What’s happened to the B2B boom?

In 2000, attitudes were quite different. The hype surrounding B2B was massive with revenues predicted in the trillions of dollars. Only six months ago Big Five firm PwC forecasted that there would be 20,000 B2B exchanges in operation by 2003.

However, the demise of high-profile B2C dotcoms like and e-tailers and has resulted in an overall loss of confidence across the new economy. Moreover even well-funded online ventures like have yet to make a profit after years of trading and the effects are being felt in the fledgling B2B sector. Companies have become cautious about investing in online ventures. Research by investment bank Morgan Stanley Dean Witter reported that interest in B2B had fallen by as much as 42%, while 32% of companies surveyed no longer wanted B2B capabilities.

You don’t have to be first to market

The wool has been lifted off many investors’ eyes and predictions of massive profits and soaring share prices are now considered naive.

‘There is now a clearer understanding of what B2B means than at the beginning of 2000,’ says Andy Kyte, a research director at Gartner.

Looking back at last year’s hype, which built up B2B exchanges and e-marketplaces as the ‘next big thing’ in e-commerce, it is now evident how ominously similar this sounded to the wide-eyed excitement which preceded the bursting of the B2C dotcom bubble.

Responding to this clearer picture, Kyte says companies are adopting a ‘long-term perspective’ to B2B gearing, while the original belief in ‘first-mover advantage’ is no longer seen as a significant competitive edge in the race to achieving a B2B presence. Many companies have adopted a slower, more circumspect approach to establishing a B2B component to their operations. Kyte comments: ‘People no longer believe that if you don’t do e-business today, it will be too late tomorrow.’

A B2B shakedown

All the evidence points to consolidations, mergers and the demise of many B2B ventures. A recent IDC report said predictions that there would be thousands of e-marketplaces within the next four years were hopelessly exaggerated. Leo Lipis, a senior analyst at IDC says that many of the e-marketplaces announced will not actually be built and many of those that are launched will not survive.

Rather, Lipis predicted the emergence of ‘super e-marketplaces’ – the result of B2B exchange mergers – in an effort to offset running costs and long-term profitability targets. He believes some of these exchanges will grow to have a ‘total market value exceeding $10bn (£6.71bn) by 2004’. Analysts are now predicting two types of B2B exchanges: Consortia-led exchanges that will be so vast they will become the virtual equivalent of industrial marketplaces, and dotcom vertical networks, which will service niche professions or communities, for example

Less than 200 B2B exchanges left standing

According to research house Giga Information Group: ‘Consortia-led e-marketplaces are less likely to face financial problems than their independent rivals because their owners have deep pockets.’

A Forrester report on the B2B market echoed this trend towards exchange mergers, but offered a much harsher picture of a huge sector-wide consolidation, leaving fewer than 200 survivors. Forrester’s final prediction is that there will be only 181 B2B exchanges left by the end of 2003.

All this evidence suggests the obstacles facing B2B exchanges in the next 12 to 18 months will be monumental. Giga predicts many will struggle to obtain additional funding from venture capitalists, a scenario that precipitated the collapse of many dotcoms (most notably financial website And B2B ventures will need to attract extra funds order to attract customers and build up sufficient critical mass.

In addition, antitrust issues – for industry-sized e-marketplaces like car parts exchange Covisint and the World Retail-Exchange- lack of customers, competitor tensions, a shortage of suppliers and inappropriate enabling technology will see the downfall of many B2B ventures.

A new internet landscape

Despite this cautious approach, and the array of challenges facing investors, B2B ventures are still expected to succeed by 2004 after the internet has undergone the equivalent of an industrial revolution.

By then B2B e-commerce is likely to be just one of a collection of new e-commerce initiatives dotting the virtual landscape.

Additional reporting by Computing magazine and

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