In the wake of the recent business-to-consumer shakeout (or, if you prefer, dot-com debacle), the business-to-business tremors are drawing closer. Despite persistent hype and glowing electronic-marketplace projections through 2004, business-to-business companies had a rough finish as last year came to a close, and the outlook seems rather ominous for many firms in this space, especially e-marketplaces.

Of an estimated 900 business-to-business Web sites that were functioning worldwide midyear last year, a little more than 400 were left standing by year's end. Many companies that were basking in capitalization just a quarter ago have since gone under -- and not from capital starvation alone.

A chilling revelation: The Dot.com Group in Reston, Va., which developed software to track the behavior of Internet users, shut its doors in the fourth quarter of last year, with nearly $5 million in hand, because venture capitalists made a move to retrieve funding. Insiders say the group hadn't signed up a single customer and wouldn't have been able to sustain its rapid burn rate, which was more than $900,000 per month when it shut its doors.

Adding to the confusion, accurate counts of existing e-marketplaces prove nearly as difficult to determine as e-marketplace growth projections. Of the roughly 400 remaining business-to-business e-marketplace sites, a suspicious number are nonfunctional "shill" sites that maintain a Web presence, automatic e-mail responders, request-for-proposal and request-for-query building tools, and little else.

Anecdotal evidence suggests that the number of business-to-business exchanges conducting transactions on the Web will be cut in half by the end of the first quarter. But analysts at Stamford, Conn.-based Gartner Inc. dispute that evidence.

"The number [of sites functioning last year] may never have been as high as a thousand," says Gale Daikoku, a research director and business-to-business specialist at Gartner.

And Gartner analyst Lauren Shu says, "At most, we feel that out of maybe 1,400 announced, 400 are doing transactions."

"There is a consolidation going on," says Evelyn Cronin, another Gartner analyst. She cites consortia, partnerships and mergers between marketplaces as defining market consolidation in industry segments, such as the recent fusing of E2open in Belmont, Calif., and Partminer Inc. in New York, two marketplaces that had been supporting the electronics components industry.

According to Cronin, clusters of companies scrambling to form alliances are defining the general consolidation in the business-to-business space, but that doesn't explain all of it.

"The environment for raising capital is much worse than it used to be," explains Ed McCabe, vice president of Merrill Lynch & Co.'s Internet Research Group in New York and the company's business-to-business specialist. McCabe says he "flushes out" from his portfolio some of the more fledgling competitors or the ones with business plans that haven't made it past the planning stage. McCabe says the inability to raise capital, along with the move toward industry consortia sites, are the two principal issues adversely affecting business-to-business exchanges.

Squeeze Play

Industry consortia sites, such as Covisint LLC in Southfield, Mich., and Trade-Ranger in Houston, which serve the automotive

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