Remember the B2B commerce exchanges of a decade ago? At one point, new exchanges were popping up almost weekly.

By 2002, the concept was dead. Mohanbir Sawhney, writing in CIO Magazine in 2002, penned a eulogy here: “Just two years ago, business-to-business trading exchanges were the rage. Experts, including myself, waxed eloquent about the potential of B2B exchanges to act as hubs, connecting buyers and sellers in electronic marketplaces. Of course, we were all very wrong. Now, most B2B exchanges are either dead or on life support. However, it’s not the concept of the exchange that is flawed but the execution of that concept.”

The idea of using the Internet to mediate commerce between companies didn’t die completely. Some players, like Ariba, survived to introduce a cloud-based version, the Ariba Commerce Cloud. Validating the concept, IBM just dropped $1.4 billion to acquire Sterling Commerce, another old B2B exchange player. The value for CFOs lies in where and how this concept can save money.

For Ariba, the focus is on streamlining operations between companies, explained Ariba CEO Bob Calderoni in its cloud announcement. As proof of the need, Ariba cites data from industry analysts: More than 80 percent of B2B commerce transactions are completed manually, and companies still send 85 percent of invoices and payments on paper. By some estimates, this inefficiency costs industry $650 billion annually.

The Ariba answer is its Commerce Cloud, which moves the old Internet B2B exchange of a decade ago to the cloud and combines it with Ariba’s Web-based trading community. The difference this time around, according to Ariba, is collaboration.

The old-style exchanges were built around closed-loop technology that could not be easily accessed by buyers and sellers alike, thereby impeding collaboration. They also didn’t connect with systems in the enterprise. Instead, they usually focused on one application for one industry without addressing other facets, like working capital or sourcing other goods, explains Ariba. With the cloud, Ariba thinks it got it right.

The old Internet exchanges also often required special networks, called valued-added networks (VAN), running specialized protocols, namely electronic data interchange (EDI), which specified particular data structures, formats, and syntax on both ends of the transaction. Presumably, Ariba and the other cloud-based exchanges have masked all of that ugliness through the use of XML.

IBM’s acquisition of Sterling Commerce is intended to facilitate B2B integration and cross-channel capabilities through Sterling’s selling and fulfillment capabilities across supplier and partner networks and sales channels. The goal: help organizations create more intelligent and dynamic business networks by simplifying and automating the way they connect and communicate with customers and suppliers, both on-premise or through cloud computing delivery models.

There is no doubt that considerable inefficiency when conducting business among partners and suppliers exists. Both IBM and Ariba promise to change that. The idea of an Internet B2B commerce exchange was a good one in 2000, and it remains attractive today. Now let’s see if Ariba, Sterling, IBM, and the cloud can improve on the execution. ###