May 09, 2005
IP Marketplaces
Please note that contributed articles, blog entries, and comments posted on EDACafe.com are the views and opinion of the author and do not necessarily represent the views and opinions of the management and staff of Internet Business Systems and its subsidiary web-sites.
Jack Horgan - Contributing Editor


by Jack Horgan - Contributing Editor
Posted anew every four weeks or so, the EDA WEEKLY delivers to its readers information concerning the latest happenings in the EDA industry, covering vendors, products, finances and new developments. Frequently, feature articles on selected public or private EDA companies are presented. Brought to you by EDACafe.com. If we miss a story or subject that you feel deserves to be included, or you just want to suggest a future topic, please contact us! Questions? Feedback? Click here. Thank you!

Introduction


According to EDA Consortium's Market Statistics Service (MSS) report the worldwide revenue for Semiconductor Intellectual Property was $314 million in 2004 up 12% from 2003. This figure represents 8% of total electronic design automation industry revenue and is nearly the same as the PCB/MCM segment. There are hundreds of firms, many very small, offering IP. How do they attract customers and how do potential buyers ferret out the IP they require in this Internet age?


Before answering the question for IP vendors in the particular, lets us consider these challenges in general.


There are two basic categories of e-commerce, namely business to consumer (B2C) and business to business (B2B). In both cases there needs to be a way for the buyer to find the desired product or products say by perusing an on-line catalog or by executing a parametric search, a way to remember the chosen products (shopping cart) while on the site, a way to order the products for delivery, a way to pay, a way to track the order/shipment and a way to return items. A well designed e-commerce site will remember information from prior visits so that the buyer need not reenter unchanged information like address. The site needs to be able to process credit cards for consumers and
purchase orders for businesses. Setting up and maintaining a e-commerce site can be expensive, time and resource consuming.


The most common type of e-commerce site is a single vendor offering its products for sale. Dell has been extremely successful selling computers over the Internet. My last computer purchase was from Dell on-line. It should be noted that Dell does have a significant direct sales force in the field for large customers and multinational firms. Autodesk is a leading CAD software provider in the mechanical, GIS and AEC markets with revenue of $3.2 million in its last fiscal year and an installed base (AutoCAD) of 3.6 billion seats. Although it sells predominantly through a global network of value added resellers, one can buy its flagship products AutoCAD and AutoCAD LT from the
store on its website. The VARs will generally offer a discount from the list price on the website. Microsoft products which are sold by on-line and by brick-and-motor retailers can also be purchased on its website.


During the dot.com boom another business model (e-marketplace) gained favor to bring buyers and sellers together. Marketplaces can be setup by an individual seller, an individual buyer, a consortium of buyers, a consortium of sellers or by an independent intermediary. An individual seller might have difficult enticing competitors to offer products on its e-market website but could have success with companies offering complementary products and services. An individual buyer might have difficulty in attracting sellers unless it had considerable buying power. Government agencies both state and federal are good examples of entities with considerable purchasing clout. The advantages
in e-procurement for the buyer can be reduced costs in the purchasing process and better pricing from suppliers.


A consortium of buyers can exert considerable influence on a common supply chain. GM set up a B2B exchange for its auto parts suppliers, initially called TradeXchange. The idea was to streamline production by sharing information electronically. At the time GM was spending ~$87 billion a year on raw materials, vehicle parts, and MRO (materials, repair, and operating) supplies with its roughly 30,000 suppliers. GM would provide specifications and info on inventory and manufacturing schedules and suppliers would provide info on price and delivery capability. Trade Xchange supported an on-line catalog, a bid-quote process, or an on-line auction. Part of GM TradeXchange allowed suppliers to solicit bids for their raw materials, potentially cutting their costs. In the first two months of operations, GM sold stamping presses in two online auctions, reaping more than $2 million in sales, and purchased more than $1.7 million in materials from supplier catalogs posted on the site. Ford created a similar exchange called AutoXchange with of course different software, formats and interfaces. To solve this problem for their common suppliers Ford, GM and DaimlerChrysler announced in February 2000 that they had agreed to join together to create a single B2B supplier exchange called Covisint. The three firms had combined annual spending of $240 billion. The Federal Trade Commission started an informal antitrust review of the Big Three exchange but soon gave it clearance. In April 2000, French automaker Renault S.A. and Nissan of Japan joined. Also among the founding firms were Commerce One GM's technology partner in TradeXchange and Oracle Ford's technology partner in Auto-Xchange. In April 2001 Kevin English was named Chairman, President and CEO of Covisint. Earlier Kevin had been VP of Sales for a company I co-founded. Suppliers to the major auto OEMS felt that the Covisint was not intended to optimize the supplier chain but rather was just the latest tool to be used to squeeze margin from suppliers. They were
particularly hostile to the online auction. There was friction between the OEMs and also technical difficulties due to differences in legacy systems. Outside observers felt that the big three were more interested in the market cap of Covisint than in their supply chains. Covsinit never achieved the level of success envisioned. In December 2003 Covisint sold the online auction portion of its business to FreeMarkets Inc, which agreed to merge with Ariba soon after. In March 2004 Compuware acquired the products and technology of Covisint, LLC. It is believed that Covisint had about $25 million in annual revenue and around 135,000 users.


