In perhaps the clearest indication of the falloff, consider the decline in sequential license-revenue growth recorded by companies across the business-to-business e-commerce landscape. According to published reports, license revenue at 11 prominent companies in the sector averaged 23 percent growth from the third to the fourth quarters last year.
Although that would qualify as a staggering increase by most traditional measures, this sequential growth rate remained well below the performance reported by these same companies over the previous four to five quarters.
Though I would offer that the above-mentioned fourth-quarter data was a largely isolated incident and that the industry would rebound immediately, muted forward-looking license-revenue projections tell a more somber story.
Even though 12-month license-revenue projections for several of these 11 business-to-business e-commerce enterprises were increased by 5 percent to 10 percent coming out of the fourth quarter of 2000, that's still sharply lower than the 30 percent-plus bumps that were frequently posted in the same reporting season during the last quarter of 1999.
What's behind the relative slowdown in the business-to-business world? For starters, look to the faltering U.S. economy, which has had a dampening effect on demand for e-procurement, not to mention software solutions associated with trading technology, customer relationship management, supply chain management and content management.
Given the uncertainty, Fortune 1000 companies are re-evaluating projected expenditures for the coming year. Their concerns range from questions about return on investment associated with large-scale business-to-business implementations to their own expectations for slower top-line growth over the near- and medium-term horizons.
At the same time, spending by Internet-based businesses has slowed to a trickle in the aftermath of the challenging funding environment (both publicly and privately) that has emerged over the past nine months.
What's more, the "law of big numbers" now appears to be a meaningful factor across the industry. This so-called law, which is a direct result of earlier successes, suggests that high rates of growth become increasingly difficult to attain as a company?s revenue base grows.
So, is this the beginning of the end for business-to-business? Hardly.
Projected benefits such as cost-savings, operational efficiencies, revenue generation and supply chain coordination that are associated with widespread adoption of business-to-business e-commerce, remain as sizable and tangible today as they were 18 months ago. Accordingly, I continue to believe that business-to-business e-commerce will remain a top priority and a key focal point for management teams around the globe, regardless of (or, perhaps, as a result of) economic conditions.
The trends surfacing in the fourth quarter of last year signal the inevitable end of one phase of the industry?s life cycle and the beginning of another. Likely consequences of this expected "maturation" include controlled growth, not hypergrowth; sales cycles measured in quarters, not weeks or months; more-defined market segmentation and product differentiation; and vertical and horizontal integration across the business-to-business e-commerce landscape.
These are all good things, in my opinion. Although it may not seem like it today, this relative slowdown is helping to accelerate economic "Darwinism" in the sector, more clearly distinguishing leaders from the proverbial pack and positioning them to more easily grow their market share. Perhaps more important, it is laying the foundation for a more sustainable, long-term environment into which emerging companies can sell well into the 21st century.
WR Hambrecht + Co makes a market in the securities of BroadVision (BVSN).
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