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Report: U.S. E-Commerce Services Market to Hit $64 Billion in 2003

The market for e-commerce services in the United States is predicted to boom, reaching more than $64 billion in 2003, says a new industry forecast.

The explosive growth will come as companies grapple with complex Internet initiatives linking internal technologies and processes to suppliers and customers, says the report from Forrester Research Inc.

The increased demand for e-commerce technical, strategy, marketing, and design services will contribute to a compound annual growth rate of 59 percent, the report says.

"Firms moving beyond basic Web storefronts will engage service providers to help them deconstruct existing business models," said Christine Spivey Overby, associate analyst in IT Management Research at Forrester.

"Companies will engage e-commerce help vendors to untangle site architecture so they may provide 99.999 percent uptime and support multiple third parties." "In addition, e-businesses will seek assistance developing consumer-facing sites that enable them to capture and retain affluent online shoppers," she said.

Forrester said it built a model that divides the market into four segments: technical, strategy, marketing, and design services.

As Y2K and ERP work winds down, firms will spend heavily on Web-specific technical services, which will constitute 50 percent, or $32 billion, of the overall e-commerce services market in 2003. Application integration will lead the technical services market, "as an $18.3 billion gold mine."

Forrester expects the market for e-commerce package implementation to reach $5.1 billion in 2003. Finally, as companies retire non-Y2K-compliant legacy systems and step up their e-business efforts, e-commerce applications will rise from 4 percent of the total application portfolio today to 35 percent in 2003, creating a demand for custom development services that will reach $8.6 billion in 2003, the report says.

Forrester predicts that the market for online strategy services will grow at a compound annual rate of 83 percent over the next four years.

For the report, entitled "Sizing eCommerce Services," Forrester interviewed 50 companies using e-commerce outsourcers and found support budgets ranging from $250,000 to $25 million.

In 2001, respondents expect to allocate 28 percent of total e-commerce help dollars to new development or package implementation and 26 percent on marketing initiatives.