B2B: 2B or Not 2B

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B2B 2B or Not 2B?
NetMarketMakers
San Francisco Hilton
June 27th, 00

• Jamie Friedman
• Vice President, Sr. Equity Analyst
• Menlo Park, California
• 1-650 234-3341
• jamie.friedman_at_gs.com

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(No Transcript)
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Investors Go For Big Bucks
B2B Big Bucks!
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This Is What Wins Investors Attention
B2C Is Huge
but B2B Is Gigantic!
Worldwide e-Commerce
1998
1999
2000E
2001E
2002E
2003E
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B2B Goes At The Crown Jewels of the Economy
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Macro View of B2B Market Opportunity.
Thats Thousands of Billions, Baby!
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The tidal wave of Internet venture
capitalcontinued thru 1Q 00 (20 LTM Is B2B)
16,000
1000
14,972
900
827
14,000
Up 385 vs. a year ago
800
11,813
12,000
700
698
10,000
600
520
498
8,000
500
6,224
400
327
5,470
6,000
288
251
249
300
197
4,000
181
3,087
175
161
144
200
2,260
1,787
1,679
2,000
1,304
1,234
1,026
914
100
639
0
0
1Q97
2Q97
3Q97
4Q97
1Q98
2Q98
3Q98
4Q98
1Q99
2Q99
3Q99
4Q99
1Q00
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Consortias
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The Empire Strikes Back Through Consortias
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List of Announced Consortia, continued
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The GoldmanSachs B2B Windmill in the Age of
Consortia
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How do we know that B2B will be adopted?


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B2B Is Born in the Lineage ofSoftware and
Networks
Content (ASDV, DNB, EPNY, MSTR, BBSW) -
Marketing Information - Customer Information -
Supplier Information - Product Information -
Industry Information
Community - Collaboration (AGIL,PMTC) -
Communication (KANA) - Support (SILK,PKSI, ASKJ)
Enterprise Connectivity - ERP (SAP, ORCL,
BAANF) - Supply Chain Planning (ITWO,PCOR) -
Customer Management (SEBL,SLGX, PVTL) -
Financial/Human Relations (PSFT, GPSI, HYSL) -
Administrative (CNQR,PSDI) - Intelligence (ACTU,
BOBJ, BRYO, INFA)
Commerce - eProcurement (ARBA, CMRC, FMKT, PPRO,
PSDI) - eSelling (BVSN, VIGN, CLIC, OMKT, ALLR,
ARTG) - eFinance (CKFR, HRBC, SE, SONE) -
eMarketing/Advertising (DCLK, EPNY, BBSW, MSTR)
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B2B Enables Small bs to Play With Big Bs
Direct 1-to-1
Content Community Commerce
e-Market
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Technology Is The ForceIt Creates Competitive
Advantage By...

• Viewing the Supply Chain Clearly
• Optimizing Assets
• Especially true for manufacturing intensive
  industries
• Reducing Cycle Times and Inventory
• Build to Order --gt better demand forecasting
• Information Is a Substitute for Inventory
• Streamlining Process Costs
• No more phone, fax, mail reduced search time
  process costs can exceed product costs in some
  industries
• Lowering Input Costs
• Dynamic pricing forces competition (auctions,
  reverse auctions, bid/quote, etc...)
• Better sourcing decisions (increased information)

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Internetworks Are Dynamic
Propellers for Sale Sample Results of a
FreeMarkets Downward Price Auction
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Industry Gross Margins
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Cisco Systems Case StudyWinning With the Force
of Technology
Cisco
Industry Peers
Gross Margin - 1999 Why?

• 47.6
• Just starting to adopt Web sales
• Longer lead times due to component shortages
• Slow to react to demand shifts
• In-house manufacturing (beginning to sell off
  manufacturing operations)
• Accounting updated weekly or bi-weekly

• 64.8
• 90 of orders booked over Web
• Enhanced supply forecasting - better component
  pricing and availability
• Enhanced demand forecasting - rapid shift to
  regional demand changes
• Outsourced manufacturing (build to order)
• Virtual Close - updates accounting on a daily
  basis

Note Industry peers comprised of COMS, JNPR, LU
and NT
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Spending Categories moving on-line
Types of Spend
Description
Comments
Current Efficiency

• Raw materials
• Direct inputs to production processes
• Pulp for paper
• Coke for steel

• Direct

• Tend to be recurring purchases
• Often under long term contract
• Typically, vertically focused
• Direct sales force involvement
• requires hand holding

B

• Maintenance, Repair, Operations

• Indirect (MRO)

• Horizontal in nature
• Everyone needs notepads and pencils
• Permiscuous

D

• Credit
• Logistics
• Quality assurance

• Fulfillment Services

• Horizontal in nature
• Often higher margin

D
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Leisure Reading at Your Bedside!