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B2B - IS IT IN YOUR FUTURE?

According to estimates by Forrester Research, the value of business-to-business transacations conducted over the Internet will reach $2.7 trillion in 2004.

Gartner Group, another prominent consulting firm, projects that the size of B2B transactions will reach $7.3 trillion worldwide.

With numbers that large, representing about 7 percent of all global transactions, it is reasonable to expect that B2B could and/or should be in your business's future.

How B2B Works

Prior to B2B beginning to catch fire on the Internet, many businesses began to move towards a system that could improve business relationships while reducing transaction-processing costs. This solution, known as EDI or Electronic Data Interchange, enabled companies to electronically transmit purchase orders, invoices and payments in bulk from one business to another, eliminating the need to push paper.

Obviously, many of us to this point have had some interaction with the more common B2C, Business-to-Consumer, side of the Internet. Here thousands of companies are offering goods and services directly over the Internet to consumers throughout the world.

B2B takes the EDI process to another level. It is focused on working with vendors, distributors, and other businesses. That is, markets where purchasing agents search for the best deals for supplies and other materials for use by their companies. Individual transactions, i.e. a purchase order, are processed totally electronically. No paper changes hands between buyer and seller. The cost of processing the transaction and the speed of the process benefit both parties. In the more sophisticated solutions, the purchase order can trigger a chain reaction which may effect the creation of a purchase order from the supplier to the manufacturer of the item to ensure delivery or replenishment of stock in the warehouse.

Some B2B sites are classified as vertical in nature and typically meet the needs of a particular industry. They will may contain things like industry news, articles, discussion groups and other items that would be of interest to industry members. Horizontal sites offer products, goods, materials, or services that cater to no specific industry. B2B auctions enable multiple purchasers to bid competitively for products from individual suppliers. In some cases, this mechanism is being used by businesses to sell off surplus inventory. This enables buyers to set minimum prices and get more than they might through a liquidator for example.

How Are They Being Used?

Some very notable examples of where B2B solutions can be found in the new effort called Petrocosm which is being supprted by Chevron and Texaco. It will become an e-marketlplace where companies in the petroleum industry can buy and sell goods to other companies. Another is the alliance formed by Ford, GM, and Daimler-Chrysler to create an on-line supply company that would buy and sell everything from raw materials to office supplies. It has the potential to connect 30,000 businesses and handle $200 billion in transactions.

The federal government is moving the B2B direction as well by preparing to establish e-marketplaces for purchases. Other government agencies are following suit. Those B2B sites offering commodities that don't have to be handled and touched in person are the ones that should gain a quick foothold according to the Gartner Group. The key to these sites is the fact they must have a good transaction-processing system that makes it easy for businesses to find and make purchases. This capability is being provided by numerous software and service companies, like Commerce One, Ariba and others.