May 2, 2006

New research from CompTIA (the Computing Technology Industry Association) reveals that B2B partners are increasingly depending on extranet websites to conduct business-to-business (B2B) sales and electronic commerce.

However, the growing trend is resulting in additional supplier costs for the supply chain among others.

CompTIA's study of B2B buyers and suppliers found that 74.1 per cent of the companies that have responded are actively using extranet Web sites today for a portion of their B2B trading.

Thirty one per cent have indicated Web site trading has increased since the beginning of 2005.

One word of caution however: more than three-quarters of the companies (77 per cent) said the shift to extranet Web sites is less beneficial than other B2B trading mechanisms.

The transition to manage transactions via an extranet Web site has been prompted by a desire by buyers to reduce costs. In some instances, however, the shift to extranet Web sites is having a negative impact for both the supplier and customer in areas such as efficiency, accuracy, cost, and partner relationships.

B2B extranets often require companies to add staff to handle manual data entry.

With greater reliance on manual trading, the risk of error is heightened. The amount of time it takes for a supplier to manually enter information into their own systems and then manually enter the response on the buyer's Web site is likely also greater than the time it takes to complete the same transaction with an automated system.

"Extranets are a viable trading mechanism, especially when communicating with small and medium sized trading partners that may not have the resources to support sophisticated e-commerce systems," said David Sommer, vice president, electronic commerce, CompTIA.

"But when transaction volume is substantial the use of manual extranets can become cumbersome and costly. In high-volume scenarios some electronic data interchange is necessary for the supply chain to be efficient."

Overall, 92 per cent of companies surveyed by CompTIA said their preferred mechanism for B2B trading is system-to-system electronic trading.

Reasons for choosing this method include improved business processes, cited by 68 per cent of companies; better integration with ERP systems (60 per cent); and because it is the same trading mechanism employed by major partners (58 per cent).

"Buyers who venture down the extranet path should establish a strategic, collaborative plan with their suppliers and discuss in detail the costs of data exchange," Sommer added.

"Without such pro-active steps, the strategic sourcing initiatives instituted by buyers may eventually increase costs and errors, and reduce the amount of information shared between trading partners."

The majority of the 57 companies participating in the survey are large. Eighty per cent have annual sales revenue of at least US$100 million; and among these, 63 per cent have annual revenue of more than $1 billion.

This research on B2B trends was conducted as part of the CompTIA Electronics Industry Data Exchange (EIDX) Group, where member organizations work together to address electronic business interoperability issues, ensuring the strategic and global advancement of e-business across boundaries, industries and vertical markets.

Source: IT Business