1.1 The B2B Imperative
Business-to-business
(B2B) e-commerce via the Internet is a disruptive technology. It turns many classic rules
of the old economy upside down, where yesterday's winners may be tomorrow's losers. In
many markets, tomorrow's winners are now preparing to undercut the incumbent. Targeted
companies will be those who are too inflexible in their business process and supporting IT
systems to respond effectively in time, and they will go under or be absorbed. In
particular, B2B promises that any intermediaries who do not add value or who have
noncompetitive cost structures will be certain losers. Although some markets will narrow,
creating several niches for nimble companies, there are also many markets where the
"winner take all" effect will rule. This is the observation that certain goods
and services, Microsoft Office and eBay being two well known examples, gain more in value
as more people use them. Microsoft Word may be no better than WordPerfect, just as Excel
may be no better than Lotus 1-2-3, but if you want to exchange files with others, you will
pick the product which is ubiquitous rather than the one which is better. Similarly, you
pick an auction site based on the largest number of members, not the best process or user
interface. There are substantial financial benefits that will accrue to successful B2B
initiatives. By 2003, Forrester Research estimates that B2B e-commerce will reach $3
trillion; Gartner Group estimates $4 trillion. The announcement of global part sourcing by
the Big Three automakers show that they "got it", and estimates put the value at
a 14% reduction in the cost of building a car. In fact, the cumulative effect of B2B is
estimated by The Economist magazine 1 , reviewing reductions in transaction costs of
between 2% and 40% depending on the industry, to be a permanent increase of 5% in the
output of goods and services in the first world economies. In the US alone, that would
mean $400 billion per year, with 1/4% to 1/2% added to US annual GDP growth. |
