It Takes a Global Village (to Nurture International Trading Exchanges)
With all the hype about globalization on the one hand and the Internet on the other, the international online trading exchange would seem to be the beloved offspring of the two. But this is a troubled child born into a complex, multicultural family of conflicting loyalties and confusing rules. In this Q&A Julian Bond explores the difficulties facing the growth of this promising e-citizen.
Julian Bond is the chief technology officer at Netmarkets Europe (www.netmarketseurope.com), which advises European companies on setting up trading exchanges and runs portals for B2B exchanges in Europe.
Q: Is there a separate B2B netmarket (online trading exchange market) in Europe?
A: It's not a completely separate market, but we're seeing two trends. First, companies are taking American models and trying to apply them in Europe as a separate enterprise. Second, all the big consortia are typically global and the underlying companies already have a presence in Europe. So there are similar activities in European markets, particularly the UK and Germany.
Q: How do the markets differ in Europe?
A: Although we tend to talk about Europe as one entity, it is really a collection of different countries, each with its own regulations and controls. Language and localization are the main challenges. Each government does local regulation and the European Commission regulates across the whole group. One key area is data privacy and protection. Guidelines are issued by the European Union that are then ratified at different levels by the individual countries. Germany and UK in particular are very strict about data and what measures have to be taken to protect it, which causes problems for global companies, particularly U.S.-based global companies, that must deal with much stricter controls. The VAT (value added tax) structures and rates also vary from country to country and in some cases VAT is collected at source rather than destination, which introduces another level of complexity.
Another problem for European companies is that the work in support services--logistics, credit finance and so on--has been very U.S.-centric, so its hard to find companies that offer these services across UK and Europe. The paperwork you have to produce in Europe is more complex than just shipping from state to state within the U.S.
Q: How do European antitrust laws compare to the U.S.?
A: Again Germany and the UK are at the forefront of taking a similar stance to the Federal Trade Commission and doing similar investigations. The Monopolies Commission in the UK takes a very similar stance to the FTC in the US. The case law behind it is obviously different, but the end result is more or less the same.
Q: What problems have you seen with netmarkets crossing borders?
A: I've seen a lot of companies spend a lot of money building expensive branch office networks only to fail. It's easy for the U.S. head office to look inward and forget that the European office needs tending. Companies that have done it successfully have partnered with local companies. In some areas like France and Germany you almost have to partner because it's very difficult to do business as an outsider.
Q: What is your experience with Asian markets?
A: My last firm, e-Exchange, was building a log head for IT products we had a lot of success in Singapore, Hong Kong and Taiwan--but not in Japan, which is ten times worse than doing business in Germany or France. We found the more developed parts of Asia there are very open to new technologies and to new ways of doing business. But if you go further afield to Malaysia, the Philippines and Indonesia the infrastructure is just not in place yet.
Q: What about countries that are not part of the EU?
A: There's a surprising amount of activity coming out of the Eastern Block right now. The Czeck Republic, Romania and Hungary are catching up fast in terms of Internet use and they're working hard on Internet technologies.