Value and

Impact of B2B eCommerce

Economic Impact

of B2B Commerce

B2B buying is slowly transitioning to ecommerce, but many organizations still rely on phone, fax, and email to place orders, which of course is time-consuming and expensive. Forrester found that the composite organization’s processing cost fell by $12 per order, or a risk-adjusted $3.7 million over a three-year period, after launching B2B Commerce. The value of this cost decrease for smaller customers since it is especially difficult to cost-effectively serve them via labor-intensive channels. Other cost efficiencies come from software and IT management cost avoidance of a risk-adjusted $2.1 million over a three-year period from retiring legacy ecommerce systems. Addationaly, the composite organization realized a risk-adjusted $7.3 million over a three-year period in increased operating profit from customers that transitioned to online ordering.

Greater business agility

The capacity to quickly extend the capability of an initial tech investment to other business units or initiatives is absolutely critical today. With Open Market Network, organizations can configure rather than customize the system, which means they can roll out ecommerce enhancements (and realize business benefits) much faster. This is the only solution that gave us the possibility to grow so quickly and with such flexibility in implementation.”

B2B Commerce

The Impact on Industry Structure

We argue that the openness of an industry's B2B e-commerce systems will have a direct effect on the structure of downstream industry activities. Industries where the B2B e-commerce systems are largely open to participation should experience increased heterogeneity and competition in downstream industry activities. Industries where the B2B e-commerce systems are largely closed should experience increased homogeneity and decreased competition in downstream industry activities. We further argue that the openness of the B2B systems will depend on the type of B2B systems that develops within a specific industry. Correspondingly, much attention should be given to the type of B2B e-commerce systems that emerge.

Business to business exchange generally refers to any business transaction occurring between two separate business entities. This includes the exchange of both products and service. Examples might include the selling of raw material inputs from one firm to another, the sale of capital equipment, the purchasing of commercial insurance or the contracting of one firm with another for the procurement of accounting services. Electronically based B2B exchange, more commonly and henceforth referred to as B2B e-commerce, refers to any type of B2B exchange that is primarily facilitated through the use of an electronic media.

The primary economic advantage of B2B e-commerce is perhaps best understood through the use of a value-chain analysis. The value chain model analyzes the production of a particular product or service as a series of "value-added" activities. In addition to the primary "value-added" activities associated with any production process, there also exists a variety of non-value-added activities or "support" services necessary for the operation of the primary value-added activities. For example, primary activities associated with the production of an automobile might involves activities such as the production of material inputs and the assembly of inputs into a final product. Support activities might include the development and use of human resource systems designed to manage the labor force and the development and use of procurement systems employed to facilitate the purchase and distribution of material inputs.

The primary economic advantage of B2B e-commerce is increased efficiency in the area of non-value-added activities. More specifically, B2B e-commerce streamlines the procurement process adding efficiency to this aspect of the overall production process. As suggested by Lucking-Reiley and Spulber (2000), B2B e-commerce "aims to reduce the cost of procurement before, during and after the transaction." B2B e-commerce lowers the cost of procurement before the transaction by reducing the searching costs associated with procuring inputs and by increasing the ease of price setting and product comparison. B2B e-commerce also reduces the cost of procurement during the transaction by reducing the level of interpersonal communication needed to facilitate the completion of the transaction. Finally, it can reduce the costs associated with monitoring contractual performance and confirming product or service delivery.

The world is changing

We live in a post-digital age, an era of constant technological change, transforming rapidly the way we live, work and relate to each other. Technology has become an everyday component in our lives; it is the invisible engine that powers the world around us. In a 24/7 economy, clients have different needs. The way they work is changing and this also influences the skills and talent they need.