The two major e-procurement software vendors, CommerceOne and Ariba, saw their stock prices and market caps plummet at the time of the dot.com bust. Commerce One even went bankrupt.


Not all e-marketplace based upon a buyer consortium model failed. In March of 2000 Boeing, Lockheed Martin, Raytheon, BAE Systems and Rolls-Royce announced the formation of Exostar, an electronic marketplace aimed at increasing the efficiency of transactions and collaborations across the aerospace and defense industry supply chain. In June 2001 Rolls-Royce joined as an additional Founding Investor. They launched Exostar as a single e-marketplace allowing manufacturers, suppliers, customers, and service providers the ability to lower transaction costs significantly by offering standard products. Exostar has connected over 300 procurement systems in 20 different countries, and has
registered more than 16,000 trading partners worldwide. More than 100 companies are actively using Exostar's online business-to-business collaboration and distributed product development solutions.


While firms in a given industry may form consortiums to promote their common interest, relevant standards and the like, they are not generally inclined to form an e-marketplace to sell their wares.


A more common approach is for an independent third party to form an e-marketplace. One could argue as to whether a distributor, who acquires product from multiple suppliers and then sells it over the Internet to multiple buyers is really functioning as an e-marketplace. An excellent example of a distributor is Avnet who provides cost-effective services and solutions vital to a broad base of more than 100,000 customers and 300 suppliers. The company markets, distributes and adds value to a wide variety of electronic components, enterprise computing products and embedded systems. Avnet has two operating groups: Electronics Marketing and Technology Solutions. The former markets and distributes semiconductors, interconnects, passive and electromechanical devices with more than 250,000 active parts for sale. Technology Solutions market enterprise and embedded technology products and services. Both groups provide additional value-added services, including supply chain and design change management. In FY2004 the groups generated sales of $5.9 and $4.4 billion respectively. On April 26, 2005 Avnet announced that they have reached a definitive agreement to acquire Memec in a stock and cash transaction valued at approximately $676 million. Memec is a global semiconductor distributor specializing in demand creation and servicing the electronics industry
with 2,400 employees. The company provides original equipment manufacturers with engineering expertise and a portfolio of semiconductor devices, and helps design customized, differentiated products. Amazon.com would be another excellent example of a firm using the Internet for retail sales to consumers.


1 | 2 | 3 | 4  Next Page »


You can find the full EDACafe event calendar here.


To read more news, click here.



-- Jack Horgan, EDACafe.com Contributing Editor.




Review Article Be the first to review this article
CST Webinar Series

True Circuits:

Featured Video
Editorial
Peggy AycinenaWhat Would Joe Do?
by Peggy Aycinena
Retail Therapy: Jump starting Black Friday
Peggy AycinenaIP Showcase
by Peggy Aycinena
REUSE 2016: Addressing the Four Freedoms
More Editorial  
Jobs
Development Engineer-WEB SKILLS +++ for EDA Careers at North Valley, CA
Manager, Field Applications Engineering for Real Intent at Sunnyvale, CA
FAE FIELD APPLICATIONS SAN DIEGO for EDA Careers at San Diego, CA
ACCOUNT MANAGER MUNICH GERMANY EU for EDA Careers at MUNICH, Germany
AE-APPS SUPPORT/TMM for EDA Careers at San Jose-SOCAL-AZ, CA
Principal Circuit Design Engineer for Rambus at Sunnyvale, CA
Upcoming Events
Zuken Innovation World 2017, April 24 - 26, 2017, Hilton Head Marriott Resort & Spa in Hilton Head Island, SC at Hilton Head Marriott Resort & Spa Hilton Head Island NC - Apr 24 - 26, 2017
CST Webinar Series
Verific: SystemVerilog & VHDL Parsers
TrueCircuits: IoTPLL



Internet Business Systems © 2016 Internet Business Systems, Inc.
595 Millich Dr., Suite 216, Campbell, CA 95008
+1 (408)-337-6870 — Contact Us, or visit our other sites:
AECCafe - Architectural Design and Engineering TechJobsCafe - Technical Jobs and Resumes GISCafe - Geographical Information Services  MCADCafe - Mechanical Design and Engineering ShareCG - Share Computer Graphic (CG) Animation, 3D Art and 3D Models
  Privacy Policy