Simultaneously, companies are evenly split on the question of whether to form separate e-business unit as 46 per cent believe they need to. Some argue that to compete with dotcoms, e-business operations must be independent and flexible. Others say that for the online and physical operations to truly support each other, e-business must be integrated into the lines of business.

These are the findings of the 81-page research report prepared jointly by KPMG and The Economist Intelligence Unit (EIU) on "The e-business value chain : Winning strategies in seven global industries".

The report, which was recently released, is based on interviews of 42 senior executives at companies ranging from Ford and Hitachi to Celanese and Avents. KPMG-EIU have also surveyed 331 industry executives in north America, Europe and Asia from automotive, chemicals, communications, consumer markets, electronics, financial services and pharmaceuticals.

According to the report, most corporate procurement would likely to shift to online marketplaces such as Chemdex for chemicals or GlobalNetXchange for consumer products. However, the report said that online marketplaces suffer from a number of deficiencies. Firstly, there are too many. The consensus among the executives of the 600 or so exchanges, that exist today, was that only one or two exchanges would survive in each industry which would help solve the liquidity problem.

Nearly 19 per cent of the interviewees said that industry-specific online exchanges are important for their supply chain management today and 48 per cent say they would remain so in the next 18 months. However, executives say they are dissatisfied with current offerings and want to see more specialised and customised products.

Of survey respondents, 55 per cent note that the ability to customise an exchange's products and services is a very important feature.The report further said that many of today's exchanges lack the high number of participants needed for an efficient marketplace and in addition to this, many of these early marketplaces are coming under regulatory scrutiny. For the moment, most companies appear to be adopting a dual approach to online procurement, experimenting with online exchanges while at the same time building own Intranet-based systems.

The report said that the Internet is transforming industry value chains. According to 57 per cent of survey respondents, e-business is transforming their company's role within their industry. Many electronics manufacturers are moving up the value chain to offer e-business advisory services and at the same time, new Web-enabled competitors are appearing at each point on the value chain, threatening companies' accustomed sources of value.

Rather than drive customers to a single sales channel, executives believe they must give customers several options. Many chemical companies are enabling their customers to buy through online marketplaces, corporate extranets and system to system connections as well as through in-person channels.

However, the respondents strongly pointed out that the greatest barriers to e-business lie within the corporation. They stressed the need to re-engineer business process (58 per cent cite this as very significant), and added that lack of e-business skills and integration between front and back end systems are the main obstacles.

The report said that companies are using the Internet to provide value-added products and services in a bid o meet escalating customer demands and keep products and services from becoming commodities. According to 74 per cent of respondents, this is a very important objective for their e-business plans.Furthermore, the Internet is turning out to be an effective way of reaching new customers, particularly overseas. According to 62 per cent of respondents, this is a very important strategic goal.

The Internet is turning out to be more than a sales and purchasing channel. According to 71 per cent of respondents, improved collaboration with business partner is a highly important objective for their e-business strategies and 70 per cent say that improved knowledge management is highly important. Alliance-intensive industries such as pharmaceuticals, are especially concerned with collaboration, with 82 per cent citing improved collaboration as highly important.