B2B e-commerce to reach $8.5 trillion by 2005

Companies conducting business-to-business (B2B) electronic-commerce could be part of a market expected to total US$8.5 trillion worldwide in 2005, notwithstanding the current economic shakeup, according to a Gartner Research forecast.

B2B transactions over the Internet totaled $433 billion in 2000, a 189 per cent increase from 1999 sales, the research firm says. While Gartner Research projects a slower year-to-year growth rate, B2B e-commerce sales will thrive, hitting the trillion-mark next year and eventually reaching $8.5 trillion in sales in 2005.

Gartner defines B2B Internet commerce as the sales of goods and services for orders that were completed over the Internet.

Lauren Shu, a Gartner analyst, says the findings were revised in light of the woes on Wall Street and possible aftereffects on corporations. For example, Gartner now projects B2B transactions to total $919 billion this year, compared to its original projection for $953 billion in 2001.

One area of B2B commerce, the so-called electronic marketplaces, won’t have any “significant” impact on Internet commerce until 2003.

In order for marketplaces to evolve, there needs to be “a return to the sanity of fundamental, sound business principles, and the resetting of realistic expectations means that going forward, the market can expand in a more rational way,” Shu says. Part of the problem stems from companies rushing to start marketplaces without a clear strategy and without a clear idea of how they affect the industry value chain, sales and distribution, and the supply chain, she says.

Private marketplace builders will drive marketplace growth as supply-chain integration improves, Gartner says.

While Gartner revised its projections, Shu says the research company didn’t revamp the forecast to depict Armageddon-like numbers, because businesses will turn to cost-saving measures, such as e-procurement, and hosted software, such as online marketplaces, rather than rely on in-house measures. Businesses will likely continue relying on embedded legacy EDI systems and delay replacing them, she adds.

However, the downturn may prove to be an opportunity for some businesses, Shu says. “While the downturn will be painful this year, it can be viewed as a reprieve for enterprises that didn’t keep up with the e-business leaders in their industry,” she says. “This is not the time to retrench [as some companies] may be inclined to do, but rather [use this time] to get their house in order and work on internal adoption of e-commerce. This is the window for them to do that.”