Much of the IT world is currently suffering from "B2B fever," as forward- looking corporations realize that the upcoming business environment in certain industries will involve a robust and active supply chain. To survive the rapid pace and ever-changing list of partners in this impending business climate, many companies are planning to automate as much of the supply chain as possible with software. IT departments that specialize in supply chain software known as "IT chain gangs" are currently focusing on inbound links of the chain procurement, for the most part although some are also considering outbound links like distribution.
THE HURWITZ TAKE: We note that B2B fever too often prevents IT chain gangs and software vendors from seeing some of the risks that must be managed in automating the supply chain. One fact that eludes many is that not all B2B supplies can be bought online. Some are too expensive, legally liable or subject to stringent requirements such that they require considerable human involvement. For instance, it is unlikely in the future that Boeing will buy jet engines online, but it will probably buy bolts and washers through competitive trading communities.
The total expenditures per year spent in B2B procurement (whether electronic or not) will approach $100 trillion in a handful of years, making it seem like an extraordinary opportunity. However, only a single-digit percentage of these dollars will account for online transactions. Big-ticket items will drive up the dollar size of the B2B market, but these are the very items that cannot be procured with an electronic handshake and an EDI or XML document exchanged by partners that pass in the night.
Hurwitz Group recommends that IT chain gangs shake off B2B fever and work with their users to identify supplies that can be acquired online with little or no human intervention versus those that are too complex or too mission-critical to be entrusted to bits and bytes.
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