Despite recent indications of the lack of growth in the e-commerce software market, many of the vendors remain bullish on its long-term prospects. The total e-commerce software market in Europe in 1999 was worth $267.3 million. The impressive growth rate of 127.6 per cent clearly typifies an immature market.
The international marketing consulting company, Frost & Sullivan's latest survey of the e-commerce software market in Europe states that although the market is poised for brisk growth, it will, however, fail to reach the expectations of some over optimistic vendors.
The evolution of the e-commerce software market has been impacted by the costs of the technological measures taken to combat the Millennium Bug. The preparations for Euro compliance have further diverted IT funds away from potential e-commerce projects.
Andrew Tanner-Smith, Industry Analyst at Frost & Sullivan, reports, "Traditional 'bricks and mortar' companies prioritise investments for the development of e-commerce and are strongly vying for customer loyalty. The converging sectors around Business to Business (B2B) e-commerce applications, content and trading communities will form the basis of investments. The broadening of e-commerce technology and suppliers market range will further buoy market growth."
The need for companies to remain competitive and the fear of being surpassed by other market contenders fuel e-commerce investments and help the market surge to $2.5 billion in 2006. Lower transaction costs and more efficient customer service with minimal resource allocation will further entice growth. The market is also set to benefit from bandwidth ramp-up and rising deployment.
However, the issues of integration costs and security, which have hampered advancements in the European e-commerce market since its nascency, will continue to be a key restraining factor.
In addition, the market is becoming more complex as IT vendors from other, often related markets such as CRM and ERP are attempting to re-brand as e-commerce technology suppliers. Tanner-Smith believes that the market will be unable to sustain the increasing number of vendors claiming e-commerce products. Consequently, a process of consolidation will begin to occur within the next 24 months.
In 1999, the enterprise e-commerce software market was worth $201.4 million. The revenues accrued are the legacy of the first wave of e-commerce investment. Late adopters of e-commerce will drive growth in the market to $2.0 billion in 2006.The study highlights that enterprise sales of e-commerce will continue to dominate but SME sales will grow.
Andrew Tanner Smith continues, "high-profile internet start-ups have encouraged small businesses and similar start-up operations to look for on-line markets. Venture capitalist funds, lowering barriers to entry and the adaptability of small firms are pushing revenues in the SME market for e-commerce software to $464.5 million in 2006."
The United Kingdom, Germany and Scandinavia have dominated the European market since 1996. However, the study points out that these countries will lose share to booming regions such as France and Italy, which are rapidly gaining a foothold in the overall European market. France, in particular, will prosper at the expense of the Scandinavian region.
Pure-play e-commerce software vendors, such as BroadVision, Intershop, and Open Market have achieved the greatest visibility and revenue share in the European e-commerce software market. However, the more mature vendors such as Microsoft, Oracle, and IBM are taking an increasingly commanding position in the market, thriving on the back of complementary technology offerings, experience, financial strength, wide distribution networks, and brand visibility.
The absence of major technical differences and increased similarities of developments will ensure that e-commerce applications will continue to be differentiated by factors such as ease of installation and use, comprehensiveness of features, and broad and persuasive brand marketing.
Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets, including the B2B and internet space, for market trends, market measurements and strategies. This ongoing research is utilised to complement a series of research publications - such as the E-Procurement Market - to support industry participants with customised consulting needs.
This study of e-commerce software is concerned with the European market for e-commerce software products, embracing simple tools for setting up a single online shop-front to heavyweight solutions marketed to ISPs and commerce service providers (CSPs).
Frost & Sullivan's study excludes "buy-side" products or services as well as solutions targeted towards suppliers that are intended to allow them to participate on web-based markets. The findings do not include revenue based on services such as e-commerce consultation, systems integration or systems maintenance.