, a market research group based in Framingham, Mass.

But providing integration to reach the multiple tiers of exchanges is a more crucial problem that many exchanges have overlooked, said Joshua Greenbaum, principal analyst at Enterprise Applications Consulting, based in Daly City, Calif. "Without the integration [of second-and third-tier suppliers] you have a wonderful dialogue with yourself," Greenbaum said. To integrate the "n tiers" will require a multiple vendor approach of middleware and EAI (enterprise application integration) players. "This has the potential of being a gold rush for these kinds of vendors," he said.

In the future, b-to-b exchanges could become "very complementary" to traditional financial services exchanges, said Larry Tabb, an analyst at the Tower Group, a Needham, Mass.-based market research firm for financial services.

A harbinger of this convergence is the effort under way between CheMatch, a Houston-based exchange for bulk commodity chemicals, and the Chicago Mercantile Exchange, analysts said.

This story, "Wall Street meets Main Street" was originally published by InfoWorld.

Copyright © 2001 IDG Communications, Inc.

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