In a new book aimed at the executive and budding entrepreneur, Bermuda Stock Exchange cohorts Arthur Sculley and William Woods have tackled the timely subject of business-to-business exchanges on the Internet.

B2B Exchanges: The Killer Application in the Business-to-Business Internet Revolution "demystifies the jargon jungle and discusses the nature of business-to-business solutions on the Internet -- that is 'B2B' transactions'', according to the co-authors.

In particular, the two outline and analyse the growth of a particular segment of B2B electronic commerce -- Internet businesses or exchanges that facilitate transactions among multiple corporate buyers and sellers. This area of Internet commerce is different from the use of the Internet by one company, such as General Electric, for the procurement of supplies through a bidding process.

Like any good consultants worth a dinner-table speech, Mr. Sculley and Mr.

Woods also have forged what they call their "secrets for success'', in this case seven pieces of advice for creating successful business-to-business exchanges.

The book is clearly written, is well organised, and as promised, is relatively free of most jargon, although I tend to get bothered by the overuse of acronyms. The book seems to have taken the example of Bermuda-resident and mega-author James Martin (the 100-book-and-counting man) by dividing and sub-dividing topics down to easily digested chunks. The use of diagrams to illustrate the concepts is helpful. At the end of every chapter is the standard executive summary. Metaphors such "the Rainforest Effect'' are also used to draw out the authors' points.

The real value of the book for me are the examples throughout the main body of the book and in separate profiles of the actual companies currently breaking new ground as electronic B2B exchanges. Companies such as the Catastrophe Risk Exchange (www.catex.com), Chemdex Corp. (www.chemdex.com), CreditTrade (www.creditrade.com), e-Chemicals, Inc. (www.e-chemicals.com), Elinex, Inc.

(www.el-in-ex.com), e-Steel (www.e-steel.com), MetalSite (www.metalsite.net), National Transportation Exchange (www.nte.net), PaperExchange (www.paperexchange.com), PlasticsNet (www.plasticsnet, and TechEx (www.techex.com) are transforming ways of doing business over the Internet.

Mr. Sculley's expertise is garnered from 25 years as managing director with JP Morgan in asset management and corporate finance, and as partner in Sculley Brothers LLC specialising in B2B e-commerce companies. He is also co-founder and chairman of IntraLinks Inc., a B2B Internet exchange and has advised Catex, CreditTrade and Techex. He is chairman of the Bermuda Stock Exchange (BSX).

Mr. Woods was a lawyer with Linklaters & Paines in Hong Kong before becoming a consultant for the Stock Exchange of Hong Kong. He co-founded The International Securities Consultancy Ltd., moving on to become chief executive officer of the BSX. He also assisted in the drafting of Bermuda's Electronic Transactions Act 1999.

The stock exchange experience provides the two with apt examples for their discussions of Internet exchanges. The traditional trading floor model of the privately held stock exchange is being challenged by cheaper, faster and more efficient upstarts known as electronic communications networks (ECNs).

ECNs, which are not strictly B2B exchanges, are privately-owned securities trading systems offering fully-automated, order routing and trade execution services in competition with traditional stock exchanges. About 50 ECNs, including Archipelago, Instinet, Island and Strike, are now trading 25 percent of the Nasdaq's volume and five percent of the New York Stock Exchange's.

What's happening to the trading of stocks, bonds and derivatives through ECNs is similar to the transformations occurring in the buying and selling of such products as catastrophe reinsurance, plastics and credit risk, the authors state.

B2B exchanges, like ECNs, are able to compete through offering a more efficient price discovery thereby cutting down on the frictional cost. This frictional cost is associated with intermediaries who provide a broker service between buyers and sellers in business-to-business markets.

"The Chinese have a proverb that (loosely translated) states: `Big fish only grow in murky water','' the authors write. "Applied to B2B markets, a lack of transparency in a market sometimes allows brokers to dominate the market and dictate large commission payments based on the value of the transaction, rather than the value of the services actually provided by them.'' Thus middlemen in reinsurance deals can sometimes command up to ten percent of premium paid, while those in the plastics industry can get away with up to 50 percent commission.

"In such markets, a successful B2B exchange can have the same effect as a burst of strong sunlight on a murky pond,'' the authors state. "As the sunlight burns off the algae the waters clear -- buyers and sellers can then identify themselves more easily, price quotes and prices of concluded transactions start to circulate, and the market starts to become more transparent.'' To survive, the brokers will have to focus on redefining their roles and collecting more realistic and lower fees, the authors advise. The key to all this change is the electronic standard offered by the Internet which comes cheap and ready made. Since the standard has already been created, the issue becomes not one of technology, but one of market design and solutions for forming exchanges.

One piece of advice the authors push is for B2B exchanges to adjust their market offerings to the customers, the buyers and sellers who will use the electronic trading floor. Once they have limned their subject matter, Mr.

Sculley and Mr. Woods move on in Part II to describe the membership, ownership, trading, strategic partnership, and revenue models of existing B2B exchanges, about 100 of which are in operation.

Part III deals with their "seven secrets for success'': focus on a niche product such as second-grade steel; gain domination through being first to the market and attracting the big players; maintain commercial neutrality; ensure transparency and integrity; add value by building a virtual community; make strategic partnerships; and operate as a virtual corporation.

This is pretty ordinary stuff as pieces of bare-bone advice. However the authors add flesh by giving multiple examples of the strategies being used by successful exchanges and by outlining methods of attack based on their own financial and legal experience. The concrete suggestions about how to go about building such companies, for example the advice on creating a virtual community by adding features to a site, are all very useful. Bermuda and the BSX also get plugs in the chapter about how an exchange can operate as a virtual corporation.

"For companies considering the role of the Internet in their industry a dominant B2B Exchange will be the killer application that lowers their purchasing costs, reduces their inventory levels, and helps them to keep track of their orders and to expand their market globally,'' the authors conclude.

(B2B Exchanges -- The Killer Application of the Business-to-Business Internet Revolution by Arthur B. Sculley and W. William A. Woods. ISI Publications.

ISBN: 9627762598. Available online at wwwb2bexchanges.com, www.amazon.com, www.isipublications.com and www.barnesandnoble.com. Price: $27.50.) Tech Tattle deals with topics relating to technology. Contact Ahmed at ahmedelamin yhotmail.com or (01133) 467012599.

Killer appliactions: BSX chief executive William Woods