BOSTON (05/21/2000) - A year into their struggle to start an online business-to-business exchange with suppliers, the Big Three automakers came up with a name for the venture last week - Covisint - and also spoke about the obstacles it faces. The Covisint marketplace won't be able to start processing transactions until Ford Motor Co., General Motors Corp. and DaimlerChrysler AG put to rest antitrust concerns raised by the Federal Trade Commission and the European Commission.
"Until we have their clearances, we can't undertake transactions," says Alice Miles, president of Ford's b-to-b ConsumerConnect division, who is on the executive team planning the exchange. But she emphasizes that Oracle and Commerce One, the architects picked to build the exchange, will press forward with the technical work. At first, GM and Ford had planned separate competing exchanges, but suppliers complained bitterly last year about the cost and inefficiency of having to join multiple exchanges. The two automakers then announced they would build one exchange for the whole auto industry, and they were joined in this effort by DaimlerChrysler. But that got the FTC wondering if such collaboration between industry giants violates antitrust law.
Although facing these unexpected regulatory hurdles, Ford, GM and DaimlerChrysler remain upbeat about the future of their exchange, which they see as providing end-to-end supply chain integration, demand forecasting and capacity planning with suppliers. "We're trying to speed up ordering time through this with our suppliers," says Peter Weiss, DaimlerChrysler e-Extended Enterprise project director, who is also a Covisint planner. "It's also going to have new services, such as financial services." There are dreams for Covisint that go far beyond the initial plans. After Covisint has proven itself, it will open its doors to serve as an exchange for other industries outside of automotive, planners said.
"It was clear to us we didn't want to marginalize ourselves by remaining in the automotive sector," says Alan Turfe, executive director of GM TradeXchange, the nascent exchange GM now uses with its suppliers. However, Covisint is still hunting for a permanent location and executive team. Separately, GM pushed ahead on its own e-commerce plans last week by tapping Reynolds & Reynolds to develop a set of Web-based applications for dealers that eventually might replace GM's existing BuyPower site used by consumers.
GM also took a 10 percent stake in Reynolds & Reynolds, highlighting the Dayton, Ohio-based firm's position as GM's e-commerce systems integrator with dealers. The upcoming Reynolds & Reynolds applications for Internet-based dealer communications with consumers and GM probably will not debut for a year or two. But the goal is to tie together multiple retail-management, accounting and marketing capabilities using XML, said Ralph Szygenda, General Motors VP and CIO.
Szygenda said the plan is to have dealers interact efficiently with consumers via the Web in a way that will support build-to-order manufacturing at GM. In other industries, business-to-business marketplaces are already sizzling.
Altra Energy Technologies, which runs the Altrade exchange, did more than $4 billion in trades last year between about 500 corporations, including Texaco, Exxon Mobil and Dow Chemical, in the natural gas and energy industry. This year, volume reached $9 billion in the first quarter, mostly for natural gas.
In a few weeks, Altra plans to complete an upgrade of its Java-based server application, developed by Epicentric, so online trading partners will no longer require a separate desktop application as the graphical user interface to engage in trading. Instead, they'll simply use a Java-enabled browser.
The reason for this change is to let Altra move beyond being an energy exchange. Altra is looking at growing into an exchange for other types of purchases -- first and foremost, large-scale broadband telecommunications.
"There's no compelling reason not to move into other commodities," says Rusty Braziel, Altra's founder and chairman. Altra was spun out of The Williams Co. and Duke Energy in 1996 and sold to Battery Ventures, Austin Ventures and Altra employees for $12.5 million in late 1997. With the firm's roots in The Williams Co. telecommunications firm, the move into online broadband purchasing shouldn't be a stretch. Dow Chemical -- known to use several trading exchanges, including Plastics.net and ChemConnect ---- made an investment last week for an undisclosed amount in privately held Buildscape, which operates a business-to-consumer e-commerce site for lumber and other goods.
Buildscape plans to open a b-to-b exchange for home-building professionals soon. Dow, the single-largest shareholder in Buildscape, is expected to use the Buildscape exchange to distribute fabricated products such as home-building insulation, said sources close to the deal. Ellen Messmer writes for Network World Fusion online.