The initial confusion about both Omnexus' mission and the role of electronic commerce in the plastics industry did not take long to manifest itself.
It happened at an early meeting between resin supplier Ticona and one of its customers negotiating a contract at Ticona's offices in Summit, N.J. There at the conference table, along with the customer and Ticona, sat sales managers from Omnexus.
Ticona was one of the five resin-supplier founders that had created and funded the online marketplace in June 2000, with each ponying up $10 million in start-up monies. Soon after, the dot-com received well over $100 million in funding from about 20 suppliers and distributors.
Omnexus trumpeted itself as offering a new way to buy resin, one not based on multiple telephone calls, faxes or golf-course outings. Instead, processors could compare and buy materials from multiple suppliers through one Web site.
It billed itself as a type of telephone service, connecting resin supplier and customer to do the same work they normally would discuss. But therein lies the rub, said Karlheinz Schuster, global e-business director for Ticona.
``We never would have brought the telephone company into a meeting. It was difficult to explain why Omnexus was there,'' Schuster said. ``We underestimated the direct relationships between buyer and seller.''
It was clear to him how muddy the concept of e-business still was, at least in 2000.
In a traditional industry used to traditional relationships, that identity problem could have been one factor in Omnexus' demise. The trailblazing dot-com lasted three years before discontinuing its transaction platform Nov. 30 and laying off its 45 employees based in Atlanta and Zurich, Switzerland.
Many in the industry believe that the future of online trading has been handicapped seriously by Omnexus' exit.
``Not many companies will be able to make a living at it,'' said Colin Masson, research director for chemical and process industries with Boston-based AMR Research Inc. ``You're only able to get a small fraction of the money in chemicals and plastics generated through exchanges. It is not a business model that is particularly attractive.''
Wayne, Pa.-based Elemica Inc. may try to fill the void. But whether processors see it as a viable alternative is open for debate, Schuster said.
Beyond that, even in-house resin sites are not performing as well as was advertised in the late 1990s. Online trading is not dying, but it is an animal that needs more care and feeding than first might have been imagined, said Andy DuPont, global director of electronic channels for Midland, Mich.-based Dow Chemical Co.
``Ultimately, the customers voted by not adopting Omnexus, and they're the ones who didn't support its ongoing operation,'' DuPont said. ``In general, this process has been harder than what was originally envisioned. E-commerce adoption has not been like a rocket taking off. It takes a lot of time.''
A perfect storm of difficulties - the tough economy and the unusual ownership setup at Omnexus - might have thwarted the company from the start. But at the end of the day, Omnexus should be proud of what it accomplished, said David Jukes, chief executive officer of distributor Distrupol LLC of Chertsey, England, and a former Omnexus vice president.
The original mission - the grand central marketplace for resin trading and information - could not be put into practice, he said.
``We made mistakes in the early days in promoting e-commerce as strongly as we did,'' Jukes said. ``It wasn't blindingly obvious how much people could save, or they would have jumped on it.''
Here, then, are some of the theories why Omnexus collapsed and what implications its failure holds for the future of e-commerce and plastics:
Too many suppliers
While Omnexus maintained an independent front, it could not entirely break free of the notion that its resin-giant owners were at the controls behind an imaginary curtain.
The company's five founders were a coterie of billion-dollar resin companies that jumped into the market so as not to be left behind. Besides Dow and Ticona, they included Bayer AG, DuPont Co. and BASF AG. Each was working simultaneously to build critical mass for their own Web sites.
That was Omnexus' biggest stumbling block and might have cursed it from the start, said Terry Cline, vice president of IQMS Inc., a software integration provider for the plastics industry based in Paso Robles, Calif.
The supplier-backed company could not shake the perception that it was working for the big resin makers and not for its customers, Cline said. On top of that, it did not offer enough of a carrot for processors to use the service, he said.
At one point in 2001, IQMS was ready to start an alliance and deliver its customer lists to Omnexus, Cline said. But Omnexus backed away, ultimately creating its own software integration solution, called UltraLite, and allying with Elemica.
``They could have expedited that effort by working with us,'' Cline said. ``But beyond that, they were a sell-side organization that never seemed to put much emphasis on the end user doing the purchasing. My focus would be to find every last guy who might buy this material, but I never saw that as their focus.''
United we stand, divided we fall
Besides the ownership issue, not all suppliers were equal in their support of Omnexus, according to several of them that worked with the company.
Some preferred to focus on their internal sites or on non-Web-based efforts, Schuster said. That led to some spotty trading at Omnexus.
Omnexus would send resin orders to some of those resin companies, only to find them dragging their feet in filling the orders, Schuster said. That slowed down what Omnexus claimed was a quick and easy process, he said.
``It was definitely difficult to get the same level of commitment from suppliers,'' he said. ``One person would support it, and one would not be happy with it. It was frustrating having to deal with that.''
That lack of support puzzled Angela Charles, president of Polysort LLC, a Web developer and group resin trading company based in Akron, Ohio.
``If they threw a mountain of money into Omnexus, you'd have thought they would support it with more than halfhearted effort,'' she said. ``But if they're not convincing their customers to use Omnexus, the effort was doomed to fail. They decided to build a common Web site and then didn't follow through with it.''
One supplier, who requested anonymity, said the signs of limited support were evident at the K show in 2001. Several Omnexus investors had huge signs trumpeting their in-house Web sites. In smaller print, the same signs would tell people they could go to Omnexus too, if they liked.
``It wasn't the most enthusiastic endorsement,'' the source said.
Another supplier called it game strategy. The firms wanted to keep up with their competitors, so they worked together and separately to hedge their bets. ``I'm thinking while I'm in Omnexus that what I'm doing behind my competitor's back will work better,'' the source said.