An overwhelming majority of US firms will be transacting on the Net in two years, drawn online by a host of compelling cross-organization process efficiencies. In a new Report in which more than 90% of firms described plans to buy and sell on the Internet, Forrester Research, Inc. (Nasdaq: FORR) predicts that US business-to-business eCommerce will hit $2.7 trillion in 2004. This growth will also be accelerated by the rapid development of eMarketplaces — new models for conducting eCommerce, including auctions, aggregators, bid systems, and exchanges. By 2004, Forrester expects these eMarketplaces to capture 53% of all online business trade.

“US businesses are universally preparing to buy and sell online, leveraging the Net to build deeper relationships with their business partners,” said Steven J. Kafka, eBusiness Trade Research analyst at Forrester. “But the rampant growth of online trade through these one-to-one business connections will taper off after 2001, as firms more actively participate in eMarketplaces to connect with a wider universe of buyers and sellers.”

Over the next two years, eMarketplaces will spring up within most industries, attacking outdated business practices and inefficient trading relationships. To determine where Net marketplaces will thrive, Forrester created the eMarketplace Opportunity Index (eMOI), which estimates the level of eMarketplace trade within an industry based on two characteristics: 1) product fit — identifying the impact of product standardization, perishability, and high transaction volumes; and 2) industry readiness — modeling the influence of structural items like fragmentation, distribution channel complexity, and unpredictability of supply and demand.

Using the eMOI, Forrester predicts that eMarketplaces will ultimately account for between 45% and 74% of eCommerce in a supply chain. The largest impact will be in the computing and electronics, shipping and warehousing, and utilities industries, where more than 70% of online trade will go through eMarketplaces. By contrast, heavy industries and aerospace and defense will find less than 50% of their eCommerce flowing through eMarketplaces.

As firms hook into eMarketplaces and adopt more dynamic trading practices, existing business practices and supply chain relationships will get pulled apart. In place of today’s sequential industry connections, the exploding number of new interconnections will create a new market structure — eBusiness networks — in which partners can switch allegiances without cost, information and best practices spread like wildfire, and market feedback flows in real time.

“Although the majority of firms expect to be drawn into eMarketplaces, they’re still not exactly sure how they’ll participate,” Kafka added. “What is clear is that large companies should treat their participation in eMarketplaces as strategic assets, and suppliers must prepare themselves for new rules in these dynamic marketplaces.”

For the Report “eMarketplaces Boost B2B Trade,” Forrester interviewed 80 executives in purchasing as well as sales and marketing organizations from Fortune 1,000 firms. Forrester’s business eCommerce forecast is based on a model of business-to-business trade in 13 hard-goods supply chains and draws upon data from the US government, industry sources and interviews, and Forrester’s own research. Forrester defines business-to-business eCommerce as intercompany trade in which the final order is placed over the Internet.