Thursday, April 12, 2001

Half of Market Revenue From Top 10 eMarketplace Services

The top 10 emarketplace service firms control 47% of the market, according to IDC. In a new bulletin, the global market intelligence and advisory firm ranks the leading firms by revenue. The list is led by PricewaterhouseCoopers, IBM Global Services, and Cap Gemini Ernst and Young.

"The top players in the worldwide emarketplace services market ascended to their leading positions on the strength of the market's focus on buyer-driven emarketplaces and their connection to supply chain services," said Leo Lipis, Ph.D., a senior analyst in IDC's eMarketplace Services program.

IDC believes service firms beyond the top 10 will have an opportunity to increase their revenue share as the market turns its attention toward small and medium-sized businesses (SMB) and markets outside North America. "Many of the firms in the top 10 have experience working with larger companies but are not well-versed in serving the SMB market, and history suggests moving down market is extremely difficult in an IT solutions market," Lipis said. "A middle tier of players that dedicate themselves to serving the needs of SMBs will emerge. Additionally, the top 10 are less dominant outside North American markets, and these markets will become increasingly important."

North America represents the largest region for emarketplace services, but other parts of the world will increase their spending significantly faster. IDC estimates emarketplace services revenue in North America will increase at a compound annual growth rate (CAGR) of less than 20% through 2005. In comparison, Asia/Pacific and Western Europe will each earn CAGRs of over 50%.

"Leading firms in the future will have to have global reach, business process expertise, supply chain expertise, and most important, the nimbleness to be responsive to rapid market developments," Lipis said.

E-Building Opportunities Changing in Latin America
Large Corporations across Latin America spend on average $1.2 million per project for online Web development and e-commerce initiatives, according to a soon to be published Report by the Yankee Group. Latin America's e-builders are regional Web site developers and IT service providers that have served the Latin markets since the mid-1990s. While some have grown into pan-regional powerhouses, even local players are gaining strength, competing head-to-head with the top-five consultancies and integrators.

"Many e-builders have regionally based but highly mobile project teams that work closely with corporate clients to strategize and build next-generation Web sites and e-commerce infrastructure. The e-builders' lower cost structures mean they can underbid the competition while providing high-quality design and implementation," said Andres Broner, an analyst with the Yankee Group located in Buenos Aires. "Corporations are contracting recurring business with the larger pan-regional and Brazilian e-builders, which, in turn, have acquired or created proprietary software and applications that are reused across many markets and client projects," according to Luciana Hayashi, a senior analyst for the Yankee Group based in São Paulo.

Industry migration toward e-business has not been uniform. The Yankee Group's research uncovers that financial services, telecommunications, and manufacturing companies have been heavy users of e-builder services. Pent-up demand exists in wholesale, government, and health-care verticals that have extended purchase cycles and consulting-intensive strategy needs. Key trends in Latin America include:

- Payment and Logistics Solutions. E-builders surveyed indicated that solutions for payment and goods shipment are still the weakest links of e-business projects, although corporate client demand for these e-business enablers is high.

- E-Government Solutions. Revenues are on the rise and expected to account for 16% of e-builder revenues by 2003. The demand for market-specific, highly customized applications as well as government impetus to steer projects toward firms perceived as "local" are good news for e-builders.

- E-Builders—A Growing IT Marketing Channel. Demand is high for buy-side e-commerce storefront solutions, multi-language management tools, and hosting services, but most equipment and service provider communications with the e-builder portion of the channel are far from effective.

Survey insights and analysis can be obtained in the upcoming three-part series of Reports published by the Yankee Group, "Latin America's E-Builders."