Stanford sees slow growth for B-to-B commerce

While online business-to-business transactions have not taken off as rapidly as once anticipated, so-called “e-procurement” will eventually catch on, given the cost savings and competitive advantage it provides, according to research performed by the Stanford University Business School.

While online business-to-business (B-to-B) transactions have not taken off as rapidly as once anticipated, so-called “e-procurement” will eventually catch on, given the cost savings and competitive advantage it provides, according to research performed by the Stanford University Business School.

The research, released Thursday, indicated that the perception of e-procurement as risky, or difficult to integrate with companies’ current information systems, has resulted in slower adoption, or limited use of B-to-B transactions in companies’ non-core business areas, such as buying office products or acquiring repair or maintenance services.

Part of the problem is choosing a technology platform, Antonio Davila, assistant professor of accounting at the Stanford School of Business in California, said in a report on the research.

“They’re not just betting on the technology, but also on which technology. That’s delaying the whole process,” Davila said in the report.

This delay comes after market analysts released sky-high predictions in the late 1990s that online transactions would balloon from $600 billion in 2000 to $6.3 trillion in 2004, the researchers noted.

However, aggressive technology adopters tend to see e-procurement as low-risk given the competitive advantage that B-to-B transactions can afford them by reducing costs, strengthening brand image and improving customer service, the researchers said. These aggressive adopters will most likely drive the growth of e-procurement adoption over the next two years, the researchers said, including in core business areas such as computer companies buying microprocessors and memory chips online.

In fact, e-procurement enabled spending is forecast to grow 433%, expanding from 2% of total purchases today to 11%, according to a survey the researchers conducted with 168 purchasing managers. In a statement about their survey, the researchers did not provide information on current e-procurement enabled spending figures, but just gave the percentage growth forecasts.

E-procurement goods and services include software, market exchanges, B-to-B auctions and purchasing consortia that leverage the purchasing power of numerous buyers to negotiate discount prices.

Indeed, much of the growth will be spurred by cost savings involved, which some e-procurement users reported to be a 42% reduction in purchasing transaction costs, the researchers said.