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Burden of Proof

Executive Summary

Early efforts to define the opportunity for e-commerce identified the problem--an inefficient hospital supply chain--but failed to prove that e-commerce is necessarily the answer. Now, Novation and Neoforma, a leading hospital group and its e-commerce partner, have released an industry-wide look at Internet-enabled supply chain economics, done by consultants Arthur Andersen, hoping to prove the value to both providers and suppliers of widely implemented e-commerce.

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Novation's E-Commerce Play

One of the last of the major hospital groups to commit to an Internet strategy, Novation has leaped into e-commerce with both feet through its recent deal with Neoforma. The company faces a host of challenges, not the least of which come from uncertain hospitals and reluctant product companies. For suppliers, the alliance of leading groups and dot-com companies raises questions about the future of the hospital marketplace.

Cardinal.com: The New Old Thing

Often overlooked in the debate over who's going to win the Internet wars, Cardinal makes its case for a distributor-driven model. A single place to purchase drugs and med/surg supplies, do remote order entry, and more efficiently process information, Cardinal.com builds off of traditional EDI programs. Like many e-commerce plays, Cardinal.com recognizes the value of an open system and the ability to work with as wide a variety of sites as the customer wants. But company officials make a distinction between a stance of openness and neutrality. In the process, Cardinal is trying to make the argument that rather than being disintermediated by the new B2B players, distribution-based models may ultimately prove the most robust and sustainable because of distributors' history of supply chain management.

E-Health's Second Mover Advantage

The revolution that the Internet is bringing to hospital supply is really two revolutions, one transaction-oriented, the other information-based. MedAssets hopes to capitalize on opportunities in the transaction-based realm by, in effect, applying Internet technology to two relatively traditional service businesses, group purchasing, and capital equipment refurbishing and resale. MedChannel, by contrast, is trying to create an infochannel that promotes wide efficiencies across a broadly defined supply chain, from OEM to end user. Both companies face a challenge: that of coming late to a B2B e-commerce market that is evolving rapidly. Their hope: a kind of "Second Mover Advantage", under which the early B2B leaders open doors to customers that both companies can more easily walk through.

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