The scale of the opportunity

The incredible growth of the Internet and connectivity to the Internet by individuals and businesses alike has brought many opportunities to create new industries and new efficiencies within businesses and between businesses.  Here is a glimpse at the major groups of relationships that will be transformed by BizTalk and the advent of eCommerce.

B2C(Business-to-consumer)

Business to consumer is well established by the existing (and increasingly automated) websites on the Internet.  Many of the SME (small, medium enterprises) and large US companies have a website which promotes their wares.  Some provide for online ordering, most likely using credit cards.

Forrester has revised upward their estimates of consumer e-commerce adoption in the US. In its most recent published estimates and forecasts for electronic retailing, Forrester predicts that consumers will spend $20 billion online this year, and $184 billion online, or 7% of all retail sales, by 2004.  The graphs below show both the dollar amounts and household participation rates, as well as product category breakouts, forecast for the next 5 years.

The auction landscape continues to be dominated by C2C auctions. eBay leads this category, accounting for over 90 percent of the C2C market, according to a recent Jupiter study. B2C dynamic pricing, however, is gaining ground quickly. Jupiter projects that the US B2C auction market will increase from $1.1 billion in 2000 to $4.5 billion in 2004.

Other forms of dynamic pricing (e.g., aggregate buying, reverse auctions, haggling) are expected to increase at an even faster rate.   While research shows that in 1999, substantial % of sales in these markets were already performed online, A second Jupiter chart from the same report shows that the Internet itself will not generate vast new retail sales streams (only $2.7 billion, or 6.5% of total B2C e-commerce, by 2002.)

C2C (Consumer-to-consumer)

C2C is essentially the space in which consumers sell goods to other consumers.  eBay and gofish.com and good examples of this consumer meeting space.

B2B(Business-to-business)

Research shows that the value of Internet eCommerce by the year 2002 will be US$500 billion.  By the year 2004, it is expected to be US$1.5 trillion!

While the focus on the Internet (until the year 2000) was on B2C (business-to-consumer) websites, we can see that in the future the demand for online ordering, online service provision auctions and dynamic JIT (just-in-time) order-fulfilment will be simply staggering.

Four of the companies creating online business-to-business marketplaces include Ariba (ARBA), Commerce One (CMRC), VerticalNet and i2 Technologies (ITWO).  These are the software companies that are creating online, automatic-trading exchanges which are enabling brick-and-mortar industries like automobiles and aerospace to become click-and-mortar companies.

As industries seek to cut costs out of the supply chain, they're building Internet marketplaces where their suppliers can bid to deliver parts, designs and other services.  While most expect these marketplaces to generate huge volume, nobody's exactly sure how the software companies themselves will make their money. Currently the marketplaces are planning on taking a percentage of the turnover of all transactions done via the marketplaces.  However due to fierce competition, this model may not last long and a per transaction or joining fee model may eventually apply.

To B2B or not to B2B, that is the question!

Marketplaces for manufacturers will enable the manufacturers to receive orders from the distributors, to negotiate pricing and plan production for their products.  Using BizTalk, they can exchange their transaction data and formats with each other.  This will facilitate e-commerce transactions by providing the mapping and thereafter the relationships can be automated. 

There can be many different types of B2B and they all take place online in what is known as trading exchanges, portals, eMarketplaces, trading hubs, B2B portals or just marketplaces.  Here are a few examples:

• A company that wants to buy supplies can place an online order and wait for a number of companies to bid over the Internet. The buying company then chooses the most competitive bid
• A supplier with excess inventory offers those goods on the Web and wait for companies to bid for them.  In this way, the company can auction them off to the highest bidder
• "Dynamic pricing", where prices change as buyers and sellers interact over the Internet and companies will begin to choose the most competitive trading partners in price or terms offered
• Auction, where many buyers bid on products for sale.  This can be hosted by the seller or by a neutral intermediary
• Reverse auction, where large buyer solicits bids or posts requests for proposals (RFPs) online.

Ariba Asia-Pacific managing director Mukesh Aghi was quoted as saying:  "The objective is to bring efficiency to business by bringing the right product at the right time at the right price to the right people"

The GartnerGroup predicts that with B2B e-commerce, companies will trade goods with frequently changing prices as if they were trading shares on a stock exchange.

A trading exchange is essentially a secure forum where multiple buyers, sellers and service providers come together to conduct business transactions.  The exchange hosts the technology for transaction processing, displaying catalog, inventory, order tracking and security.  Triggers alert buyers that items need to be reordered, or automatically reorder the goods.

Exchanges are organized both vertically by industry and horizontally.  In a traditional supply chain you have a structured relationship created over a a series of negotiations - this all takes a long time and tends to be geographically limited.  The electronic marketplace does not have any of those restrictions!

The value of business-to-business e-commerce in the Asia-Pacific (excluding Japan) is forecast to grow at a compound annual rate of 155 percent from 1999 to 2004, and reach US$1 trillion by 2004, the Gartner Group said.

Initially though, marketplaces will tend to support interactive merchandise catalogues and order-processing. Services such as ordering shipment, insurance and payment services would be added later to create an end-to-end procurement process.

Whatever the future of B2B holds, BizTalk has the toolset for the next generation!