The challenges faced by enterprise in making the strategic move to e-business is a cause worthy of exploration

By M. Anwar Usman
B. Eng (Hons), UK; MSc (UK)
June 16 - 22, 2003




M. ANWAR USMAN is the Managing Director of Universal Board and Industries. He is an industrialist and an entrepreneur. Anwar completed his Bachelors in Electronic and Communication Engineering from the University of Liverpool, UK in 1997 and joined Perfect Engineering Works as Operations and Technical Support Manager. He has also worked for Siemens Pakistan Engineering and Philips Electrical Industries of Pakistan. After few years of work experience, he decided to get professional degree in computer sciences and did MSc in Business Information Technology from another prestigious University of Manchester Institute of Science and Technology (UMIST), UK in 2001. Later, he joined Metropolitan Bank as a Systems Analyst and Systems Designer. And also started Lecturing, Software Engineering Projects Consulting and writing/supervising research papers for MS/PhD level program at SZABIST. Also actively participating in activities carried out by Association for Computing Machinery (ACM) Karachi chapter and IEEE Karachi chapter. He is a professionally designated MIEE and MIEEE. Also member of ACM, Member of Pakistan Engineering Council (PEC) and Member of Committee for Telecommunication and Software Development at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) as well.


Each e-marketplace places a primary role of "marketmaker" to match buyers and sellers, brokers deals, and facilitate transactions [Kobielus 2001]. Today's dominant "e-marketecture" is the hubbed marketplace, a central Web site at which buyers and sellers focus on transacting business activates. Hubbed e-marketectures go by many names, which often reflect the type of the business models developed by particular marketmakers. Indeed, any given marketmaker may combine elements of several business models into its hub-based service. So we cannot expect the real world to shake down into clean marketplace models. Most common names for hubbed marketectures are as follows: Auction, Bot, Aggregator, Broker, Community, Exchange, Mall, Marketplace, Hub, Listing Matchmaker, and Portal. There is no specified rule about any of these labels mentioned above, and many marketmakers use them interchangeably. Hubbed e-marketplaces are evolving very fast to divide them into any but the most flexible of taxonomies.


Marketmakers can effect policy changes with the click of a mouse where as economists spend their lives contributing to the formulation of macro and micro-economic policies. Changing the business rules at the marketplace hub means you re-engineer supply chains far and wide.



One can describe any e-marketplace as a "stack" of these seven functional models: Hosting, membership, aggregation, Transaction, Pricing, Payment, and Facilitation. Figure 4 below shows the hubbed marketplace's layered architecture. We will discuss only few of these functional layers with respect to the architecture of a particular e-marketplace we are proposing. The e-marketplaces, as fundamental technical specifications that support online environments where buyers and sellers meet to do business, places B2B interoperability frameworks in their full economic context. What distinguishes one e-marketplace from another is not so much that it uses cXML, XML/EDI or some other set of technical interfaces but it is the business rule, the process model, that drives the transactional workflows that these e-marketplaces are set up to host.

For an e-commerce glue layer, a full-featured e-marketplace hubsite should implements an intermediate layer of software adapters between communicating Trading Partner (TP) applications, exposes the functionality of possibly incompatible TP applications to each other, manages the transfer of data between TP applications over appropriate protocols, translates data exchanged between TP applications, enforces appropriate business rules in interactions between TP applications. There is a "superglue" on top of e-commerce glue, where Server is basic glue for interoperable e-commerce, and also host of other new-generation B2B "interchange servers" which manages document mapping, translation, and message-based routing between dissimilar applications. We can call trading hub as the superglue in the e-commerce equation. This is a niche where software products such as Ariba Technologies' Trading Dynamics Market Suite are more appropriate solutions. Such products enable marketmakers to configure the hosting, membership, aggregation, transaction, pricing, payment, and facilitation options appropriate to their trading environments.


Hosting a privately managed marketplace is a bit like running an economy, but on a narrower scale. But hosting a B2B hubbed e-marketplace is a complicated and costly undertaking. If one is a dominant buyer in the market, he can turn his existing supply chain into an e-marketplace. A marketplace's defines who owns, controls and manages the trading environment. We can group B2B e-marketplaces in four basic categories:

BROKER-HOSTED MARKETPLACES: Such environments is managed by an entity that is neither a buyer or seller of the traded good or service but instead, the marketmaker simply brokers deals between others who bear the associated financial risks and rewards.

