IBM, Other Components Makers Launch B2B Site

BOSTON (06/07/2000) - Here we go again.

A consortium of electronics and telecommunications companies - including IBM Corp., Hitachi Data Systems Corp. and Nortel Networks Corp. - announced plans this morning to launch a new business-to-business Internet marketplace for the $700 billion electronics industry.

The new digital exchange, dubbed e2open.com, is scheduled to open its virtual doors next month, operating in the same industry arena as several other recently announced exchanges, including Hewlett-Packard Co.'s high-tech exchange for the computer and electronics industries and PartMiner.com, a new online exchange for electronic components.

Partners in the latest venture include Hitachi Ltd., IBM, LG Electronics Inc., Matsushita Electrical Industrial Co., Nortel, Seagate Technology Inc., Solectron Corp. and Toshiba Corp. All the founding members made a financial investment in the new exchange, which also received venture backing from Crosspoint Venture Partners and Morgan Stanley Dean Witter & Co. in New York.

All told, the exchange has raised $200 million so far. But none of the founding members have committed to funneling a majority or even a set percentage of their annual spending through the marketplace.

Instead, they foresee doing business on multiple Internet exchanges, perhaps as many as a dozen.

"Obviously, it would be nice for all of this to consolidate on one exchange, but given the history and complexity of this industry, that's very unlikely in the near term, " said Phil Fok, CEO of staff operations at Milpitas, California-based Solectron.

"In our position, we deal with hundreds of companies that are our customers and thousands of companies that are our suppliers, and each requires a unique way of doing transactions," Fok said. " If we get it down to even a couple of dozen exchanges where we conduct all of our business, that's a huge improvement over today. Any consolidation is a huge improvement," he added.

Like the other exchanges, e2place.com is designed to streamline the planning, management and execution of the electronics industry's supply chain transactions, which total more than $700 billion per year worldwide.

With a launch date less than a month away, members of e2open.com are also working at a blurring speed and on what some consider an unrealistic time line.

"Trying to get a compressed time line like this is very challenging," said Pierre Mitchell, an analyst at AMR Research Inc. in Boston. "It's tough enough to think about the Japanese companies getting to a consensus about how to do business, and then you add in four more electronics guerillas from the U.S. and it gets really tough," he said.

Marilyn Muller, an analyst at Boston-based Summit Strategies Inc., said that users shouldn't expect a fully-functioning exchange come opening day.

"On Day One, they will not have an integrated exchange," Muller said.

Instead, exchange officials said, capabilities such as reverse auctioning and collaborative demand forecasting that are inherent in the Ariba Inc. and I2 technologies Inc. on which the marketplace is being built will be rolled out over the next 12 months.