Online power buyer slashes bills

An online marketplace claims to have helped companies reduce their electricity costs by 35%, giving rise to forecasts that more...

An online marketplace claims to have helped companies reduce their electricity costs by 35%, giving rise to forecasts that more than 20% of utilities could be traded online by 2005.

By Arlene Martin

Buyingpower, an online bulk purchaser of electricity for small to medium-sized businesses, pooled orders from more than 200 companies with a combined annual expenditure of more than £1m. The winning bid for the contract came from Enron Direct, a subsidiary of Enron Europe.

The news is seen as a vindication of online marketplaces, whose claims of passing on huge savings to customers have been disputed by analysts.

Jaap Favier, a senior analyst with Forrester Research Europe, says he expects to see huge growth in online marketplaces.

"On average, we expect that by 2005, 6% of all trade will take place through online marketplaces. The utilities market will be bigger and grow faster simply because it consists of commodities that need no persuasive descriptions and so are suited to trade online."

He predicted that by 2005, 22.8 % of utilities will be traded online in the UK and that half of this figure, equating to Euro7bn (£4.4bn), will be handled through e-marketplaces.

He added: "Businesses will use their ERP or CRM systems to connect straight into the marketplace. An ERP system knows what types of supplies are needed by your company. With that information, the ERP system will then call the e-marketplace, searching for the best deal online. When all criteria are met, the system can make the decision to buy."

According to Favier, machine-to-machine trading will be a reality by 2003.

Read more on IT for small and medium-sized enterprises (SME)

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