IDC Expects eCommerce Applications License Revenues to Reach $23 Billion by 2004
FRAMINGHAM, MA – JUNE 19, 2000 — Growth in the ecommerce software applications market shows no signs of letting up. IDC forecasts worldwide revenues will explode from $1.8 billion in 1999 to $23 billion by 2004. While growth of revenues will remain constant, vendors will need to change their business models to take advantage of new opportunities.
"eCommerce software vendors can no longer count on application licenses as a dependable revenue stream," said Albert Pang, research manager for IDC's eCommerce Software program. "Increasingly, they have to accept the fact that their long-term success will depend on additional revenue sources, such as transaction charges, subscription fees, shared revenue with partners and affiliates, and advertising as well as other creative ways of generating new and recurring product revenue.
"These additional revenue streams will become much more evident as ecommerce software vendors get involved in building emarketplaces and Web- based trading communities," Pang added.
IDC expects product licenses' share of ecommerce software applications revenues to plummet from 90% in 1999 to 32% in 2004. During that same time, transaction fees' share will skyrocket from 4% to 29%. Transaction fees reported as product revenues will be generated from functions such as automatic matching of buyers and sellers via personalization, order execution, tracking, routing, and payment reconciliation.
Another change that occurred in 1999 was the market's front-running vendor. Broadvision captured the market's top spot with $81 million in revenues and a 4.5% share. Oracle was a close second with $80 million in revenues and a 4.4% share. Last year's top player, Sun/Netscape Alliance, slipped to ninth place.
According to IDC, 1999 marked the last time ecommerce business-to-commerce software applications would generate more revenues than business-to-business applications. In particular, the current boom in the creation of emarketplaces and Web-based trading communities is expected to be the driving engine behind many ecommerce software vendors, especially those that offer business-to-business content management and dynamic trading applications.
"Starting this year, the sale of ecommerce applications will skew toward the business-to-business environment for several reasons. Business-to-consumer ecommerce sites have become saturated in North America, software vendors want to diversify, and business customers will demand the attention," Pang said. "Nevertheless, it's too early to write off business-to-consumer offerings completely. The market will regain momentum after 2001 when people in regions like Asia/Pacific and Eastern Europe become more willing to use the Internet to buy consumer goods and services."
Another change that IDC thinks ecommerce software vendors should prepare for is an onslaught of wireless customers. "Without question, ecommerce will be extended to mobile devices and to power users that are switching from desktop to wireless to access the same amount of information anytime, anywhere," Pang said. "The result could be a wireless stampede that could change the look and feel of many ecommerce sites to meet the small-screen and rapid- content-display requirements of these users. "Any ecommerce software vendor that fails to take advantage of the wireless phenomenon could find themselves hapless."
IDC recently published eCommerce Software Market Forecast and Analysis (IDC #B22240). The report contains product and marketing data from more than 250 ecommerce software vendors, including detailed analysis of 150 companies that generated revenues from the market in 1999. It identifies leading vendors in the market and compares their 1997-1999 revenues. Additionally, 1999 vendor ecommerce software application revenues are shown for each of the following segments: sales and marketing, procurement, order management, and customer service and support. Each segment is thoroughly analyzed. In addition to revenues, the report measures vendor performance by customer wins and product development plans. The report also forecasts revenues through 2004 by source, region, and operating environment. To order a copy, contact Cheryl Toffel at 1-800-343-4952, ext. 4389 or at firstname.lastname@example.org.
IDC delivers dependable, high-impact insights and advice on the future of ebusiness, the Internet, and technology to help organizations make sound business decisions. IDC forecasts worldwide markets and trends and analyzes business strategies, technologies, and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC provides global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com.
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