Report: Business-to-business e-commerce to climb sharply in next two years

The $US5 billion business-to-business e-commerce market will double in each of the next two years, according to new research from The Delphi Group in Boston.

Behind the triple-digit increases: an explosion in the growth of online trading exchanges, coupled with companies' relentless drive to compress supply chains.

This should come as good news to makers of software tools for building and operating business-to-business Web sites, which currently represent about 40 per cent of the $5 billion B-to-B market, according to Delphi president Tom Koulopoulos.

"Our conservative projection for 100 per cent compound annual growth in the coming years can easily be exceeded if the number of new entrants in this space continues to climb," Koulopoulos said.

The growing number of digital marketplaces serving vertical industries, such as Chemdex.com; PaperExchange.com and e-Steel.com, also are positioned for explosive growth, as companies "try desperately to get rid of latency and create greater flexibility in their supply chains," according to Koulopoulos, whose findings are based on surveys of 600 users at Fortune 1000 companies.

A prime example is General Motors, which opened a Web-auction and catalogue-procurement system to its vast network of suppliers December 17.

By using its new TradeXchange online system to buy most of its $87 billion in annual supply purchases, GM officials said they aim to decrease purchase order costs from an average of $100 to $10.

Delphi expects similar digital exchanges, which it calls "vortals" for vertical portals, to quickly emerge across all industries, often with an industry leader, like GM, at the helm.

"What we'll end up with are a few dozen vortals, which will require enormous infrastructure [investments], which is one reason why the infrastructure piece of [business-to-business e-commerce] market is growing so fast," Koulopoulos said.

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