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Game theory in the popular press.

B2B: Keep it Complex - Stupid

Server World
Opinions: Contra
Martin Butler
December 2000
text is a cache of http://www.serverworldmagazine.com/contra/2000/4q/12_complex.shtml

B2B commerce is oh so simple — at least it is if you believe some of the more prominent technology vendors in this market. Companies such as Oracle, Commerce One and Ariba boast B2B implementations that take less than a few months to put in place. These claims should of course raise some immediate doubts about the value of the resulting systems. If it is easy for your system to be built, it's easy for someone else's to be built as well and, as the economists would point out, where barriers to entry are low, competition is usually greatest and rewards the least.

It would be nice if the fairy-tale world of the vendor community translated into real benefits for the businesses that use their technologies, but alas, this is not the case in many instances. Promises of easy, once-and-for-all solutions that have great appeal to managers that feel intimidated by IT are simply not worth the free lunch over which they were offered.

Back to reality. If you want to win in the B2B wars you will have to do two things — neither of them very pleasant. First, you will have to embrace complexity, and the greater your ability to absorb it and handle it effectively, the greater will be your competitive advantage. Secondly, your B2B systems need to be smart — and the keyword here is embedded intelligence.

As far as complexity is concerned, it really isn't enough to implement some form of order matching exchange, where buyers and sellers meet to trade. Anyone can do that — and besides, buyers and sellers will soon expect such a service to be provided for free. The real value in B2B exchanges is the ability to handle complexity and automate the things that would otherwise involve lengthy manual processes. The simple act of creating an order has between 10 and 20 ancillary processes associated with it. Automate these and you are in business. This is exactly what is happening in the aerospace industry, where a number of technology vendors are working with manufacturers to create a hub-and-spoke architecture (with the exchange at the hub) that can handle and simplify the massive coordination effort that goes into designing and manufacturing an aeroplane. Markets will reward B2B intermediaries that are capable of handling complexity — all the "out-of-the-box" hubs and exchanges are probably better off being put back into the box.

If your business can embrace complexity, the next step is to make your B2B systems smart. They need to be able to handle the more mundane aspects of buying and selling automatically. Expect to see embedded intelligence calling upon disciplines such as game theory to support automated negotiation. Washington State University has developed what it is calling a "next generation e-business server." This supports gaming models in the way complex contracts are handled. Pity the poor negotiator that has to deal with this system.

Simplicity is cheap, and it's the stuff that we all wish the world was made of — but it isn't. Get ready for an order of magnitude increase in the complexity and sophistication of the systems our businesses use.


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