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Business e-commerce to top $8 billion

A new study predicts that business-to-business e-commerce will grow tenfold this year, topping $8 billion.

Manufacturers, middlemen selling computers, and services will drive business-to-business commerce over the Internet to $8 billion this year, a tenfold increase from 1996, according to a new study from Forrester Research (FORR).

In 2002, the value of goods and services traded between companies will rise to $327 billion in 2002, estimates the inaugural report from a new Forrester unit focused on business-oriented e-commerce.

Manufacturers, like Cisco and Boeing, will do $3 billion in business on the Net mostly in electronic and airplane parts, Forrester predicts. Computer-related intermediaries like MicroAge and office supply firms like Boise Cascade will do $2 billion in sales this year. Services and utilities, such as QuickTrade and Altra Energy, will ring up $3 billion by December 31.

Forrester predicts that durable goods manufacturers will lead the rush to Net-based e-commerce, reaching $99 billion in sales by 2002. Makers of paper, plastics, apparel, and other non-durables will sell $17 billion online by 2002.

Advantages of interbusiness Internet commerce include its efficiency to describe products more fully, configure orders better, and offer round-the-clock access.

Initially lower administrative costs for Net-based orders will create fatter profit margins for manufacturers, but cushy profits will soon evaporate as buyers demand price cuts to win deals.

As the Internet grows as a sales channel, most firms will experience a decline in phone and fax usage. That will let sales people concentrate more on their accounts rather than order processing, according to Forrester director Blane Erwin.

In preparing its report, Forrester researched e-commerce plans of 150 companies in 12 industries, then interviewed executives at 63 firms actively trading goods and services over the Internet. The research group also interviewed 25 vendors of Internet commerce software and services about their experiences with businesses building e-commerce capabilities.

The biggest internal hurdle to e-commerce was getting a company's own marketing and IT groups to work together. Another major issue was tying front-end customer systems to back-end order processing systems. Businesses also had to convince customers, suppliers, and partners to adopt Internet commerce, the study found.