Friday, January 5, 2001
Infrastructure Spending by eMarketplaces to Reach $80.9
Billion
Business-to-business Net Market infrastructure spending
in the US will grow from $2.1 billion in 2000 to $80.9
billion by 2005, according to Jupiter Research, the worldwide
authority on Internet commerce. In addition, the report
finds that growth of private Net Markets will drive much
of the future spending on technology and services required
to integrate an Enterprise's business partners into a collaborative
commerce environment.
"The shift towards Net Markets by many brick-and-mortar
businesses brings to light many significant back-end integration
issues," according to Marc Harrison, research director
of Jupiter's Custom Strategy and Research group. "This
translates to huge revenue opportunities for technology
and services enablers, something we will see even more
of as these marketplaces reach the next level of maturity."
Beyond Transactions
Harrison explains that vendor opportunities increase substantially
as Net Markets integrate deeper into the supply chain
and require more than basic transaction platforms. The
report provides new revenue estimates and projections
for six technology and services categories sold into
Net Markets, and identifies three phases of development
that are common for all Net Markets:
- Buy Side Aggregation: Buyers require relevant content
- Real Time Availability: Focus shifts to supply side
integration and advanced functionality
- Value-Added Transactions: Decision support systems and
new revenue sources are critical to long-term viability
and success
"During an economic slowdown, businesses look to
increase efficiency through shortened product development
cycles, collaboration and lowered product costs through
better planning," says Harrison. "Net Markets
provide businesses the vehicle to create these efficiencies
by forming closer, more realistic relationships with their
trading partners."
Today's Net Markets
After the first boom for Net Markets, technology service
vendors created packaged software that would essentially "power" marketplaces,
modeled after the proprietary systems of early Net Markets.
However, today's Net Markets demand new functionality
and technology service companies are trying to predict
what Net Markets will want in the longer term. Specifically,
this MarketAccess report will help vendors:
- Understand the market (revenue) opportunity and market
segments, business objectives and unmet needs of leading
Net Markets
- Understand their value proposition and fit within the
technology "road map" desired by leading Net
Markets
- Understand competitive offerings and positioning of
leading vendors
- Develop a "go to market" strategy and validate
their business plan with partners and investors
Methodology Summary
Jupiter Research's MarketAccess Report on Net Market Infrastructure
is based on a series of 80 interviews with leading executives
in each technology segment as well as Net Markets. The
report also includes results of an executive survey of
90 Net Markets which define the "voice of the market" -
an analysis of current Net Market technology needs and
measurement of anticipated demand for the offerings of
technology service companies.
33% of Website Budgets go to Maintenance & Design
The two largest components of site development and operation
are site design / programming maintenance costs (33%
of the total) and costs for access and site hosting.
These two site components require nearly 60% of total
global site development and operational budgets annually.
Some costs, like hardware and software, may be born as
outside services when sites are outsourced, or may show
up as independent budgets when sites are internally supported.
Over $22 Billion will be spent by businesses globally
to establish and maintain an online presence. This translates
to 17% of the $132 billion in E-Commerce revenues being
generated today and is expected to help generate trillions
of dollars in the near future. Detailed statistics about
website investments are presented in ActivMedia Research's "Real
Numbers Behind Web Hosting & Development" study.
Nine key areas of site development have been researched
with an eye to establishing benchmarks and budgetary norms
in both dollars and proportional percent allocations to
guide managers through the budget process. These key areas
are:
1. Website Design & Web-page Programming
2. Web Hosting & Access Services
3. Web Transaction / Order Processing Services
4. Web Applications / Outsourced Web Services
5. Consultants for Site Design & Strategy
6. Computer Systems & Peripheral Hardware
7. Network Hardware
8. Web-related Software
9. Systems Integration with Backstage Computer Networks
Website development and ongoing site upgrades constitute
the largest portion of total site development budgets for
sites in all site types. One in three website dollars goes
into web page programming and design. Website development
is not a one-time E-commerce startup cost. In today’s
online market, major site rebuilds are an essential ongoing
task and expenditure.
For all site types, the percentage of site development
and operation budgets devoted to site upgrades increases
with number of years online, online revenues, and total
site development and operational budgets. The increase
in budget devoted to continual site upgrades rises approximately
20% by all these measures.
ActivMedia’s VP of Market Research Harry Wolhandler, “Websites
must be constantly vigilant to be successful online. While
it is a benefit to E-commerce managers that their “stores” remain
open “24x7,” it can also be a curse. Whenever,
for whatever reason, the site goes down, the revenue stream
abruptly stops. Shoppers don’t care a bit why the
site goes down; they are simply prompted to buy elsewhere.
While externally hosted sites rely on outside services
for around-the-clock technical support, internally managed
sites face the daunting challenge by themselves.”
News Tidbits (appears every day on the front page)
- Fox is the newest company to start laying off Internet
employees. Fox has announced that it will merge many
of its online services resulting in hundreds of employees
being let go. The decision came after Fox determined
that a strict online model based on advertising doesn't
work and that the Web serves its needs better as a marketing
medium for its non-Internet related services.
