Business-to-business (B2B) electronic market places started out with a bang, but will stumble over such issues as overly ambitious plans, and the lack of venture capital and suppliers over the next few years. However, market places will grow dramatically by 2005 as enterprises see a chance to improve their bottom line and streamline operations, as well as bring in higher revenue, according to research released recently at Gartner Group's B2B eMarketplaces conference in Boston.
North American market place sales skyrocketed from $US153 million in 1998, to $492 million in 1999. The number of market places rose from 30 in January 1999 to more than 300 by the end of 1999. "It's the big bang that happened 18 months ago," said Lauren Shu, an analyst at Gartner Group.
Sales will double next year to $1 billion, jumping to $5.7 billion by 2004. About 1500 market places will exist by the end of 2000, doubling to 3000 by 2005.
The research firm defines an e-market place as a market place that brings together buyers and sellers within a certain industry, geographic region, or affinity group, providing content and commerce transaction capabilities. Market places will evolve into three types: commodity, business service and integration service. Commodity market places will support high-volume exchanges of goods, similar to the way Nasdaq handles stocks. Business service will focus on specific processes, such as those related to financial services and maintenance, repair and operations procurement. Integration service's focus will be on process definitions and workflow standards between trading partners.
The financial boom that market places will bring is yet to significantly boost participation from companies. According to Gartner Group research, 66 per cent of 421 sellers surveyed aren't involved in market places, while 17 per cent are considering participating and 17 per cent are participating. Seventy per cent of the 500 buyers surveyed aren't participating in market places, while 15 per cent are considering involvement and another 15 per cent are involved.
Transportation, chemicals, plastics, rubber, paper, pulp and lumber products are a sample of what the companies that participated in the study are buying.
"The majority [of enterprises] aren't ready for these partnerships because they're offering limited capability now," said Leah Knight, a former analyst at Gartner Group. More than 500,000 companies will join market places as buyers and/or sellers by 2005.
"There's significant opportunity in these new markets, but there's a lot of trepidation in participating," said Carl Lenz, an analyst at Gartner Group. Part of the problem stems from security and privacy issues. "It's a tremendous inhibitor as these market places evolve. Companies will have to figure out how much [data] they push out into the market and networks," he said.
Other issues inhibiting B2B market places include:l Lack of venture capitall Questions over who manages the market placel Lack of suppliersl Technology vendors struggling with functionality needed to build trade, causing buying enterprises to curb investmentsl Suppliers figuring out how to access the data from a business and technical perspective"These issues will take some time [to iron out]. We'll get there, but these are issues other businesses need to watch out for," Lenz said.www.gartnergroup.com