B-to-B Internet commerce projections are scaled back

Because of the recent economic downturn, Gartner Group Inc. has scaled back its forecasts for worldwide business-to-business Internet commerce 20 percent over the next five years, according to a study released Tuesday.

Worldwide b-to-b Internet commerce will grow 81 percent during the next five years to top US$8 trillion by 2005, the study said. That is $1.3 trillion less than last year's forecast reported.

The value of worldwide b-to-b Internet commerce sales transactions will grow from $433 billion in 2000 to $3 trillion in 2003 to top $8 billion by 2005, according to the study. However, Gartner has pulled back from a projection last year of massive adoption of Internet commerce across all industry verticals by 2004.

"Because of the sagging economy this year ... we don't anticipate reaching an inflection point in this forecast period," said Lauren Shu, e-business research director at Gartner. "The transition to Internet commerce is a long and difficult process. Technology can be implemented in months ... but what we're hearing from end-users is that changing human behavior ... takes a lot of time."

The economic situation will cause enterprises to be more deliberating and judicious about new IT investments, Shu said. Gartner anticipates that some enterprises will continue to rely on legacy EDI systems and delay replacing them.

However, the economic downturn should not prompt enterprises to retrench their e-business efforts, Shu said. Instead enterprises that have not kept up with the e-business leaders in their industries should take this opportunity to make the internal process changes needed for b-to-b Internet commerce, she added.

Although e-marketplaces have been one of the most widely publicized areas within b-to-b commerce, few e-marketplaces had substantial revenue in 2000, and they accounted for only a fraction of total Internet commerce in 2000, Shu said.

The e-marketplace market is now in a "trough of disillusionment" as a result of the failure of many public exchanges to live up to the hype associated with their potential, Shu said. Now, many enterprises will be turning to private e-marketplaces for b-to-b commerce efforts, she said.

However, because of the complexities of linking the internal processes and systems of multiple suppliers with the buyer, private e-marketplaces will take time to emerge as major contributors to Internet sales transactions, Shu added.

"The private e-marketplaces phenomena allows buyers and suppliers with existing relationships to more tightly integrate the existing supply chain," Shu said. "It will take longer to build those. It will take longer to drive very high levels ... of transactions through them."

Gartner defines b-to-b Internet commerce as the sales of goods and services for which the order-taking process was completed via the Internet. This includes purchases via Internet EDI, e-marketplaces, extranets, and other sell-side initiatives, but excludes activity over proprietary networks.

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