andrew bartels vice president forrester research
TRANSCRIPT
ForrTel:B2B eCommerce Trends And OpportunitiesAndrew Bartels
Vice President
Forrester Research
May 11, 2004. Call in at 12:55 pm Eastern Time
B2B eCommerce still growing
Extranet/Private eMarket Public eMarket
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Online buying of both direct and indirect materials growing
Source: Forrester/ISM Survey
0%
2%
4%
6%
8%
10%
12%
14%
2001: Q1 2001: Q3 2002: Q1 2002: Q3 2003: Q1 2003: Q3
Direct materials, all
Indirect materials, all
But mostly between large companies
50%-60%
5%-10%
Over $1Bin revenues
$100M to $1B in revenues
$10M to $100M in revenues
10%-15%10%-15%
B2B buyers
B2B sellers
5%-10%
B2B buying driving B2B selling
• Eager B2B buyers:
» Large companies investing in eProcurement and eSourcing solutions to reduce cost of goods and services purchased
• Reluctant B2B sellers:
» Most small and midsize companies scared of online sales due to fears of becoming commoditized
» A few early adopter leaders, especially large companies and those in technology
Online buying activity still lags
Source: ISM/Forrester Report On Technology In Supply Management: Q3 2003
Average percent of spending
• Indirect materials purchased via the Net
• Direct materials purchased via the Net
Percent of companies
• Purchased goods through an online auction
• Used an eProcurement application
• Used the Net as part of an RFP process
Percent of all firms
12%
13%
24%
44%
69%
But large firms doing more
Source: ISM/Forrester Report On Technology In Supply Management: Q3 2003
Firms with more than $500 million in spendingAverage percent of spending
• Indirect materials purchased via the Net
• Direct materials purchased via the Net
Percent of companies
• Purchased goods through an online auction
• Used an eProcurement application
• Used the Net as part of an RFP process
19%
20%
54%
67%
80%
A glass floor for eProcurement and eSourcing
Fortune 200
Upper mid-tier($0.5B-$1B)
Lower midtier($50M $500M)
Small(Under $50M)
Large($1B-$10B)
Smaller companieshave limited
leverageover suppliers
(for deals, participation)
Mainly largeenterprises
have adopted eSourcing
andeProcurement
% of direct materialsbought online, Q3 2003
32%
16%
14%
10%
7%
Large companies dominate B2B buying
89%
25%10%
9%
22%
17%
23%
20%
29%
52%1%
0.2%
0%
25%
50%
75%
100%
Share of companies
Share of total buying
Share of online buying
Fortune 200
$1B - $10B
$100M - $1B
$10M - $100M
B2B buying: key mistakes
• Buying a product before changing the processes
• Starting with eProcurement instead of with eSourcing
• Underestimating supplier enablement gap
• Viewing B2B buying as a one-time solution instead of a repeated process
• Failing to participate in B2B eCommerce
Road map to success
1. Implement P-Cards to get process savings, process changes, initial data on MRO spend
2. Use spend analysis tools to get granular detail on MRO spend, savings opportunities
3. Use eSourcing for high-spend categories to get better deals from fewer suppliers
4. Use eProcurement to get employee compliance with sourcing policies
5. Repeat Step 2 and Step 3
Organizing for spend management effectiveness
• Best when CFO is executive sponsor
• For spend analysis and sourcing, organize centrally, deploy geographically
• For MRO eProcurement, set standard centralizing, deploy unit and geography
• For services procurement, deploy department by department using global platform
eProcurement and eSourcing vendor landscape
eProcurement
eSourcing
ServicesGeneral indirectDirect materials
SAP,
Oracle,
ICG Commerce
Elance,Fieldglas
s IQ
Navigator
Ariba, PeopleSoft
i2
Ketera,Perfect
Commerce, ePlus
SSA GT (Baan), Lawson
ATKPS, B2eMarkets, Emptoris, FreeMarkets*,
Frictionless, Global eProcure, Procuri
Spend analysis Softface*, Zycus
Iasta
* Acquired by Ariba in 2004
B2B selling: three channels
1. Via sales forces• Salespeople place
their orders online
2. Direct sales• Customers place
their orders online
3. Via partners• Distributors or sales
partners place their orders online
Sales
B2B selling: key mistakes
• Ignoring impact of B2B Web site on other channels
» Launching a B2B Web site before enabling sales people to place orders online
» Failing to understand requirements and needs of channel partners
• Underestimating catalog management requirements
• Failing to integrate Web site with telephone call center
• Focusing on small/midsize customers instead of larger ones
• Failing to participate in B2B eCommerce
B2B selling: Key requirements
• Have an electronic catalog
• Be able to receive and respond to electronic purchase orders in standard formats
• Customize catalog per contract requirements
• Personalize content by company and by employee roles and authorities
• Integrate directly into buying system of strategic customers
B2B selling: Process changes
• Sales force channel:
» Provide online order-placement Web site
» Train and motivate sales force to use
• Direct online sales channel:
» Get sales force onboard first
» Implement commerce server solution
» Address channel conflict issues
» Redesign production and fulfillment systems for online orders
• Channel partner/reseller channel:
» Understand partner interest and needs
» Address channel conflict issues
» Implement partner relationship management solution
» Train and motivate partners to use Web site
The importance of catalog management
Suppliers
Seller’s Web site
Procurementportals
Distributor site
eMarkets
Load product information
Syndicate product information
Normalize product information
11
22
33
44
AggregateExtract Cleanse Distribute
XML stream
Change stream
Commerce server market by size and price
Under $50K
Over$500K
BroadVision
BEAIronside
SAP
Oracle
Siebel
$50K-$100K
$100K-$250K
$250K-$500K
Microsoft
HAHT
Blue Martini
PeopleSoft
ATG
IBM
Partner relationship management market
Brandmanagement
focusedeCommerce
focused
Partner relationship-focused
• MarketSoft• Onyx• Pivotal• Webridge
• Web Collage• IBM • Azerity• Firepond• Trilogy
• Channelwave• Click Commerce• Comergent• PeopleSoft• Siebel• Oracle• Onyx
• HAHT
• SoftAd• InfoNow
Conclusion
• B2B buying and selling via the Internet are becoming essential
• But the Internet coexists with other channels
• Applications are becoming more mature, part of larger application offerings
• For B2B buying, procurement, and sourcing process changes are key factors for success
• For B2B selling, sales channel management is key for success
Summary
• Companies are increasingly purchasing online because of the real savings
• Process changes produce the greatest savings
• Successful online buying is an eight-stage cycle
• Repeated cycles create sustainable supply management
