Dealigence: E-commerce still has a lot to learn

Thousands of years have passed since Man first invented and fine tuned the theory of bargaining over deals and things are not very different today. We conduct deals through e-commerce, but we don’t yet have the technology for automated electronic negotiations. There is no need to be concerned – Israeli start-up Dealigence is trying to solve this problem.

Existing e-commerce solutions limit us to simple transactions, with a minimum of definable circumstances. No real negotiations take place with the other party and in fact in most cases the price can be argued. “Dealigence is able to conduct complete, complex deals consisting of various items. At the moment, you have a package the seller assembled for you, but may be there’s a combination of suppliers that can offer a more suitable deal,” company CEO Benny Yehezkel says.

Dealigence was founded by Prof. Oded Shmueli of the Faculty of Computer Science at the Haifa Technion, David Konopnicki and Lior Leiba. The founders hold 48.3%, Elbit holds another 48.3% and the Technion and Hebrew University of Jerusalem jointly hold 3.4% of the company. Prof. Shmueli started working on the technology eighteen months ago and the company was formed in August 2000 with a $2.5 million investment from Elbit.

Dealing room negotiations

Yehezkel says that Dealigence is not going to set up another e-commerce site. “We’re a company focusing on developing technology,” he says. “We’re not setting up a shop or market to which people will come. We want to enrich existing market places.”

Using Dealigence technology, an individual can present the terms to the site he is interested in for purchasing a holiday in London. For example, he will be booked in at a hotel only on condition that it is ten minutes from the city center, since his holiday is short and he doesn’t want to waste time commuting. At the same time, if he is rational and has a number of trade offs, the site can offer him a higher quality hotel or a whole suite if he compromises on another ten minutes.

In the same way, businesses can be defined in a limitless amount of definitions and trade offs. For example, after finding three potential suppliers for a product, the negotiation process takes place, just like in real life, with the mechanism determined by the buyer. This mechanism can be on a one-to-one basis, in which case the three potential suppliers “sit” in separate “rooms” and the dialogue starts to take place. “I can tell one supplier the truth about the second supplier’s offer in another room, similar to real negotiations,” Yehezkel says. “Alternatively, holiday suppliers can “sit” in the same room and I can say ‘whoever can’t offer me a flight to New York for $700 need not remain in the room’.”

In principle, the technology is capable of bringing negotiations to a signed conclusion of a deal, but each user can determine the level of human intervention he is interested in.

Much more than chat

How do you intend to make money from your technology?

Yehezkel: ”In the current electronic era, it’s not yet clear. At first, there was talk of a commission for every e-commerce deal concluded. Not all sellers like the idea – they don’t want all sorts of partners in their site. They now state a final price and that’s it. I assume this is what Dealigence will ultimately do as well. We’ll charge a fee for the license to use the technology we developed.

”The B2B market is estimated at $6-7 trillion. The business plan shows sales of $5 million in 2002 and some sort of growth rate. If the market trend starts to go in the direction of payment per deal instead of the sale of a license, we’ll have to make the adjustment.”

Shmueli: ”When we built the model, we had to do it according to the norm at the time. Will it be percentages of the deals or the sale of licenses in the future? No-one knows yet which model will spread and we’re flexible on the matter.”

Which market do you address – B2B or B2C?

”An individual making an occasional purchase on the Internet won’t have the patience to fill out a long form of definitions for one item, so the B2C market is less appropriate for the technology. It’s better suited to the B2B market. At the same time, both options remain open to us.

“When we talk about trading between companies, trade offs are clearer, since it’s much more important to understanding the consequences of receiving goods two days earlier or later. On the other hand, businesses have the opportunity of using our technology in the organization’s ERP system with the decision making process and the tools for better deals.”

Don’t the B2B giants that manage deals for billions of dollars already offer negotiation services on their sites?

”No. There’s a technological obstacle here. There’s a reason for their not offering the technology. A number of other companies are offering similar technology – we are not alone in the field. However, none have the automated negotiations capability, at least from what we have heard.”

Which existing technology is like the one you are offering?

Yehezkel: ”There’s the simpler sort of technology used in chat. You receive an offer and have an e-mail response system. What we offer is completely automated and the process does not take up time.”

Published by Israel's Business Arena on 16 January, 2001