Success in European B2B Trade Requires the Right Investments

A report published in May says online business-to-business (B2B) trade has major potential in the years ahead. And, by 2005, the research predicts, the online market will account for about one-third of all B2B sales in Europe.

To keep momentum in the marketplace, however, the study says that online firms will have to make a significant investment in the "sell side" of e-commerce, as well as stomach relatively high labor costs.

The Forrester Research report, entitled "ROI of Europe's eCommerce Sites," found that labor costs will consume more than 50 percent of online B2B companies' budgets.

Forrester analyst Charles Homs said that for a typical Europe top 100 firm to tap into trade opportunities, they will have to invest more than 11 million euros ($9.72 million) to get the service rolling.

Homs added that the cost of integrating the applications will eat up half the firm's IT investment in the first year, but, once the required infrastructure is up and running, the labor costs will start to climb as well.

As if this wasn't enough to give the financial director a headache, Homs said that the B2B commerce site will also need a marketing program, just like any other type of business.

"After the initial launch, these costs will catapult to 15 percent of ongoing spending to keep the trade site up, but the return on investment will be worth it," he said.

Homs cites the example of a top European 100 transportation company being able to generate 33 percent of its total trade through its online B2B services.

Before this sales bonanza can happen, Homs sees a need for many firms with existing e-marketplaces to overhaul their systems and invest in what he calls "sell side commerce sites."

"Today's approach to B2B Web sites is focused on features, not functionality," he said, adding that there is now a definite need for site overhauls in many cases.

"European firms are failing to deliver because a wealth of features don't generate extra business," he said, adding that poor access to applications results in an inability to transact online.

Forrester's report concludes that focusing on B2B commerce sites will allow firms to benefit from improved sales at lower costs and higher-quality services.

For this to happen, the research firm says that B2B commerce sites must mature sufficiently to include collaboration and ensure accessibility of business processes to their customers.

The report says that they must also improve overall profitability to ensure that business process re-engineering efforts make e-business investments pay off.

For its research, Forrester says it interviewed 42 European executives responsible for their firms' B2B sites.

--Reported By Newsbytes.com, http://www.newsbytes.com .