SELLER-HOSTED MARKETPLACES: These are environments managed by one of the sellers in the marketplace, often a dominant seller or by a consortium of sellers.



BUYER-HOSTED MARKETPLACES: These are environments managed by one of the buyers in the marketplace, often a dominant buyer; or consortium of buyers.

INDUSTRY-HOSTED MARKETPLACES: These are environments managed by an organization owned and controlled by a broad range of buyers and sellers in an industry.



The marketspace is the online parallel to the physical marketplace. In an online marketspace, buyers and sellers exchange information about the goods and services, reaching agreements through information alone. Information-based goods and some services may be delivered through the marketspace; physical goods and some services may be delivered to the customer later on, outside of the marketspace. Some interactive marketspaces offer rudimentary negotiation, usually of the price for items which are relatively well-defined, such as credit cards and cars. These items are ones for which the ontology problem is relatively simple, and can usually be solved by displaying either a few critical pieces of information or a picture of the item.


Every trading community is a culture with its own specific formats rules, and procedures for doing business. An e-marketplace's transaction model defines how traders are introduced, offers floated, contracts negotiated, orders submitted, and deals executed in that community. We are describing e-marketplaces' transaction in terms of their commercial contracts, bargaining mechanisms, and transactional workflows. But we will further only going to discuss the bargaining/ negotiation mechanism.


Business transactions are generally viewed as processes to exchange goods and services for some form of compensation. Being at the core of all economic activity, transactions are the object of much research in business and economics. "A transaction occurs when a good or service is transferred across a technologically separable interface. One stage of activity terminates and another one begins". Of the many features that can be used to characterize and analyze transactions, we concentrate on participants and transaction phases.


Transactions usually involve three categories of participants: buyers, sellers, and intermediaries. Buyers and sellers are the active groups in terms of exchanging goods and services (sellers) for some form of compensation (buyer). The third group, intermediaries, offers a variety of services to support and facilitate transactions. It includes financial institutions such as banks, credit-card companies, and insurance brokers; providers of shipping, logistics, and warehousing services; and consultants, industry associations, and market researchers offering advice, product data, or market information.


Business transactions consist of a number of sub-processes. While there is generally consensus on what a business transaction is all about and whom it involves, the approaches to delineate their sequence show some variety. As with any definition, the task largely depends on the research objective and perspective that is taken. Comparatively simple models distinguish between three stages: information, negotiation, and settlement. In their empirical work to determine the impact of electronic networks on an organization's degree of virtualization, identify six separable stages of a transaction. (Refer to figure 5 below). Schmid discusses the characteristics, organizational structures, and potentials of electronic markets. He uses a four-step approach to outline transaction processes as the core activities that take place in (electronic) marketplaces. In the following, each of the phases is summarized (Figure 5 below provides an overview and contrasts of all approach)




In the information phase of a transaction, both buyers and sellers reach out to the world in search of information. Buyers locate information sources such as product catalogs, use them to scan product listings, obtain offerings from prospective suppliers by issuing Requests for Information (RFI), and gather additional information about products, vendors, or transaction-specific requirements. A variety of Web-based information systems and other applications are available to provide support for the information phase of a transaction. Electronic catalogs, for example, feature comprehensive product descriptions and search tools, configuration support for complex purchases, workflow routing for approval processes, and access to additional information such as market research data and product reviews.


Of all transaction phases, the negotiation phase shows the broadest range of variations ranging from simple processes to very complex arrangements. Negotiations are often perceived as processes where a small number of prospective customers and sellers (often only one participant on each side) bargain on product prices and other terms of a deal. The parties jointly identify possible solutions with the goal of reaching a consensus, usually in the form of a contract.

As prospective buyers and sellers start communicating directly with each other, interaction is at the centre of attention. In this phase, influence is the primary object of exchange between the transaction partners. In fact, the negotiation phase is very often quite simple or even non-existent, such as in the case of retail buys and pre-negotiated contracts. Traditionally, auctions form a well-defined form of negotiations, confined to price alone and relatively easy to automate. Recently, multi-attributive auctions have been developed that account for a broader set of variables. Negotiations can be distinguished according to their validity, ranging from a single transaction to multiple-year contracts. The longer the time span that is covered, the more complex the bargaining process tends to be structured.


