Economics of InformationMgt 523Open Standards22nd February,2001 Joe Pendergrass Surya D Pathak Dongjo Kim Anil Yilmaz
Outline • XML Standards • B2B Industry • Why XML? • Commerce One • Analysis • Conclusions and Recommendations • Discussion
XML • Extended Markup Language • Supported by W3C • W3C developed XML as a standard method for parties to share information in the web environment. • XML is a structured language where a user can specify his own grammar for the system he is trying to describe (within the XML framework). This is known as a Document Type Declaration (DTD). Based on these DTD's a complete system can be described.
B2B Industry • Main value creation : cutting transaction costs • XML is emerging as the standard in the online B2B marketplace • Currently, several proprietary versions of XML are being developed to focus on specific types of internet commerce.
Why XML? • Why not EDI ? • Mode of exchange (Static vs. Real time) • Basic Data Delivery (VAN vs. Internet) • Connectivity (One to one vs. One to many) • Structured Language • Customization is possible • Companies can find their own niches
Commerce One is an e-marketplace company that provides a platform for B2B electronic commerce transactions • Commerce One also offers automated procurement solutions that allow users to operate more efficient, flexible supply chains • The company has developed a proprietary framework called xCBL for content, framework, and business processes based on XML.
Analysis The Cycle of Adoption XML Adoption • Why adopt? • Lower costs • More efficient supply chain • Network effects How does Commerce One benefit? Believes that it has the best version of XML in its niche.
Analysis Competition and Compatibility • Competitive power is widely dispersed (400 dialects of XML) • Many “competitors” are not online yet • Compatibility issues • Difficult to ignite positive feedback • May be winner take all at the niche level • Cooperation through E2E’s
Conclusions and Recommendations • Take advantage of early mover position. With nearly 400 XML dialects in existence, niche competition will become very fierce. Perhaps the only way to ensure survival is to ignite positive feedback and network effects in the niche. • Strengthen strategic alliances with leading program providers like SAP and Oracle and big manufacturing companies. In order to ignite network effect in individual e-market places, the best way is to strengthen strategic alliances with possible leaders of each B2B sectors.
Conclusions and Recommendations • Cooperation and collaboration with rival standard groups • To increase the switching cost:Providing better tools, modeling environments, and improved support for the standard can also increase the cost.
Conclusions and Recommendations • Provide incentives to pivotal customers to ignite positive feedback before other competitors come online. This will also help coax confused old-line companies to try this new type of marketplace. • Consider the acquisition of proprietary versions of XML in other B2B niches. By operating in more than one niche, the company can overcome compatibility issues by becoming a “one-stop shop”
Food for thought • Can we really claim XML as an open standard at all ? • What can go wrong for Commerce one: The company being an early mover? • Can companies like Ariba and Commerce one coexist with their own proprietary standards?