It's hard to believe that it has been less than 12 months since the words "trading exchange" entered the mainstream of the technology industry's vernacular. The movement started as most technology trends do — a small buzz followed by a boom that seemed to have occurred overnight.

But like most anything related to technology — oh how things change. Hundreds of recently formed exchanges are starting to consolidate or fail. Predictions are that only a handful will survive.

So the conclusion seems to be that collaboration doesn't work after all. Let's not be too hasty. A more accurate assessment might be that it doesn't work yet, but it can — and it will. Companies are by no means giving up on the competitive advantage that collaboration can provide. They are simply looking for tools that can make the vision a reality.

More and more, that search is leading to something called a private trading exchange or PTX. To date, most trading exchanges have been created on a public, or independent, model. The goal is to create a marketplace where customers and suppliers, many of whom are unknown to each other, can conduct business.

PTXes differ from independents because they connect a community of companies that have pre-established relationships. Like members of their independent counterparts, parties can share information and execute transactions; however, access is limited to participating companies.

Private trading exchanges offer real opportunities for building competitive advantage. However, they will face some of the same challenges that independents have dealt with, plus the legacy of doubt that will likely linger from the market's first true attempt at taking collaboration mainstream. Some of the ways PTXes will differentiate themselves include:

• Supporting existing business relationships. PTXes will provide for the application of common business rules that support existing relationships, honor existing contractual agreements, and result in true B2B trading.
• Protecting proprietary business information. Members will only be required to share information with companies that they choose as business partners.
• Providing rapid and demonstrable ROI. PTXes won't be limited to the pay per transaction model that independents typically use, making ROI easier to achieve and measure.
• Bringing value to all parties involved. Customers, distributors, manufacturers, and resellers will be able to increase efficiency by sharing information about demand, inventory, production, etc. This will require something that only a private environment can support—trust.
• Supporting complex business transactions and financial management requirements. The ability to apply complex business rules and provide robust back office functionality is where the rubber will meet the road for many PTXes. Not all will succeed here, creating a gap in the offerings of various providers.

As you start to evaluate private trading exchanges, look for a provider that can support all of the business essentials described above and seek out an exchange that offers robust back office functionality. For mid-market companies, consider a hosted PTX to provide you the benefits of collaboration without excessive cost and risk.

Finally, don't let stories of struggle turn you away. Collaboration represents an incredible opportunity for businesses to build competitive advantage, and companies will find a way to make it work. It's simply a matter of time.