Business to Business

While business to business activity exists both online and offline, the acronym B2B has primarily been used to describe the online version. (B2B) is electronic commerce between businesses, as opposed to between business and consumers (B2C). While derived from "business to business", "B2B" is narrower in meaning.

There are many very successful business to business companies. Services and products offered by B2B companies may be less prone to become "commodities" as they are in a B2C type business.

The term B2B is often applied to e-commerce between businesses. An earlier and much more limited kind of online B2B prior to the Internet was Electronic Data Interchange (EDI), which is still widely used.

Business to Business Outlook
Although early interest centered on the growth of retailing on the Internet (sometimes called e-tailing), forecasts are that B2B revenue will far exceed business-to-consumers (B2C) revenue in the near future. According to studies published in early 2000, the money volume of B2B exceeds that of e-tailing by 10 to 1.

There has been a significant amount of hype given to the potential size of B2B markets--and how much bigger B2B will be than B2C. Over the next five years, B2B is expected to have a compound annual growth of 41%. The Gartner Group estimates B2B revenue worldwide to be $7.29 trillion dollars by 2004. In early 2000, the volume of investment in B2B by venture capitalists was reported to be accelerating sharply although profitable B2B sites were not yet easy to find.

Among the key trends for e-commerce are a new surge in B2C sales, continued growth in B2B sales, continued soft demand for buy-side e-procurement and e-sourcing solutions, and a revival of demand for sell-side commerce servers.

The buy side will remain the primary driver of online commerce growth in 2003 and 2004, with businesses adopting e-procurement and e-sourcing solutions and consumers steadily increasing their use of the Internet for buying consumer goods.

By the end of 2002, businesses of virtually all types had the potential to create profit-enhancing efficiencies by using Internet-enabled technologies. Analysts at Gartner Dataquest estimated that business-to-business (B2B) transactions reached $1.9 trillion in 2002. Internet-induced gains in business productivity in the U.S. are already in the $200 billion per year range, and may grow to $400 billion or more by 2005 as firms continue to implement better electronic data interchange (EDI) strategies.

Worldwide, businesses are finding that Internet-based tools used in the tasks of ordering or tracking inventory; managing, hiring or scheduling employees; collecting, managing and mining operational data; and collaborating with co-workers, consultants and suppliers can save impressive amounts of time and money while eliminating mistakes and waste. In addition, firms of many types continue to find new Internet-based ways to communicate with and sell to customers worldwide.

Businesses have only begun to reap the productivity gains they will eventually enjoy through Internet-based technologies. Many firms must largely redesign important processes from the ground up in order to capitalize on technology. Then they must motivate employees to embrace broad changes while training them in new methods.