Business Models for P2P to be Turned on Their Heads

Business Models for P2P to be Turned on Their Heads

Posted by Pete Loughlin in Procurement Software, Purchase to Pay 26 Feb 2011

Purchasing InsightThe charging models of the supplier networks may be non-sustainable as the commodity transaction fees are replaced by added value services. But which comes first?  Develop the added value products or secure the customers prepared to pay for it?

Recently we began to speculate about how the future of P2P will look. This was inspired by a conversation with Jason Busch at Spend Matters who recently published a short series on the topic. (Part 3 is here.)

An important part to the backdrop to this speculation is the increasingly number of non-traditional business models that have emerged, particularly in the B2C internet world, over the last decade. Facebook, recently valued at $50 bn and twitter, the now iconic symbol of freedom in the tumultuous North African countries of Egypt and Libya, have both thrown away the rulebook. What makes their business models unusual when you consider the impact they have had is that they are free and despite the fact that they offer competing services, they inter-operate seamlessly.

In a previous piece we asked: “How will the new free, collaborative, interoperable model fit into the B2B world?  Will Ariba and OB10 have to start giving it away?” Facebook and twitter are easy to identify with and act as good analogies for what the future might hold but in the big bad B2B world we need to draw on bigger more complex business models and experience to understand what the future will really hold.

Big Bad B2B

There is a model that we can draw upon to try to guess at the look of the future. The banks. The traditional role of the banks, the role they they played originally, was to facilitate trade. The middlemen. Helping buyers that want to buy, buy from sellers that want to sell. The banking industry has become incredibly complex but in essence it provides commodity transactional services for free (or low cost) and makes it’s money from the exceptions and the added value: the late payment charge; the FOREX charges; credit fees.

The comparison with the B2B networks is obvious. They sit between buyers and sellers offering something that the buyers and sellers can’t provide themselves – the universal or generic transactional platform. The difference is that it is not a financial transaction but a data transaction. But ask yourself, what is the difference? Money isn’t real. A dollar bill is just a promise to pay. It’s just a record of a transaction. It’s data. The analogy between B2B networks and banks is very, very close. Why the banks have not embraced e-procurement and e-invoicing is beyond me.

The first rule of business: you need a customer

If we extrapolate this model the supplier networks need to take two messages on board. First, a sustainable future is going to based on offering commodity transaction services for free – face it, you’re not adding value – get over yourselves. Instead, use your infrastructure and customer base to deliver genuine added value.

The second message to take on board is the twitter message: The egg came first. Don’t expect your customers to fund your future and beware of your competitor that realizes that customers come first, profit comes later.

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