Subject: Nov2000 Growth Continues its Dramatic Pace brought to you by
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November 1, 2000 *4,100 subscribers* Volume 2, Issue 11 Online: 
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B-to-B growth will continue at its dramatic 1999 pace, leading to more liquidity in the B-to-B exchanges and inter-organizational virtual enterprises. Part of this growth will stem from the B-to-B practitioners applying techniques that have already been proven successful in the B-to-C marketplace. Below is a listing of key market drivers for B2B growth.

B to B exchanges and marketplaces:
Dynamic pricing- commonly used in market economies and auctions, and popularized on the Internet by B2C portals eBay, Priceline, eWanted, and Mercata- has extended beyond the consumer market. The Internet exchange model is rapidly being adopted by both buyers and sellers in a variety of B2B industries to gain efficiencies in apparent supply, to eliminate information inequity, and to create new intermediaries and business models. In the B2B markets, Keenan Vision estimates that $129 billion of the Internet economy will be conducted using Internet Exchanges in 2002. One of the fastest-developing online arenas is the marketplace concept, a hybrid of the Internet Exchange- essentially a Web portal that is used to sell goods at auction. Exchange members meet to buy and sell goods for a market price, negotiating according to a set of rules.

Small business buying direct from suppliers:
An additional source of B2B growth is the number of small businesses that find it useful to buy from suppliers online. A greater number of small businesses use the Internet for procurement of supplies than to sell goods. This is obvious when you compare the number of retail establishments, 1.5 million, with total number of small businesses, over 8 million. Just as consumers have experienced broader selection, faster service, automated shipments, and personalized offerings in the B2C space, small businesses are deriving the same benefits by purchasing from suppliers over the Internet instead of via phone or fax.

EDI factor:
EDI (Electronic Data Interchange) has grown from one trillion dollars at the beginning of 1990 to almost 3 trillion by the end of 1999. By comparison, Internet commerce (including B2C and B2B) is barely one tenth of that (Forrester estimates $320 million for the year 2000). Most market research firms (including eStats) estimate that Internet commerce will reach a little over $1 trillion by 2003; Forrester has lately estimated that e-commerce revenues in 2003 would be 3 trillion dollars (still only equal to EDI). As XML-based EDI encroaches on traditional VAN (Value Added Networks), and more significantly, as Fortune 50,000 suppliers require smaller businesses in the supply and value chain to be EDI compliant, Web-based EDI will push total B2B transactions quickly to the 3 trillion dollar figure estimated by Forrester. XML, the eXtensible Markup Language, will allows easy creation of EDI documents, using the Web infrastructure for routing.

Shipping B2B services with hardware:
Both Hewlett-Packard and Compaq have learned from Microsoft's model of shipping applications with desktops, and are shipping business servers with preloaded applications for e-business services. Hewlett-Packard's e-Services group has been especially aggressive in establishing business alliances that can be bundled with applications.

Telcos bundling e-commerce offerings:
Just as many telecommunications firm are offering Internet connectivity, email accounts, and web hosting bundled with residential service offerings, larger firms including MCI, SBC, GTE and Sprint are scrambling to rollout e-commerce and Internet directory services bundled with DSL and T-1 service. The play is for the 8 million small businesses and 11 million SOHO [define or spell out this term] that telcos consider to be their customers. These are ripe for B2B (and B2B2C) offerings that include credit card payments, Internet marketing, and product listings in Internet directories.

Global digital commerce:
The 1990's saw the beginning of the transformation of national and international economies to global, digital, internetworked economies. With world gross domestic product estimated to be $32 trillion, Forrester's estimate (which predicts that only one tenth of that commerce will be converted to e-commerce by 2003) may even seem low. It is more likely that Fortune 5000 firms with a global presence will conduct a large fraction of their international commerce via the Internet, because it helps open markets, provide more suppliers, and coordinate production and manufacturing of "international products".

Vertical market explosions:
While e-commerce growth in both B2B and B2C sectors has been almost 100% CAGR in the United States, key vertical markets still haven't embraced e-business processes. Health care, which represents almost $1 trillion, remains fragmented because documents are not standardized and because there are no uniform business processes for service approval, payments, and record keeping. State and local governments face similar challenges. Banking and finance (which arguably are already digital but not internetworked) have moved rapidly to offer consumers online services, yet the majority of consumers still have not participated. Utilities and telecommunications also are underrepresented in Internet commerce, but are exploding rapidly in Internet Exchanges. Utilities are now routinely trading power, and global telecommunications are creating a seamless cable, fiber, and wireless grid where services must be traded to maintain network integrity.

B2B2C model:
An additional source of B2B growth is from the number of B2C eCommerce sites, which has grown in number from 400,000 at end of 1998 to an estimated 1,000,000 businesses at the end of 1999. These sites require business services for payment processing, banking and finance, shipping and logistics, and resupply of products they sell. This represents "upwards pressure" from smaller business to conduct commerce with suppliers and other participants in the value chain.

ERP, extended ERP and extended enterprises (Inter-organizational virtual enterprises)
The extended enterprise is being built from extended applications, using horizontal and vertical integration brought about through Java and XML. Future enterprises will be defined by extension of their business processes applications over networks, rather than the physical and legal boundaries that once defined and confined them. The Internet is a revolution in both distributed computing and transactive content. Leveraging the Java and ASP value proposition and the synergy of ASPs co-located in data centers (e-Application centers), business and alliance partners of "traditional firms" can integrate their business processes, share their markets, and create virtual enterprises as needed. Integrators at e-Application centers can create e-business incubators from the synergy of ASPs they host. It's a new model with few data points, but Exodus, Navisite, and 400 ASPs are pioneering the next generation "enterprise".

Even with the April stock market retreat and the continued erosion of e-tail and B2B stocks, it's clear that we are at the beginning of a new way of conducting business. Nevertheless, "legacy" processes, laden with paperwork and other inefficiencies, are still in place. Over time, these legacy processes will be chipped away and replaced with more efficient processes brought by either the new B2B marketplaces or the incumbents that integrate the Internet into how they conduct business.

Compaq -
eWanted -
Exodus -
Mercata -
Microsoft -
Navisite -
Priceline -

Let me leave you with a few of my favorite quotes this month:


I feel we all must just hold on, the roller coaster ride is only in its second or third turn. Hysteria and quick reactions will is ignorant. Many people thought TV would never survive. The malls of the 70's died out to be replaced by highly profitable mega malls. The railroad and shipping industries, true b2b industries, have gone through ups and downs since the 1600's. The economy will survive and prosper.
(Kevin Maris, President, Beanstalk, Inc.)


B2B is very difficult since most retailers won't be able to compete against K-Mart or other big players with an existing infrastructure and better economies of scale. Growth rates are difficult to estimate, but certainly in the 50 - 100% annually. B2B will further grow on the information side, not only on the pure transaction side.
(Patrick Stark, Data Comm)


Based on the B2C experience, I think that purchases over the Internet are most likely to happen if: -it is a repeat purchase of a previously owned item (i.e. apparel) -it is a known item (i.e. book, CD) -the user can physically test the product in a shop (i.e. car) -the user can buy from a remote shop location (i.e. buyer in us/seller in Europe) B2B business, generally, is all of the 4 above, therefore B2B can only be successful and grow!
(Alberto Griffa - San Jose - CA)


I hope you enjoy this eZine.

See you in cyberspace,

Mitchell Levy

Executive Producer, <>
Author, <>

President, <>
Founder and Coordinator, SJSU-PD ECM Certificate Program <>

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