Economic mechanism design looks at how to design the "rules of the game" so that each independent agent, acting only self interestedly, will behave in a certain manner. The mechanism of interest here is the auction, in which the buyers bid for an item following a predetermined set of rules. While the outcome of the auction is unknown beforehand, the rules are well laid out, and both the buyer and seller can formulate optimal strategy and program it into a software agent ahead of time. The auction mechanism's biggest limitation is that it only allows negotiation for price, not for colour, delivery schedule, or any other variable; however, despite this shortcoming, the auction mechanism has had success on the Internet and is well worth studying. Auction theory is a complex economic subject, and space does not permit a treatment here.


In this section we present various approaches to brokerage. The diversity of functional features of brokerage services in the electronic marketplace makes it useful to define several criteria in order to classify them. In terms of functionality, brokers support different phases during an electronic market transaction. (See section on Transactions). Most brokers on the Internet support the information and partially the agreement phase. Guttman propose a slightly different model. In their work they analyse seven brokerage services (called "mediating agents") and show, which phases they support. The functionality ranges from looking for the right product and comparing different product alternatives to negotiating the terms of the deal. Besides their functionality, there are several other dimensions that play a role in the implementation of a brokerage service:

Provisioning describes the nature of the content of the trading entity (on-line information, physical goods, or virtual goods).

Information gathering describes the way, in which a broker is given access to information of market participants. The broker either gathers the information to create a catalogue before the user requests it, or dynamically after receiving the user request.

The payment dimension determines, how the broker itself is paid. The broker can be paid per usage or per transaction.

Ownership dimension determines if the mediator is the owner of the content or not. The distinguishing factor between a broker and a seller is the ownership relationship with the mediated good.

Finally, the technology dimension determines the underlying techniques used to provide the brokerage services. Many approaches have their roots in distributed systems research. Research projects around ISO's RM-ODP or OMG's CORBA provide many valuable ideas. A second major category of technologies is focusing on establishing brokerage services on the Internet.




Most brokers on the Internet concentrate on the aggregation of information from underlying electronic catalogs. However, a growing number of brokers allows dynamic aggregation, where the gathering of information is made after receiving the user request. As most markets are extremely volatile, it is important to have this flexible way to adapt to the frequent changes of information sources. Andersen Consulting's Bargainfinder and Netbot's Jango are some of the most well known examples for brokers supporting dynamic gathering.

The lack of interoperability standards between e-commerce applications leads to high costs for the broker. Brokers face the challenge of combining all the information within a single coherent structure through which buyers can navigate readily. New approaches that define high-level interoperability protocols for product listings, offers or orders (e. g. XML/EDI) could make it much easier to automate these tasks. These standards are a critical enabler for a whole new generation of electronic commerce systems. However, so far there are no widely adopted interoperability standards for Internet commerce.


Another large class of projects tries to develop brokers on top of distributed object systems like OMG's CORBA. Object Web technologies got a lot of attention during the past few years. Especially the combination of CORBA and Web standards lead to a flood of research projects and new products. Several projects like ABS, OSM, COBRA, GAIA, and ABROSE are conducted by European consortia. However, for e. g., ABS (Architecture for Information Brokerage Service) tries to define an information brokerage service architecture based on ODP-RM and TINA concepts. The project designs and implements prototypes of an open brokerage system using CORBA and Java.


The alleviation of the challenges faced by enterprise in making the strategic move to e-business is a cause worthy of exploration, mainly due to the economic consequences of such research. In generic software architectures, the N-tier architecture appears to lend itself best to a flexible e-business set-up. Similarly, in terms of flexible data interchange, XML is cited as the obvious choice in the context of business document exchange, with independent business rules are put forward as enabling the flexibility into such a system.

Hence, the investigation is set to the goal of demonstrating an approach that provides a flexible architecture for e-business. Thus this approach basically combines the contemporary technologies and methodologies. The demonstration of the approach will be achieved through the implementation and evaluation of a prototype.