E-commerce among companies is rapidly changing the nature of procurement.
By Jennifer Riley
A small-business manager casually awaits e-mail from an Internet auction site on a bid he submitted for a computer. If he seems strangely at ease for someone shopping online in the middle of the workday, in plain view of his boss, itís because heís simply doing his job.
This is the new face of business-to-business (b-to-b) commerce. No longer limited to retailing, the sprawling online marketplace is becoming a magnet for companies looking to purchase work-related goods and services. Online business transactions by U.S. small and medium-size companies will value a collective $1.3 trillion by 2003, up dramatically from the current $48 billion, according to a Forrester Research projection. In comparison, the online business-to-consumer market is expected to grow from $8 billion to $144 billion.
"Both sectors will continue to grow, because e-transactions on the whole are just at a noise level right now," says Jack Skeels, a senior business analyst at Rand and an electronic commerce professor at the University of Southern Californiaís Marshall School of Business in Los Angeles.
"Those numbers sound big, but we have a $7 trillion economy. So $8 billion in e-commerce transactions is a lot of money, but itís still a Ďso-what.í Weíll probably see electronic commerce grow to represent 20 percent to 30 percent of the economy, because if I do anything electronic as part of the transaction, itís assumed to be an electronic transaction. B-to-b will be for the parts of the sales process that are better done electronically."
Although the Internet is credited with revolutionizing the way we do business, companies have been engaging in b-to-b e-commerce since the late 1960s through a system known as Electronic Data Interchange. EDI enables companies to electronically exchange purchase orders, invoices, shipping orders, confirmations, and other business documents in a standardized format ("The EDI Revolution," April).
But EDIís greatest advantage Ė its proprietary, secure networks Ė is also its greatest weakness when it comes to electronic commerce. While EDIís closed system prevents the loss of e-mail, it also costs money to use. Enter the Internet, an open medium accessible to anyone with a computer and a modem. Companies that use the Internet for e-commerce may risk losing the occasional e-mail message, but they enjoy considerable savings in terms of cost and time.
"Itís hard to say what the fastest-growing segment of b-to-b e-commerce is," Mr. Skeels says. "Effectively, this is all about information. The fundamental economics have changed. What is defined as the middle ground is changing. If we say the consumer is at one end and the manufacturer is at the other, everyone else is in the middle. E-commerce is going to be about redefining your role in that space."
Thereís been a lot of redefining lately. According to a 1999 study by InternetWeek, a host of business activities have undergone significant change with the spread of the Internet, including corporate communications, marketing, customer service, job postings, and manufacturing. This in turn has spawned a new generation of online services such as Bizbuyer.com, Onvia.com, and DigitalWork.com. These companies offer everything from online auctions for products and services to consulting services aimed at small and medium-size businesses.
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