Confidence in Digital Marketplaces Continues with Increased Activity in Last Six Months, Arthur Andersen Finds; E-Procurement Seen as a Strong Enabler to Marketplace Participation.

Business Editors, Technology Writers

NEW YORK--(BUSINESS WIRE)--Dec. 12, 2000

Despite recent struggles in the business-to-business sector, companies are not wavering in their confidence in the future of digital marketplaces, according to a survey released by Arthur Andersen at the eBusiness Conference and Expo in New York, Dec. 12-14. The survey creates a benchmark for an Arthur Andersen survey on digital marketplaces conducted in June 2000 and produced similar results: the importance of digital marketplaces to a company's overall eBusiness strategy is crucial, and over the next 12 months, their role as a means of competitive positioning will dramatically increase. The survey also found that most executives see e-procurement as an effective on-ramp to marketplaces.

The survey revealed that 50 percent of executives see digital marketplaces as a critical means of competitive positioning in the next 12 months, while one-third perceive digital marketplaces as critically important to their companies' overall eBusiness strategy.

In addition, two-thirds of those surveyed have or plan to implement an e-procurement system, with most executives planning to buy rather than lease. The potential barriers to successful e-procurement implementations include lack of internal skilled resources, cost or supplier adoption.

Conducted by KS&R, the Arthur Andersen survey polled 105 high-level executives from large and mid-size companies, start-up dot coms and high-technology companies in the United States.

While the anticipated importance of digital marketplaces has remained steady over the past six months, companies are more likely to offer and procure products or services via marketplaces now than they were at the time of the previous Arthur Andersen survey. Forty-five percent indicated that their firm currently offers products or services in one or more digital marketplaces established by other companies, an increase from the 31 percent from six months ago. Also, 66 percent of respondents indicated their firm procures and purchases products or services via digital marketplaces, versus 48 percent from six months ago.

"The challenges are mounting for digital marketplaces, including globalization issues and impending consolidation that could dramatically reshape the sector," said Kevin Costello, partner and global leader of Arthur Andersen's digital markets solutions. "But despite these considerations, companies are continuing to realize that these marketplaces will play a key role in the future of B2B."

Other key findings from the Arthur Andersen survey include:

Realization of ROI:

-- Thirty percent of those participating in digital marketplace have

realized an average ROI of 29 percent. Those who have not yet

realized an ROI, on average, project realization 13 months from

inception.

Consolidation likely to increase success:

-- Consolidation will most likely increase the success of digital

marketplaces, according to 50 percent of respondents. In

comparison, 42 percent believe consolidation will not affect

success, while another 7 percent suspect it will greatly decrease

the prospect for success.

Challenges for digital marketplaces:

-- The greatest challenge facing digital marketplaces is upfront

investment, according to respondents, as 42 percent of the

executives surveyed considered it a serious problem. The next

greatest concerns were long-term viability and training, which

were each considered a significant concern by 41 percent of

respondents. In comparison, six months ago the greatest challenge

for digital marketplaces was considered to be compatibility of

infrastructure by nearly one-half of the executives surveyed.

Adding value to digital marketplaces:

-- Customer service, ease of use and reliability were ranked as

critical value-added services for digital marketplaces. In

addition, an average of 50 percent of respondents named logistics,

back office/ERP, buyer/supplier adoption and inventory management

most important to digital marketplace success.

"It's clear that we have moved beyond the early adopter phase and that significant activity is taking place in the digital markets and e-procurement sector," Costello said. "At Arthur Andersen we've seen the concerns our clients have regarding digital marketplaces evolve, but what hasn't changed is the understanding that digital marketplaces will continue to be an intricate part of their eBusiness strategies in the future."

About Arthur Andersen

Arthur Andersen's vision is to be the partner for success in the new economy. The firm helps clients find new ways to create, manage and measure value in the rapidly changing global economy. With world-class skills in assurance, tax, consulting and corporate finance, Arthur Andersen has more than 77,000 people in more than 80 countries who are united by a single worldwide operating structure that fosters inventiveness, knowledge sharing and a focus on client success. Since its beginning in 1913, Arthur Andersen has realized 87 years of uninterrupted growth, with 2000 revenues of USD$8.4 billion. Learn more at www.arthurandersen.com.

Note to editors:

-- Kevin Costello is available for interviews at the eBusiness Conference and
Expo and can be reached at Arthur Andersen's exhibition booth #726 to further
discuss the survey findings and to address issues related to digital
marketplaces and e-procurement. Complete survey results are also available for
review.

-- Arthur Andersen client, MetalSpectrum, a marketplace formed in May 2000 for
18 of the leading specialty metals companies, will be presenting a case study
at 10:30 a.m. on Dec. 13.