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The Incredibly Quiet B2B Resurgence

By Lou Hirsh
Oct 18, 2002 4:00 AM PT

There is life after the bubble for technology and portal providers that serve the business-to-business (B2B) sector of e-commerce. But to enjoy that life, vendors must adjust to a new landscape in which spending and cost-cutting priorities have shifted dramatically in response to tough economic times.

The Incredibly Quiet B2B Resurgence

The good news for vendors is that there is a proven need for B2B offerings that can boost the efficiency of processes and cut costs. However, expectations for what the technology can realistically achieve have become far less grandiose.

Bite-Size Projects

According to Gartner research director Judith Rosall, companies now tackle technology improvements in much smaller increments than in bygone days. Instead of committing to major capital outlays for technology that will produce results over a five- to 10-year period, companies have shortened their implementation time span to six to 12 months, and ROI expectations have been adjusted accordingly.

By dividing implementation into smaller-scale projects, companies clearly are seeking to deflect the risks of new investments in technology. For vendors, that means big-ticket contracts will be few and far between; instead, companies will have to make do by winning one project at a time.

"It's become much more realistic and pragmatic," Rosall told the E-Commerce Times. "It's not being driven by market hype anymore."

Plenty of Potential

For the foreseeable future, there probably will be plenty of new business for companies that specialize in two types of B2B software. One type includes e-procurement and buy-side offerings, and that field is led by such companies as Ariba and Commerce One. The other type focuses more on the sell-side and is led by BroadVision, Oracle and SAP, among others.

On the buy side, analysts noted, several small niche players have established large installed bases but have been struggling financially nonetheless. As in other technology segments, consolidation will remain a distinct possibility over the next few years as some of those companies fall by the wayside or are gobbled up by larger players.

Business Opportunities

Yankee Group program manager Jon Derome told the E-Commerce Times that in the current climate, there is ample room for both large and small B2B players to pursue new business. However, he added, all companies must be more responsive to individual clients' needs and must be able to deliver rapid ROI.

He noted that internal automation projects have been delayed for a long time at many firms, but the moment of truth is approaching. "There are companies out there that have been trying to automate their supply chains for 20 or 30 years," he said. Specifically, increased demand for technology in this area is likely among manufacturing firms that want to streamline processes for tracking production, inventory and shipments.

Derome added that companies also will be more inclined to automate their partner relationship programs with other firms. This trend could accelerate as businesses increasingly use interactive, interoperable Web-based portals to conduct daily tasks.

Shifting Tides

These developments mark a slow but steady turnaround for an industry in which even major players saw revenues decline significantly during the past two years. Few players -- whether on the procurement or sell-side of B2B -- have remained financially unscathed.

"In 2001, both sides took major beatings," said Gartner's Rosall, adding that 2002 has not been much better. To ensure that they are part of the ongoing recovery, she noted, companies large and small have begun repositioning their offerings to meet specific requirements of potential clients.

While it is still unclear which companies will be the ultimate victors, experts contend that the future generally looks bright for B2B companies that can adjust to new market realities. For the most part, the cost cuts that once threatened providers are now benefiting them, as companies realize the perks of streamlining internal operations and selling platforms.

"Anything you can do to improve the flow of information is going to be advantageous," the Yankee Group's Derome said.

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