While most analysts appear to be focusing on business to business ecommerce as the big money spinner, analyst firm AMR Research believes that Internet based trading exchanges (ITE) is where the real action will be.
But while it is bullish about the prospects for ITE's, AMR is also concerned about the progress they have made so far and the potential challenges ahead.
ITE is the generic term for Internet trading sites where buyers and sellers, usually in the same vertical industry, are brought together under one umbrella.
AMR Research predicts that while ITE's are in their infancy today, the market will grow to $5 billion over time and could have a significant impact on industry practices as enterprises move from ad hoc or spot buying to purchasing core materials and services in this way.
Scott Latham, senior analyst at AMR and the author of the report, said: "Today, enterprises will only consider buying that 20 per cent they don't have on contract."
Corporate buyers are currently reluctant to relinquish their long standing relationships with existing sellers of core materials and services, he claimed, but may be prepared to reconsider this once the ITE concept is proven.
"The lynchpin will be the existing relationship and how that compares with the kind of online tools a buyer can easily use in the buying process," he said.
But Latham also sees significant technical problems with ITEs. They are currently focused mainly on providing information and are woefully immature as far as applications integration is concerned.
"Customers want more than a place to find things and sellers want more than a marketplace," he explained.
With the notable exception of Chemdex, which specialises in bringing buyers and sellers together in the life sciences industry, very few exchanges provide tools that enable transactions to flow between the trading parties.
"Supply chain integration is the pinnacle, but we're a long way off that yet," Latham said.
But such marketplaces provide a new way of doing business and it is far from clear which business models will prevail.
However, this is anything but a given as the recently announced jointly developed ITE for the fluid processing market from chemicals giant DuPont and Chemdex shows.
And while marketplace sites are currently mushrooming in the US, Latham also noted that most are struggling as a result of cash shortages.
"The suppliers are reluctant to come as they already have customers in place and buyers don't see why they should pay for the service," he explained.
This has led to many fledgling ITE's being forced to give away large tranches of equity capital to potential partners in a bid to keep money flowing through the business while they attempt to reach critical mass.
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