Business Networks a Must in a Digital Economy

Blog /Business-Networks-a-Must-in-a-Digital-Economy

During the mid-to-late nineties, an explosion of business networks, known then as "online marketplaces," promised a paradigm shift in how businesses and suppliers would interact. Targeting gross inefficiencies in procurement processes and costly kinks in supply chains, and focusing on supplier-intensive industries, online marketplaces were the B2B darlings of the early Internet craze.

However, despite enormous investment in technology, accessing these early attempts at business networks proved to be notoriously complex, slow and expensive. Add to this a general lack of confidence in cloud-based technologies among businesses and, then (circa 1999–2001), the burst of the dot-com bubble, and it is not difficult to understand why early online marketplaces, by and large, suffered a fiery death.

Business Networks Arise From the Ashes of Online Marketplaces

But that was fifteen years ago, and much has changed over the intervening years.

Today, globalization, the extended enterprise, and convoluted supply chains force businesses to manage an increasingly complex set of relationships spanning suppliers, distributors, partners, and numerous other third-party stakeholders.

Cloud technology is now readily accepted by most enterprises; solutions that automate sourcing, procurement, and accounts payable have advanced and matured; social networks have changed the way people interact; and collaboration among business partners and suppliers is the new normal.

It turns out that the concept of business networks, born as online marketplaces, was sound, albeit technologically immature and a tad premature with regard to timing.

In concert with cloud technology, business networks are spearheading a new era of enterprise technology centered on connecting businesses to each other and enabling easier and more efficient communication, interaction and commerce.

According to a survey conducted in 2014 by Ardent Partners, business leaders across industries are bullish on future of business networks:

  • 55% agree that B2B networks will eventually become the main platform for trading partners to conduct business.
  • 73% believe that B2B networks enhance collaboration between buyers and suppliers.
  • 75% agree that B2B networks are beneficial to buyers and suppliers.
  • 54% agree that B2B networks are an increasing source of new business for suppliers.

Business Networks a Boon for B2B eCommerce

Today, consumerization in the workplace, cost and competitive pressures, the ever-pressing need for efficiency gains, strong demand for an easy, convenient, and simplified purchasing experience, and the potential for tapping rich new revenue streams collude to create an inflection point for business networks and a boon for B2B eCommerce.

As reported by ZDNet, Forrester Research estimates that B2B ecommerce sales in the US will top $1 trillion by 2020, representing an 8% compound annual growth rate over the next five years, with B2B sales reaching $780 billion by the end of 2015. 

Frost & Sullivan is even more optimistic about the future growth of B2B ecommerce, predicting that, globally, by 2020 the B2B ecommerce market will be twice as large as the B2C market — $6.7 trillion vs. $3.2 trillion.

Topping all, according to the volume of global business trade between connected businesses will reach $65 trillion" target="_blank">SAP, analysts report that by 2020 the volume of global business trade between connected businesses will reach $65 trillion.

Enter the SAP Business Network Group

Ariba, Fieldglass, and Concur, known collectively as SAP's Business Network Group, use an open, proven platform to connect internal business processes to ecosystem partners, redefining, respectively, the models for sourcing and procurement, flexible labor management, and travel and expense management.

All of these leading business networks survived the implosion of online marketplaces occasioned by the dot-com bubble burst.

Founded in 1996 and acquired by SAP in 2012, SAP (Ariba) was positioned as a Leader in the 2015 Gartner Magic Quadrant for Strategic Sourcing Application Suites.  It has more than 2 million buyers and sellers leveraging Ariba's comprehensive source-to-pay solutions and business network to simply and efficiently manage relationships and spend, according to the company. Additional Ariba stats include a new business joining the Ariba Network every two minutes, where more than $2.5 billion in business commerce is transacted and $82 million in supply costs is saved.

Fieldglass provides a cloud-based Vendor Management System (VMS) to manage contingent workforce and service procurement systems.  Founded in 1999, and acquired by SAP in 2014, Fieldglass purports to be the industry’s largest VMS for contingent workforce management with more than 250 customers leveraging the company’s platform. According to a recent Ardent Partners report, nearly 35% of today’s workforce is comprised of non-employee workers. Moreover, according to the report, 95% of organizations consider their contingent workforce to be vital to overall business success and growth, and nearly 70% expect to increase it.

Concur, founded in 1993 and acquired by SAP in 2014, is the leader in the multi-billion dollar market for travel and expense (T&E) management solutions. Concur’s services are trusted by over 20,000 clients around the globe with around 30 million users. Concur’s on-demand services process over $50 billion in T&E spend a year – equal to roughly 10 percent of the US T&E spend, according to the company.

Business Networks – Strategy, Integration a Must

While business networks and the B2B commerce they enable have much in common with B2C ecommerce, conducting transactions in the two worlds can be markedly different.

B2B products can be highly complex, making it difficult to accurately present them across multiple channels.

B2B account management -- with different types of users serving different roles, varying contracts, trading relationships, price lists and delivery options -- is starkly different and vastly more complex than B2C account management for individual consumers.

Lastly, and perhaps most importantly, B2B order fulfillment presents requires extensive integration with purchasing systems, logistics systems, ERP, CRM, finance and billing systems.

At NTT DATA, we understand the importance of business networks in today’s digital economy. We also understand the need for an over-arching strategy that ensures full optimization and integration of all cloud-based and on-premise technology investments.

Contact us today to learn more about our strategy for Enterprise-Grade Digital Business or to schedule a meeting at SAP Ariba Live.

Source: Gartner, Inc., Magic Quadrant for Strategic Sourcing Application Suites, February 4, 2015.

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Post Date: 2/19/2016

Baskar Radhakrishnan Headshot Baskar Radhakrishnan

About the author

Baskar Radhakrishnan is a director of the Global SAP Ariba Practice at NTT DATA, with 18 years of IT experience. He has an extensive experience working with customers globally across various industries in the areas of indirect procurement, MRO, sourcing, spend and supply chain analytics and contract management solutions. He has successfully led several large global procure-to-pay transformation projects, which leverage SAP Ariba on-premises and SAP Ariba cloud technologies.