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B2B: 2B or Not 2B?

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@gs.com. Investors Go For Big Bucks. B2B = Big Bucks!. $1,221. B2C. B2B. ($ in billions). $858.

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B2B: 2B or Not 2B?

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  1. 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@gs.com

  2. Investors Go For Big Bucks B2B = Big Bucks!

  3. $1,221 B2C B2B ($ in billions) $858 $1,114 $574 $782 $522 $327 $294 $133 $39 $47 $115 $8 $107 $18 $52 $33 $76 This Is What Wins Investor’s Attention: B2C Is Huge …but B2B Is Gigantic! Worldwide e-Commerce 1998 1999 2000E 2001E 2002E 2003E

  4. B2B Goes At The Crown Jewels of the Economy

  5. Macro View of B2B Market Opportunity. That’s Thousands of Billions, Baby!

  6. Value of Internet venture deals Number of Internet venture deals 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 $4,000 181 175 $3,087 161 144 200 $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

  7. Consortias

  8. The Empire Strikes Back Through Consortias

  9. List of Announced Consortia, continued

  10. The GoldmanSachs B2B Windmill in the Age of Consortia

  11. How do we know that B2B will be adopted?

  12. Supply Chain Mgmt Product Life-cycle Mgmt Marketing Sales Order Fulfillment ManufacturingExecution Organization WarehouseManagement Customer Support Purchasing Receiving Field Services Invoicing & Accts Receivable Accounts Payable Budgeting, Planning, General Ledger Human Resources, Legal, Administration 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)

  13. Large Businesses Large Businesses Small Businesses Small Businesses B2B Enables Small bs to Play With Big Bs Direct 1-to-1 Content Community Commerce e-Market

  14. Technology Is The Force…It 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 --> 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)

  15. Internetworks Are Dynamic Propellers for Sale: Sample Results of a FreeMarkets Downward Price Auction

  16. Industry Gross Margins

  17. Cisco Systems Case Study:Winning 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

  18. 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 • Tend to be recurring purchases • Often under long term contract • Typically, vertically focused • Direct sales force involvement • requires “hand holding” • Direct B • Indirect (MRO) • Maintenance, Repair, Operations • Horizontal in nature • “Everyone needs notepads and pencils” • Permiscuous D • Fulfillment Services • Credit • Logistics • Quality assurance • Horizontal in nature • Often higher margin D

  19. Leisure Reading at Your Bedside!

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