Where we stand with e-commerce

Right up until the bottom fell out of tech stocks in 2000, MSI had a steady stream of start-up B2B e-commerce software vendors trooping into our offices to explain why their applications would be the next big thing. Few had user deployments to discuss, but they all had PowerPoints. These presentations cited astronomical figures from analysts for Internet-based, B2B e-commerce growth.

As I recall, $7 trillion per year by 2004 was an oft-cited figure. I may be off here a bit, but what's a trillion dollars when you're talking about the next big thing?

I've heard some analysts defend those boom-era predictions, but let's face it, for the most part, the estimates—which typically were based on theoretical models—fell short. That's not to say, however, that B2B e-commerce isn't happening. Far from it.

Just look at the latest figures from the Report on e-Business, an ongoing study from the Institute for Supply Management (ISM) and Forrester Research. Of course, many of those start-ups used Forrester's predictions, although as it turns out, Forrester's numbers weren't the wildest of the bunch. Besides, the Report on e-Business is an ongoing survey of what companies actually are doing, rather than a prediction based on some model.

The latest report found that 70.3 percent of companies bought direct materials via the Internet in the fourth quarter of 2002, up from 63.8 in the third quarter. The percentage of total direct materials purchased via the Web also saw an increase—from 6.5 percent in the third quarter to 9.4 percent in the fourth quarter. Large-volume buyers said they used the Internet to purchase 13.4 percent of total direct materials in the fourth quarter, up from 7 percent in the third quarter.

What do the numbers show? Well, for one thing, many companies are at least trying out Web-based procurement, though the vast majority of spending is conducted via more traditional means.

Another not too surprising finding—given the failure of public, Internet-based trade exchanges—is that the use of e-marketplaces slowed slightly in the fourth quarter. On the other hand, 41.5 percent of manufacturers say they now use enterprisewide e-procurement tools.

These findings are in line with what I hear from manufacturers. Many companies are upgrading their systems for Web-based commerce, but they are hanging on to older electronic data interchange connections, and for the most part, looking to make their dealings with established trading partners more efficient. That might not be the revolution that was expected, but it helps today's bottom line, and that's what matters.