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B2B E-COMMERCE: $403 BILLION IN 2000

February 2, 2000

      Business-to-business (B2B) e-commerce will grow at aggressive rates through 2004, causing fundamental changes to the way businesses do business with each other, according to research conducted by Gartner Group, Inc.

      According to the research, the worldwide B2B market will grow from $145 billion in 1999 to $403 billion in 2000, and $953 billion in 2001. In 2002, the market will increase to $2.18 trillion, and at the end of 2003 worldwide B2B revenue is forecast to reach $3.95 trillion. By 2004, B2B e-commerce will represent 7 percent of the forecasted $105 trillion total global sales transactions.

      "The B2B explosion is imminent, fueled by a combustible mixture of investment financing, IT spending, and opportunistic euphoria that is being funneled into start-ups and brick and mortars' e-commerce initiatives," said Leah Knight, a Gartner Group analyst. "Collectively, they will drive short-term economic disruption but long-term business efficiency across industries and geographies."

      According to the Gartner Group, the catalyst for B2B e-commerce is e-market maker activity. An e-market maker is an organization that develops a B2B, Internet-based, e-marketplace of buyers and sellers within a particular industry, geographic region, or affinity group. E-market makers are projected to facilitate $2.71 trillion in e-commerce sales transactions in 2004, representing 37 percent of the overall B2B market, and 2.6 percent of forecasted worldwide sales transactions.

      GartnerGroup analysts said e-market makers will have a critical yet subtle impact on transactions that flow through brick and mortar sell-side initiatives, including extranets, B2B Web storefronts, EDI, and flat file transfer over the Internet.

      "These brick and mortar sell-side initiatives will fuel the B2B e-commerce fire significantly, as e-market maker valuation envy and Wall Street pressures drive brick and mortars to accelerate sell-side e-commerce adoption," Knight said. "Valuation envy has already sped up e-commerce adoption in the chemicals and electronics components industry, where traditional brick and mortars are under pressure to keep up with fast-moving virtual competitors."

      The Boston Consulting Group released a report in December of 1999, which found the transaction value of B2B e-commerce done over the Internet will be more than 2 trillion in 2003, with nearly $800 million in purchases made through Electronic Data Interchange (EDI). More than 65 percent of all B2B e-commerce purchases made in the US by 2003 will be made in six sectors: retail, motor vehicles, shipping, industrial equipment, high tech, and government, according to BCG.

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