IBM to Take the Plunge with a B2B Exchange

SAN MATEO (06/05/2000) - IBM Corp. is preparing to announce next week a global Internet business-to-business exchange for the telecommunications and electronics industries, according to industry sources.

The exchange -- for buying and selling semiconductors, assembly components, and manufacturing services -- is expected to begin operations this summer. The partners' combined buying power is estimated to be in the $200 billion range, according to sources.

The move is a major policy switch for IBM because not only will it sell infrastructure technology to e-marketplaces, such as its WebSphere Commerce Suite, Marketplace edition, but it will become a player in this realm. The forthcoming exchange is expected to use IBM technology as well as capitalize on IBM's partnerships with i2 Technologies and Ariba.

Reportedly, the exchange, to be named e2open.com, will have support from Nortel Networks, Motorola, Nokia, Philips, South Korea's LG Electronics, Japan's Hitachi, and five other telecommunications and electronics vendors worldwide.

It will start with more than $200 million in financing from its founding partners and venture capital partners Crosspoint Venture Partners and Morgan Stanley Dean Witter.

The most interesting question is if e2open.com will have support from Compaq, Hewlett-Packard, Gateway, NEC, or any of their partners in a similar exchange unveiled last month to address supply-chain inefficiencies in the PC industry, said David Yockelson, an analyst at Meta Group, in Stamford, Conn. That exchange is expected to launch in two months.

Another concern is what form the IBM-led exchange will take, Yockelson said.

"How fully formed will it be, and what will it take [to participate]?" he asked. Details about payment mechanisms and the collaboration design, for instance, are not yet clear, he said.

Last August, supply-chain vendor i2 allied with IBM's services division to create easier ways to set up business-to-business e-commerce. Since then, they have been working on standards for business information transfers such as definitions for Internet-based "invoice" and "fill order" transactions.

At the August announcement, i2 and IBM officials said they would adopt standards and technology from IBM's Application Framework, a set of middleware products including the WebSphere application server, MQSeries messaging, and Tivoli systems management.

Recently, Bob Timpson, general manager of solution developer marketing at IBM, said that the Ariba and i2 announcement "was a big shoe dropping," making it clear that IBM is a player in e-marketplaces.

"We want to get involved in a very significant way," Timpson said. "Yes, we used equity [investment] to cement that -- partly because we think it will be a good financial return."

IBM Corp., in Armonk, N.Y., is at www.ibm.com.

(Ed Scannell and Stephen Lawson, the Hong Kong bureau chief for the IDG News Service, an InfoWorld affiliate, contributed to this article.)