More corporate procurement is taking place online, thanks in part to an increasing number of Internet networks that make this a more affordable option, experts say.
The business-to-business networking landscape has changed significantly over the past dozen years, says Forrester Research Inc. vice president and principal analyst Duncan Jones, who covers B2B e-commerce. About a dozen years ago, companies began looking at web-based platforms to link buyers and sellers, leading to the creation of hundreds of industry exchanges or third-party networks, he says.
But most exchanges failed to make it off the ground or crashed and burned after the dot-com investment period meltdown of 2000. The concept may have had merit, but e-commerce technology was still in its infancy, expensive and difficult to deploy.
Many companies, even Fortune 500 companies with big computer systems and a large information technology workforce, still operated on mainframe computers for functions such as enterprise resource planning, procurement, and supply chain management. Those mainframe systems were extremely hard to link to web-based networks.
With corporate networks increasingly built to leverage the Internet, however, more companies are expressing interest in using B2B electronic networks to process transactions and link to key vendors, distributors and others, Jones says.
Affordable e-commerce and cloud-based computing technology are making it much easier these days for purchasing managers at companies of varying size to conduct procurement and related business over the Internet, Jones says. “B2B networking is becoming mainstream with more companies because customers are telling them ‘I want to do more business online,’” Jones says.
B2B e-commerce networks also are being utilized more because they give procurement managers more ways to collect and analyze purchasing data and to control spending, says Heather Ashton, a researcher with IDC Manufacturing Insights. “Purchasing managers now more than ever are accountable for controlling spending at their company and knowing how suppliers and services are being purchased, by whom and by what amounts,” Ashton says. “Connecting through a B2B network to key suppliers and having more reporting tools to analyze the flow of procurement dollars gives them more ways to monitor and control spending.”
Overall spending on automated procurement and B2B networking is on the rise, says Forrester. U.S. providers of procurement systems will generate an estimated $5.4 billion in revenue fromautomated procurement applications and networking in 2014 and an estimated $6.6 billion, an increase of 22.2%. “There will continue to be strong demand for in this technology category,” Jones says.
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