B2B NETWORKS LINK STRANGE BEDFELLOWS.

• Author: Drucker, Vanessa
• Position: Business-to-business

Getting into bed with the enemy has always been a popular theme of film and fiction, as the spats and squabbles of Kiss Me Kate, It Happened One Night, or Pride and Prejudice have amply demonstrated. But these odd alliances are no longer confined to the cultural domain: Old rivalries between corporate foes are being smoothed over as a rash of business-to-business (B2B) exchanges bring rivals together.

These electronic networks are in their infancy, but the technology promises big improvements in costs and speed of delivery as companies across the country and around the world pool resources to streamline procurement and transaction processing. Giant companies like the Big Three automakers are in the game, having announced formation of such a network last winter. So are major auto parts suppliers and huge consumer goods companies like archrivals Coca-Cola and Pepsico.

Such traditional competitors may eye each other warily, but now must seriously consider putting aside their differences and enter exchanges. That's not an easy decision, as most rivals are haunted by fears of losing trade secrets, eroding pricing margins and potential antitrust concerns.

Still, many companies are concluding that the efficiencies gained outweigh the risks. Announcements have come hot and heavy in recent months, even if most of the groups are still in the planning stages. Most have not yet named a chief executive, settled on a final structure or even chosen a name. (One exception is Transora, a B2B network in the consumer packaged goods area; see "Transora's Speed from Seed," page 26.) "Most have yet to process their first transactions," notes Don Etsekson, founder and CEO of Seattle-based LiveListings, which is currently launching an online system for automotive/truck/industrial parts.

As companies mull over their roles, they must decide whether, and to what extent, exchanges make sense and truly add value. Exchanges come in a variety of flavors, differentiated by ownership and transactional models. As defined by ownership, exchanges may be structured as co-investments among equals, possibly to be taken public at some point. Alternatively, an independent investor may set up and maintain an exchange as a separate entity from the participants.

Despite all the hoopla, the word "exchange," Etsekson insists, is easily abused to describe any e-commerce-enabled Web site. The real McCoy is a "neutral playground where all the power is shared." Transactions may be conducted in several ways, such as in auctions and/or catalogs, in which sellers post offerings on the site and buyers bid. Other...