Next, Please
GE Gives Commerce One a Boost
By Erick Schonfeld
The Internet was supposed to promise a cheap and easy way for
businesses to exchange information electronically. But for all the
hype surrounding business-to-business e-commerce, we're still much
further from this utopia than you might think.
That fact was made apparent last Monday when GE Global eXchange
Services (which was recently spawned from GE Information Services
to focus on the emerging world of B2B e-commerce marketplaces)
struck a deal with Commerce One. (GE actually owns 4 percent of
Commerce One through its pension fund.) The deal was little
remarked upon but vastly important for the future of B2B
e-commerce. The purpose of the alliance was "to significantly
increase the number of buyers and sellers who can transact business
with one another on a global basis," according to the press
release.
What the press release did not say, however, was that the companies
that are already plugged into Commerce One's Global Trading Web are
not doing very much trading. Harvey Seegers, CEO of GE Global
eXchange, explains the problem: "There are no transactions. When
buyers see something they want, they pick up the phone and order
it. That is hardly the implementation of B2B we all want."
And, in fact, the vast majority of Commerce One's revenues now come
from sales of its BuySite procurement software and its MarketSite
exchange software, rather than from a cut of the transactions
occurring over its Global Trading Web, an exchange for maintenance,
repair, and operating supplies. There are plenty of suppliers on
the exchange -- thousands post their catalogs there.
But it's easier just to pick up the phone than to deal with the
hassles of Commerce One's electronic exchange right now. That's
because it speaks in a computer language called XML (an industrial
version of HTML), which is not as common as its proponents would
have you think.
"The problem is, nobody is doing XML yet," notes Seegers. Most
suppliers have their own legacy computer systems that are not yet
conversant in XML. And that is where Seegers comes in. GE Global
eXchange handles about $1 trillion worth of B2B transactions,
mostly over EDI (electronic data interchange), a way for companies
to communicate digitally that dates back more than 25 years. EDI
may be old and creaky, but GE is giving it a facelift and it's
still the de facto standard for B2B transactions. GE will now
translate Commerce One's XML messages into the EDI format or just
about any other communications protocol a supplier might ask for.
And it will then translate it back into XML for the return trip to
the Commerce One server.
This may sound simple, but it's a technological headache -- and
without it B2B e-commerce is stymied. That's why the entire
industry is after a similar solution. Commerce One's archrival
Ariba is tackling this same problem through its alliance with IBM
and i2 Technologies, another B2B player that makes supply-chain
management software.
The only thing missing from the GE/Commerce One alliance is its own
heavyweight in supply-chain management software. Since i2 is
already taken, companies such as SAP or Manugistics could fill that
void.
These alliances point up the fact, once again, that newfangled B2B
startups aren't going to walk away with the lion's share of the
wealth that will be created as more and more commerce gets
transacted over the Web. It may even turn out to be the case that
the Aribas and Commerce Ones need the IBMs and GEs of the world
more than vice versa. After all, what good does procurement
software do their customers if the companies those customers are
trying to procure from don't understand a word they're trying to
say?
And consider this: Commerce One currently has 6,900 buyers linked
up to its Global Trading Web, while GE is bringing to the table
100,000 trading partners (both buyers and suppliers) for which it
already handles electronic transactions. If only 10 percent of
those customers sign up for the Global Trading Web as well,
Commerce One's efforts to date to sign up customers will pale by
comparison.
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