Business-to-Business E-commerce: A Snapshot

A highly successful E-business is one that is not only able to meet or exceed the needs of its customers, but also work in a collaborative, interactive and efficient manner with vendors, distributors and other businesses. Applying technology to engage these strategic partners online in a collaborative effort is called business-to-business (B2B) E-commerce.

The extent to which a business can work efficiently with its partners directly affects its performance to deliver high quality products or services, and ultimately its ability to meet customers’ needs. As a result, B2B E-commerce is more than just the buying and selling relationship. It encompasses new models that entail many areas of a business including supply chain management, inventory management, channel management and distribution management - to name a few.

To meet customer expectations, businesses need to be able to utilize customer feedback from all points of interaction, share this information with manufacturers, distributors and other partners, and translate this feedback into better products and services. B2B E-commerce enables team members to collaborate via the Internet, employing technology to connect all partners in a way that will improve access to information, provide broader choices, achieve rapid planning, eliminate inefficiencies, improve performance, add value to business activities, and produce outcomes that will build and maintain customer satisfaction.

The Market…

According to eMarketer, worldwide B2B E-commerce will total $823.4 billion by the end of 2002, and will experience strong growth through 2004 with $2.4 trillion. International Data Corporation (IDC) speculates this number to be much higher, at around $4.3 trillion by 2005.

IDC also forecasts that the largest markets for B2B growth are the US, Western Europe and the Asia Pacific with compound annual growth rates of 68 percent, 91 percent and 109 percent respectively from 2001 to 2005. B2B E-commerce presents significant growth opportunities, as these regions expand their networks and customer bases by accessing new export markets. The majority of B2B sales consist of volume purchasing, which means companies are spending huge amounts of money online.

Opportunities/Trends…

The growth in B2B E-commerce can be attributed to a number of factors.

EDI Paves The Way: Many businesses have used EDI (electronic data interchange) to interconnect their systems with their vendor’s systems, revolutionizing the way they conduct business. However, EDI is a restrictive and expensive solution to maintain. Where EDI falls short, B2B E-commerce bridges the gap.

Partnering: Competitors are realizing the opportunities presented by partnering together. Pooling their resources enables them to drive down their supplier costs and improve efficiencies greater than any single member could do individually.

SMEs: eMarketer states that while large and medium-sized businesses will dictate the volume of E-commerce, the number of small and medium-sized businesses participating in E-commerce will drive its growth forward. For SMEs, one of the most compelling reasons for B2B E-commerce is the opportunity to sell products and services through a very efficient cost effective channel.

Training: Gartner Group recommends businesses to invest in collaborative training tools to increase the likelihood of channel partner acceptance.

The Challenges…

While B2B forecasts are significant, growth will not come easily to businesses. Following are some of the challenges businesses will face.

Acceptance: In order for B2B communities to work effectively, all partners must be willing to collaborate with each other. Many B2B environments comprise a variety of suppliers that have traditionally competed with each other. In a B2B environment they must share information and be willing to collaborate for mutually beneficial outcomes.

Integration: Engaging in B2B means a substantial migration from paper-based solutions and the standardizing and developing of new procedures, which includes introduction of new technologies and integration with existing technology and legacy systems.

Channels: Because of the number of potential partners involved in B2B E-commerce, there will be no single channel or solution to meet all of a company’s needs. The need for a multi-channel approach will increase the complexity of relationships; and the channels implemented will depend on the nature of the relationships and their individual requirements.

Security/Distrust: Many of the concerns around B2B E-commerce center around the security and reliability of E-commerce. The issues of authentication, repudiation, integrity and confidentiality have been heightened with fraud related issues around B2C E-commerce.

Customer Relationship Management: According to Jupiter Media Metrix, companies are ruining B2B relationships by providing poor customer service to their business partners. In fact, they state that 29 percent of B2B companies do not respond to E-mail customer inquiries.

Skills Base: The availability of skilled people to support E-business strategy and implementation is relatively low compared to demand, often creating a disconnect between the vision of management and the way the B2B solution is understood within the company.