E-commerce: a market analysis and prognostication

Abstract

■ Foreword by Carl Cargill: This article examines the market potential for e-commerce from an analyst’s point of view. I asked Sherrie Bolin for a copy of a report that she had provided to clients for their use in market analysis and market potential sizing. I have made some changes to the format of that report, to ensure that the identity of the clients for whom the report was prepared cannot easily be determined. The report fairly summarizes the potential for the e-commerce market; in light of recent advances it may understate the size and speed of that market. This is the kind of study that managers considering embarking on an e-commerce expansion or e-commerce activity use to begin their planning. The firms to which Sherrie Bolin provided this information have acted upon it, and have initiated/expanded e-commerce (Web-based) sites. It is this type of report that drives many in the industry to action. You will note that standards are never explicitly called out in the report—it is expected that they will be there, for security, for the Web, for presentation, for privacy. The point of commerce on the Web is to make money; standards to support such initiatives are part of the necessary infrastructure. In the absence of activity on the part of the consortia and Standards Developing Organizations to provide them, the market will put something in place because of the tremendous amounts of money involved. This is one of the most important lessons in this article— that the market will drive to success/completion, with or without active participation by technologists to structure it with standards. lectronic Data Interchange is a safe and secure means of exchanging standardized business forms electronically. Since the late 1970s, it has been used to automate the procurement process and reduce costs. Analysts estimate that businesses trade in excess of $150 billion over EDI and obtain savings of 5–10% (US Department of Commerce). However, because EDI is usually run over Value-Added Networks, the costs are high. For example, the cost to add one trading partner can exceed $50,000. While the value of EDI transactions are currently 14 times higher than business-tobusiness transactions over the Internet/ Web, a transition is occurring. The Gartner Group predicts that 80% of current EDI users will implement extranets by 2003. This transition will allow small businesses that traditionally conduct business via fax and phone to cost-effectively participate in the procurement process and become suppliers to larger companies. Companies such as WebEDI are already developing software that can turn EDI purchase forms into Web forms for smaller suppliers.