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OF B2B PROPORTIONS: STREAMLINING AND AUTOMATING

Posted on August 17, 2000

      B2B is losing its sex appeal almost everywhere. Writers and financiers have figured out that B2B is pretty much just business -- and business is, well, boring. Business relies on things like scalability, accountability, profitability, guarantees, throughput, and efficiency, not on exciting bus-dev expressions like "first to market", "vertical marketplaces", and "niches."

      In early June, I exposed the myth behind the eMarketplace hype (Strangers In The Night: eMarketplaces Fail to Support Buyers' and Sellers' Core Business Functions): with few exceptions, there's no there there. In the last week or so, I've read several reports that come to the same conclusion that I came to two months ago: eMarketplaces aren't the place to be, B2B will ultimately be about automating existing relationships between businesses.

      B2B: Back-to-basics Sex appeal or not, businesses are coming online and want to use the Internet and associated technologies to streamline their transactions with their existing trading partners. This makes sense. There are two basic ways to increase profit: expand revenue by increasing sales and/or margins on the front end or decrease expenses on the back-end through streamlined processes. Other nouveau management philosophies and trends are permutations on one of these two approaches.

      "Expanding markets" was the first idea of how Web businesses were going to cash in on the B2B trend, and to some degree, we see this happening. According to IDC, small businesses -- firms with fewer than 100 employees -- spent $19.6 billion on building Web sites in 1999, accounting for 26% of all business web spending. By the end of 2003 this will grow to $85.5 billion -- a 35% share and a 44.5% compound annual growth rate. Overall, small businesses will provide the largest absolute and relative share of new revenues to vendors. Thus, to technology vendors, expanded markets will represent new opportunities for growth.

      What's Not Profitable? What about the small businesses who are spending all this money on the Web? The news is not so good for that group. For them, and most other non-technology-vendors that are getting online, they're more likely to find the Web to be a tool for back-end streamlining, rather than market expansion. The costs associated with customer acquisition are so high that they offset any revenue gains associated with expanded markets, and margins...forget about it!

      As unexciting as business is, streamlining back-end processes is an even bigger yawn for those consumed with being hip. However, that's where the business is in B2B today, and for good reason. The question for businesses is how to go about it: which method to choose, which vendor or ASP to rely on, the degree to integrate, and the partners with which to integrate?

      In June, I wrote Working Models of B2B: Business Information Exchanges as a response to the many questions I received from readers about to despair that eMarketplaces weren't going to solve all their problems.

      Which Way to Go? For companies that want to integrate more than their procurement systems, and want to enable guaranteed data delivery between themselves and their partners, CommerceQuest is worth investigating for handling procurement or digital document delivery CommerceQuest is noted for the robustness and scalability of its systems. No "first-to-market" solution with a half-baked semi-functional features list here. CommerceQuest has been providing integration services to businesses for seven years. Rather than integrate businesses with their own systems in the ECOutlook style, they integrate the businesses with their partners, using the businesses' choices of applications. Additionally, CommerceQuest provides the reliable hub through which the data flows. CommerceQuest's enableNet manage service has been designed to be the switch through which the B2B industry's data flows, whether coming from eMarketplaces or established B2B tools such as EDI. CommerceQuest doesn't limit itself to the Internet as the communication medium. Because it predates commercial use of the Internet, it is also willing to support businesses that rely on SNA, virtual private networking (VPN), or EDI on a value-added network.

      CommerceQuest provides the fat pipe to the businesses, the integration of the partners' systems, and delivers guaranteed data. So unsexy, yet so necessary.

      B2B Is Here To Stay: Whatever the next trend in acronyms is, B2B will be the meat and potatoes of many businesses' relationships with the Web for the imminent future. You might find that some hip, tech writers have moved onto covering wireless devices, sites from which to grab pirated music when Napster is shut down, and why P2P is the next big thing. Don't fret, though, I'll continue to cover it here. For many businesses, this is where the rubber meets the road -- er, the computer meets the network.

E-Commerce Alerts are issued by Bennett Gold LLP, Chartered Professional Accountants as situations develop. Bookmark this site and check back often. Our e-mail address is: info@BennettGold.ca

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