Uptake of enterprise ebusiness applications and online procurement is set to skyrocket over the next 18 months, according to analyst reports.
Durlacher Research last week unveiled findings from its corporate ebusiness and ASP survey after questioning 500 UK corporations with revenues in excess of £75 million. The results revealed that the number of companies which have invested in ebusiness applications is set to grow from less than 20 per cent to more than 50 per cent within the next 18 months.
According to the Durlacher, early leads established by new entrants in the ebusiness software space will be challenged by the more established software vendors moving into the same market.
The results showed that 16 per cent of enterprises indicated that they would consider new entrants when looking to extend procurement out onto the internet. A significantly larger 46 per cent indicated that they would rather consider established software suppliers.
Durlacher's European internet analyst, Sarah Skinner, said users' attitude would "offer huge opportunities for established software providers and niche ERP vendors who are ahead of the curve and have an established customer base".
Huge growth in demand
The survey said that demand for trading communities shows that usage is growing from six per cent to 33 per cent, with the highest uptake planned in the IT, engineering, health and utilities and business services sectors.
Skinner also said that 22 per cent of ebusinesses are using or trialling ASP services, with a further 19 per cent looking to invest in ASP services at some stage in the future. The survey also indicated a significant latent demand for outsourced inter-company applications including e-procurement, supply chain management, business-to-business and collaboration of communications.
The survey also said that 13 per cent of corporations have invested in an internet-based supply chain management system, with planned investment bringing this to 41 per cent within the next year and 53 per cent within 18 months. Skinner said that the basic functionality offered by all ebusiness applications would be rapidly expanded to include applications that provide decision support, collaboration and tighter integration into existing back-end systems.
Other findings revealed that the UK corporate market is moving forward from basic internet connectivity to integrating the internet into core business processes, creating a more integrated ebusiness model. Skinner said that internet penetration has reached saturation point in the enterprise with intranet penetration reaching 77 per cent and extranet penetration doubling up to 32 per cent. Skinner said: "The UK internet market is poised for a period of qualitative changeover the next five years. UK corporations are not unfamiliar with the fundamentals of electronic trading."
About 71 per cent of ebusiness corporations already have electronic data interchange (EDI) connections, but only 19 per cent of these link to supply bases, Skinner said.
Businesses looking forward
But she added that ebusinesses are beginning to migrate their EDI systems, which are traditionally expensive over to IP VPNs and the internet.
"Ebusiness is not just about replacing EDIFACT with XML and VANS with internet, although there is a strong case for doing this. It is about using the most appropriate technology for the type of exchange required."
On average, enterprises and ebusinesses are currently putting at least 16 per cent of their transactions through a trading community, with the focus today being on content, collaboration and the procurement of indirect goods.
Skinner said that companies are also looking at putting both direct and indirect goods through trading communities.
"The concept of trading communities is still new," she said, "with six per cent of corporations indicating they do not even know what a trading community is." Only a further 15 per cent are actually making use of or trialling an online market place, according to the results of the survey.
The survey results indicated that a higher than average uptake of trading communities was found in the financial sector, with 35 per cent saturation.
The IT sector had 33 per cent interest, telecoms 18 per cent and distribution had 21 per cent. Skinner said that "trading communities, or online marketplaces, were designed to bring together content, communication and commerce in a centralised online format, to address inefficiencies in current trading relationships."
Key growth factors
The Durlacher report highlighted the fact that the drivers behind ebusiness have been the promise of huge cost savings, but the main barrier is the slow realisation that companies will need a greater degree of back-end integration into existing systems to attain these cost savings.
But initially, notes Skinner, this is expensive to implement and is often lacking from today's systems. She added that the benefits of online procurement can only be seen in larger organisations after changing internal processes. This means that an enterprise will have to buy in high-level management systems or outsource the project to an ASP.
Another major barrier is still security, or "the perception of the lack of security," as Skinner puts it. But Durlacher believes that the growth of secure extranets and developments in VPN technology will solve this problem.
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