E-CommerceBusiness to Business

(B2B)Week 6

B2B Introduction FORGET THE HEADLINES about Amazon.com

and eBay. The really big business traveling through the

browser isn't about bestsellers or Beanie Babies.

It's about binder clips and ball bearings, electric power and electronic components-that is, the stuff that businesses buy from, sell to and distribute for each other

B2B Introduction Business-to-business e-commerce over the

Internet can be as basic as a manufacturer putting up a bare-bones Web site to let distributors securely order a handful of products; it can be as complex as a distributor offering thousands of customers company-specific pricing and content, complex product configurators and near real-time access to inventory levels for its entire product line.

B2B Definitions On the Internet, B2B (business-to-

business) is the exchange of products, services, or information between businesses rather than between businesses and consumers.

B2B is e-commerce between businesses

B2B Growth Forecasts are that B2B revenue will far exceed

business-to-consumers (B2C) revenue in the near future. According to studies published in early 2000, the money volume

of B2B exceeds that of e-tailing by 10 to 1. Over the next five years, B2B is expected to have a compound

annual growth of 41%. The Gartner Group estimates B2B revenue worldwide to be

$7.29 trillion dollars by 2004. In early 2000, the volume of investment in B2B by venture

capitalists was reported to be accelerating sharply although profitable B2B sites were not yet easy to find.

Forrester estimates that U.S. business-to-business Internet commerce will grow to more than $1 trillion by 2003

Benefits of B2B Business-to-business electronic commerce systems make life a

lot easier for the purchasing department but the real benefits are in the bottom line.

E-commerce can save money--a lot of money. The low-hanging fruit of the business-to-business market is in ORM (operating resource management). ORM is the process of controlling the ordering of nonproduction goods, such as computer equipment and office supplies.

Paper-based procurement is an expensive, slow, carbon-copy-laden process--ask anyone who's had to baby-sit requisitions through purchasing. Not only does a paper-based procedure frustrate line employees and slow down the wheels of business, it's not economical, especially for high-volume, low-cost items such as nonproduction goods.

How it works

Implementation Compared with traditional electronic

data interchange (EDI) systems that run across private networks, Internet-based business-to-business e-commerce is seen as less of a headache to implement, especially for companies that want to reach smaller customers and suppliers that can't handle EDI's cost and complexity.

B2B Implementation Rolling out a business-to-business e-commerce

site is not so easy—or cheap: Cambridge, Mass.-based Forrester Research Inc.

puts development costs at $1.5 million for a basic site to more than $15 million for the most sophisticated of sites; count on spending another $700,000 a year to keep up a basic site and up to $4 million a year to run a high-end site.    

Implementation Costs Most of the costs are for labor. In addition to programmers, a successful e-commerce

team will need graphic designers, content creators and business analysts.

Many companies wind up having to do a lot of application development in-house, tweaking off-the-shelf systems and integrating them with back-end systems.

A CIO can expect to spend about 40 percent of his or her company's e-commerce budget on content management, data cleansing, and legacy-system and supply chain integration.

Implementation Problems Even if an e-commerce team can get incompatible

legacy systems to work together, there's no guarantee that it can get the company's marketing and IS departments to work together

Or that it can mobilize the company to adopt new business models at Internet speed.

Perhaps the biggest obstacle to a company implementing a successful B-to-B e-commerce effort is the company itself—that is, the company's inability to agree on an e-commerce strategy or to even acknowledge that it needs to develop a strategy.

B2B Solutions Business-to-business electronic commerce is far from

a static product category--implementations of any one solution will be vastly different from one company to the next.

Examples of solution providers: Microsoft Corp.'s Site Server 3.0 RightWorks Corp.'s ProcureWorks 2.0 Trade'ex Electronic Commerce Systems Inc.'s Trade'ex

Procurement 5--

B2B Solutions

The Ideal Solution

B2B Standards EDI (electronic data interchange) is the complex and expensive-

to-use VAN (value-added network)-based standard everyone loves to hate, but it has also been the only game in town.

That will change as new standards such as OBI (Open Buying on the Internet), OTP (Open Trading Protocol), XML (Extensible Markup Language) and EDI over Internet are deployed in production environments as early as next year.

In the B2B (business-to-business) market, OBI in particular looks to be a breakthrough technology, bringing many of the benefits of EDI to a much wider audience.

B2B Success Tips Evaluate and, if needed, plan for an upgrade of your

connectivity infrastructure. Don't forget, B2B e-commerce has a two-way connectivity

requirement. Walk before you run. Don't assume that your business partner is as committed

to the use of e-mail as you are. Examine the skills of your IT staff or contracted service. Keep the channels of communications to your B2B e-

commerce software vendor and VAR/integrator wide open. Stage your rollout. Be patient with the current group of software vendors in

this market.

B2B Site Classifications Company Web sites

Since the target audience for many company Web sites is other companies and their employees.

Company sites can be thought of as round-the-clock mini-trade exhibits. Sometimes a company Web site serves as the entrance to an exclusive

extranet available only to customers or registered site users. Some company Web sites sell directly from the site, effectively e-tailing

to other businesses.

Product supply and procurement exchanges Where a company purchasing agent can shop for supplies from vendors,

request proposals, and, in some cases, bid to make a purchase at a desired price.

Sometimes referred to as e-procurement sites, some serve a range of industries and others focus on a niche market.

B2B Site Classifications Specialized or vertical industry portals

Provide a "subWeb" of information, product listings, discussion groups, and other features.

These vertical portal sites have a broader purpose than the procurement sites (although they may also support buying and selling).

Brokering sites Act as an intermediary between someone wanting a product or service

and potential providers. Equipment leasing is an example.

Information sites Provide information about a particular industry for its companies and their

employees. These include specialized search sites and trade and industry standards organization sites.