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CANADIAN FIRMS ILL-PREPARED FOR INTERNET WAVE

Study indicates 16% have begun planning for B2B proceedings

Source: National Post

Posted on January 10, 2001

      Canadian companies remain unprepared for the coming wave of Internet-based business transactions despite predictions that by 2005, nearly one-fifth of all business-to-business transactions will be conducted electronically. In a report released January 8, Forrester Research Inc. of Cambridge, Mass., said senior executives at 82% of Canadian companies believe Internet-based B2B transactions will make up a significant part of their revenues within a few years but just 16% have begun planning for that change.

      James Sharp, a Toronto-based research analyst for Forrester, suggests in his report that Canadian companies may not have devoted resources to online B2B initiatives because it forms a relatively small amount of overall revenues this year. Forrester says 70% of Canadian firms do not sell any of their products and services online and only 8% generated greater than 20% of their sales online.

      But those same executives believe that by the end of 2002, nearly half of all Canadian firms are likely to derive 20% or more of their annual sales from Internet-based transactions.

      After analyzing data from Statistics Canada and other sources, Mr. Sharp predicted the combined value of all online B2B transactions in 2005 will top $272-billion, or 18% of the estimated $1.54-trillion worth of B2B transactions. Forrester estimates that, by the end of this year, online B2B transactions will total $46.2-billion or about 3.4% of all Canadian B2B transactions.

      Business-to-business transactions, which makes up the bulk of economic activity in any country, are those sales by businesses to other businesses and not sales by businesses to consumers or household users.

      In terms of the rate at which companies are moving to online B2B models, Canada is about nine months to a year behind U.S. companies, Forrester concludes.

      Canada's automotive manufacturers will lead the charge towards online B2B, mostly because they will have little choice if they wish to continue exporting to U.S.-based manufacturers who are becoming increasingly insistent that their business partners move their operations online. Forrester predicts by 2005 Canada's automotive supply chain will conduct $91-billion, or one-third, of its business through Internet-based transactions. This year, Canada's automotive sector will account for an estimated $9.9-billion worth of online B2B transactions.

      Canada's computing and electronics sector leads all sectors this year, with an estimated $27.5-billion worth of online B2B deals. By 2005, the sector is likely to transact $45.9-billion or 40% of all its B2B transactions in an online forum.

      Canada's petrochemical companies, which will do just $2.5-billion this year in online B2B transactions, will do 20%, or $46-billion a year, worth of business online by 2005. Already, the Enbridge Petroleum Exchange, an electronic marketplace, is moving as much as 2% of Canada's daily crude production through its systems.

      Even old economy stalwarts like CN and Canadian Pacific will benefit from the move to online transactions. At marketplaces like FreightWise and Arzoon.com, CN and CP are expected to auction off as much as $13-billion a year in excess spot freight capacity.




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