SCIQUEST.COM's B2B E-MARKETPLACE
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THE FUTURE
SciQuest attempted to position itself as a vendor neutral
partner for both buyers and suppliers. It secured over 100 enterprise customers
and contracts with 850 suppliers around the world by March 2001. The company had
more than 1.5 million stock-keeping units, ranging from reagent and antibodies
and latex gloves costing 50 cents, to high-end, $20,000 spectrometers. About 300
transactions were handled through the exchange each day, involving approximately
700 orders to suppliers. SciQuest had the capability to customize its
marketplace and integrate it with its customers' enterprise systems, internal
inventory systems and libraries. The company's catalogue had increased to one
million products in 2000 and its services had received the approval of major
global product suppliers and research organizations, including Dow Chemicals, Du
Pont pharmaceuticals, Glaxo Wellcome, Merck and Monsanto.
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SciQuest derived its revenues through commissions from
auctions & e-commerce transactions and from advertising and sale of
information on its site. The increase in SciQuest's revenues from $0.48
million in 1998 to $3.88 million in 1999 and $51.7 million in 2000, was
largely attributed to the establishment of the e-marketplace, since 90% of
the revenues was generated through e-commerce transactions. Though
SciQuest benefited from its relationships with large buyers and suppliers
through transaction volumes, it found itself working on very thin margins.
This was reflected in its bottomline, with the company consistently
posting net losses during the 1998-2001 period. While the net loss was
$4.22 million in 1998, it increased to $84.35 million in 2000. For 2001,
while revenues declined almost 55%, the loss remained almost the same, at
$82.84 million |
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According to analysts, SciQuest's losses were expected to
go up further in the future as spending on sales and marketing, content
development, technology and operating infrastructure increased. The global
slowdown in the InfoTech business in the early years of the 21st century,
coupled with the fact that SciQuest's business model was new and unproven, did
not augur well for the company.
QUESTIONS FOR DISCUSSION:
1. Why did SciQuest decide to set up a B2B e-marketplace? Explain how this
decision led to the implementation of the Pure ECommerce solution.
2. How is an e-marketplace developed? Briefly comment on the system's
architecture. How did SciQuest benefit from the e-marketplace?
3. What are the benefits of Pure ECommerce and how is Pure ECommerce
implemented? Despite streamlining its operations, SciQuest has not performed
well financially. Why?
ADDITIONAL READINGS & REFERENCES:
1. Brown Richard, B2B Alchemy at SciQuest, Line56, March 30, 2001.
2. www.sciquest.com
3. www.ibm.com.
4. SciQuest.com, Management of E-Business, ICMR.
5. Annual Report, 1999, 2000, 2001.
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