During the late '90s and the early part of 2000, many people were busily working in startup X or Y, gleefully anticipating an initial public offering and the promise of cashing in on the New Economy.

Then the bubble burst.

Many people are out of work due to poor stock performance, unrealistic business models, or "vulture" capitalists. Several successful e-business companies watched their stock values plummet and began laying off employees, attempting to lower costs while winning the favor of Wall Street analysts.

We may not have hit bottom yet - several integration vendors' stock values are hovering at (or below) a dollar per share. Rather than address the entire tech sector, let's take a closer look at a specific strategy that promised (yet failed) to revolutionize how companies transact business with one another.

B2B exchanges were heavily promoted as a new, low-cost approach for transacting business electronically. Several startups appeared; some provided tools for building and maintaining exchanges, while others provided resources to host exchanges. Bold analyst predictions continued to surface, fueling a blazing inferno of B2B activity. B2B exchanges would be capable of generating billions of dollars - clearly someone was going to capitalize on this emerging opportunity and become very rich.

Or not.

Implementing successful B2B exchanges required attracting high levels of participation from both buyers and sellers, a delicate, if difficult process - exchanges can't attract buyers without sellers, and attracting sellers is impossible without buyers. Sellers in a B2B exchange can become frustrated since there is no clear approach for differentiating their services from other sellers within the exchange.

Technical and procedural challenges also proved to be a major issue. Many companies lacked the technical expertise or business process flexibility required to connect and succeed within the highly competitive environment of a B2B exchange. Companies were expected to abandon their internal metadata/naming conventions to accommodate proprietary XML vocabularies. These vendor-specific vocabularies were designed to represent a wide range of business transactions. Companies soon realized that these vocabularies were incapable of modeling all of their transactions, forcing them to develop custom extensions. This caused additional integration issues because one company's vocabulary was rarely shared by another. B2B exchanges that managed to attract buyers and sellers soon realized that very large volumes of consistent transactions were necessary for the exchange to generate a profit. Large organizations broke off and began to establish private exchanges to serve their own supply chain needs. These smaller, private exchanges proved to be easier to implement and operate since they served a single company's supply chain. As the apparent demand for public exchanges waned, many B2B vendors either went bankrupt or retreated into safer, more mature areas of the e-business model (such as supply chain management).

Not all public exchanges have ended in failure - several industry-specific exchanges continue to operate today:

Covisint serves the auto industry.

While the B2B exchanges mentioned above were still in operation at the time this piece was written, some of them are operating at a loss and have had to lay off numerous employees. Additionally, several large e-business vendors are continuing to experience problems. General Electric recently sold off 90% of its e-business unit (Global eXchange Services - GXS). Note, however, that GXS has been very successful - it continues to serve over 60% of the Fortune 500.

So what does the future hold for XML in e-business? XML-based e-business vendors and users should analyze the success of EDI prior to moving ahead. EDI has been very successful in linking companies' business processes together for decades. EDI also provides a rich set of metadata and business rules for defining, maintaining, and conducting e-business. Despite what you may have read, EDI does not necessarily require the use of an expensive value-added network (VAN) or high-priced vendor tools - EDI can also be used over the Internet, much like XML.

The popularity of instant messaging has introduced the concept of Business Activity Monitoring (BAM) - real-time agents capable of detecting and notifying all participants to exceptions that may arise across the value chain.

Web services provide the promise of low-cost, standards-based connectivity, but fail to address the issue of semantic integration. Despite the hype, Web services alone won't cut it.

Last, the gradual awareness of RDF and the Semantic Web has forced many vendors to reconsider traditional approaches to mapping and data transformation.

Perhaps an ideal e-business initiative will knit these disparate technologies together, enabling the vision of a collaborative, business process-driven Semantic Web to be realized. This is the next killer app - some company will surely capitalize on this emerging opportunity and become very rich.

Or not.

Published Jul. 31, 2002— Reads 10,910
Copyright © 2002 SYS-CON Media, Inc. — All Rights Reserved.
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About John Evdemon
John Evdemon, formerly coeditor-in-chief of XML-Journal, is an Architect with Microsoft's Architecture Strategy Team covering BPM, SOA and Internet Scale Computing. He is an XML and e-business expert, having served as CTO/Director of XML-Related Products for both a large integration platform vendor and a small XML-centric start-up. He has been working with XML since its early beginnings, is an Invited Expert with the W3C XML Core Syntax Working Group and has chaired several industry-specific XML initiatives.