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BayanTrade
Teaches the World a Lesson
By Michael Alan Hamlin
October 1, 2002
"We are now known as the e-bidding
capital of the world," Carol E. Carreon recently told me. Carreon
is the vice chairman & CEO of BayanTrade, a barely two-year-old
B2B e-marketplace established in the Philippines at the height of
the dot-bomb. Although the timing was far from perfect, BayanTrade
has grown far more rapidly than originally expected, and if current
trends hold, stands a good chance of moving into the black next
year.
The company (Full Disclosure: BayanTrade
is a client of mine.) has surprised other e-marketplaces around
the world and industry observers alike in two ways. First, it moved
from foundation to operation in less than six months. Second, it
quickly figured out how to successfully develop and launch a fast-growing
e-bidding service, something no one anywhere has been able to do
as well according to industry spokesman Sandy Kemper. Kemper founded
eScout, a U.S.-based e-marketplace, and heads up the Global Trading
Web, an association of e-marketplace operators.
As a result, the BayanTrade director
for e-bidding has been named the global E-Bidding Special Interest
Group director for e-bidding of the International CommerceOne Net,
an umbrella organization for e-marketplaces using CommerceOne's
B2B solution. Its success has made BayanTrade something of an online
laboratory. "We regularly receive requests by other e-marketplaces
to visit our site and learn how we operate. That's third-party confirmation
of what we do, not speculation," Carreon says.
If she sounds a bit testy, it's because
Carreon is sensitive to speculation associated with the company's
structure. BayanTrade was founded by six large conglomerates that
occasionally cooperate with each other, but more often compete.
Occasionally a competitor or outside critic will suggest that the
nature of the competition between the BayanTrade founders doesn't
bode well for its future. Carreon disagrees.
"In fact, the consortium model
is the most successful e-commerce model globally," she says.
"There are a number of reasons for this. First is the consortium's
capacity to attract large numbers of sellers. For example, our founding
consortium together with our verticals (industry specific B2B portals)
account for 40% of total Philippine purchase spend. That's a powerful
reason for sellers to join BayanTrade.
"Next, the benefits of economies
of scale with respect to developing infrastructure and services
are substantial and long term, and most companies have other urgent
priorities competing for capital, people, and time. Third, e-marketplaces
provide an excellent venue for collaboration among competitors,
an accepted and growing management practice across industries. Coopetition
has been around for decades, it's growing, and it's not going away,"
Carreon explains.
"Finally, e-marketplace communities
are an important source of information on procurement and commodity
trends, which can be observed as they develop by the online community,
enhancing their capacity to respond to shifts in the market."
To support her argument, Carreon
rattles off BayanTrade's most recent value pass through (VPT) results.
VPT is the value of all transactions on the e-marketplace. They
are pretty impressive numbers. "We reached P5.0 billion (US$96
million) in VPT in the first eight months of 2002, or 114% percent
of VPT for the whole of 2001. The number of e-Bidding events is
already 132 percent of 2002, and e-Catalogue Purchasing is 172 percent.
So we're growing at better than 100 percent a year, and adding four
to five verticals a year, too."
In its second year of operations,
BayanTrade added three industry sectors: construction, electronics,
and power & utilities. In June, the e-marketplace signed an
agreement with the Bankers Association of the Philippines (BAP)
to host the BAP vertical which will serve the country's financial
sector. The company is currently working on a medical vertical,
which it expects to announce in the next few weeks.
As buyers and sellers have grown
accustomed to e-commerce through BayanTrade's e-bidding facility,
growth has increased in e-Catalog Purchasing, a process in which
buyers transact for products and services listed in online catalogs.
Where e-bidding involves one-time, special events, e-purchasing
through catalogs involves routine e-commerce, truly institutionalizing
the process.
BayanTrade processed almost P2.5
billion (US$48 million) in such transactions between its 244 buying
and 511 selling organizations in eight months. According to Carreon,
the "strong growth in e-Catalog Purchasing reflects the rapid
adoption of e-Commerce in the Philippines." She says growth
is driven by acquisition of new industry sectors, recruitment of
companies outside its founding consortium, and realization of efficiency
gains among BayanTrade's buyers and sellers.
"The higher efficiency of online
procurement processes helped both buyers and sellers realize substantial
savings, and encouraged them to strengthen their partnerships with
us," says Carreon. She cites Ayala Land, Inc. (ALI) as an example,
noting that "ALI saved as much as P70 million (US$1.3 million)
from January to May this year by bidding out construction requirements
through BayanTrade."
Carreon says another advantage is
faster procurement. "Traditional procurement methods require
two weeks and processing costs of approximately P1,000 (US$19) per
purchase order. On BayanTrade, companies can complete a transaction
in less than three days with an average processing cost per purchase
order of just P200 (US$3.80)."
BayanTrade has come a long way in
a short period of time in what can be fairly described as difficult
circumstances. What has helped is the search for ways to increase
efficiency and productivity of business processes, and e-commerce
does that. BayanTrade is still special, though, because it has not
just taught Philippine business how to do e-commerce. It's shown
the world how to do e-Bidding the right way, and grow into a sustainable
business at the same time.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001). He can be reached
at mahamlin@teamasia.com.).
Copyright © 2002 Michael Alan
Hamlin. All Rights Reserved.
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