Vertical sector B2B ready to explode

The online business-to-business (B2B) market will be worth $3 trillion by 2003, fuelling an explosion in vertical and horizontal trading communities.

Analysts at Robertson Stephens' Tech 2000 conference in San Francisco said this week that the B2B ecommerce market would not only become a money spinner for IT suppliers, but would change the traditional distribution models of a range of vertical sectors.

Eric Upin, a senior B2B analyst at Robertson Stephens, said: "It's rare to have markets of this size opening and this is resulting in a massive land grab."

Upin claimed, however, that the nature of the B2B market is changing and could no longer defined as trading between different businesses.

It is taking the form of commerce between companies in the same vertical sector, where organisations such as Chemdex bring together buyers and merchants in the pharmaceutical industry, he said.

Such trading places enable participants to exchange goods, sometimes anonymously, to auction off and bid for one-off or new and used products, and to aggregate workflow, Upin explained.

But he warned that these trading communities are extremely complex to build because they need to encompass all purchasing processes such as product inspection, customs clearance, logistics and billing. They also need to be multilingual and support international currencies.

"Every industry is different requiring deep knowledge of variations in products, processes and players," he said.

Suppliers in this space include developers of infrastructure software such as Epiphany, Siebel and Agile, and vendors providing back-office integration services such as Breakaway, Razorfish and Scient, he said.

Upin said owners of such trading communities would initially make money from transaction and subscription fees, but would eventually offer member companies such services as insurance and financing, transportation and storage, product inspection and refurbishment.

He also predicted that small businesses would be among the early adopters of these trading sites. They are expected to spend $106bn online by 2002.