Commerce One Goes High, Wide and PeopleSoft

  • Written By: D. Geller
  • Published: December 22 1999

Event Summary

Commerce One (NASDAQ: CMRC) announced a broad range of initiatives in E-procurement. Continuing in its apparent strategy to dominate E-procurement outside of the United States (See TEC News Analysis article: "Commerce One to Procure for the Antipodes...and Elsewhere"), the company will partner with TD Bank Financial Group (NYSE/TSE: TD) to build an electronic marketplace and trading portal in Canada. TD Bank Financial Group is a Canadian firm that has already developed a number of Internet-based businesses. TD will manage the new marketplace and will offer E-commerce services to the bank's customers and to other Canadian firms. A similar venture with Grupo Financiero Banamex-Accival ("Banacci") will offer a marketplace in Latin America.

Commerce One also announced vertical portal partnerships in the healthcare industry with and in the apparels industry with GUESS? Inc. (NYSE: GES). The arrangement with GUESS? will be laid out in three stages, of which only the last will be open to members of the textile and apparel industries that are not in the GUESS? supply chain. The GUESS? MarketSite portal is a partnership with ERP vendor PeopleSoft (NASDAQ: PSFT), who is also partnering with CommerceOne to create both an E-procurement capability for Pepsi General and a module that will enable any of the ERP vendor's customers to build E-procurement capabilities that integrate with existing PeopleSoft data and systems.

Market Impact

The joint efforts with PeopleSoft follow the promises of the teaming announcement made by the two companies earlier this year. At that time PeopleSoft made a $8 million equity investment in Commerce One and reportedly made a "royalty investment" in excess of $10 million. These significant announcements show that the arrangement was a good one for Commerce One, and yet in its aftermath one has to wonder how much other ERP manufacturers will be willing to play with Commerce One. One of the reasons Ariba moved out of the integration business was difficulties in getting interface information from one of the newly competitive ERP vendors. Ariba's solution was simply to let third part integrators handle the job. In Commerce One's case, where PeopleSoft is both a partner and a part owner, we expect that other ERP vendors will be exceptionally unwilling to share integration information. This may lead to increased business for systems integration partners. Certainly, as Fig 1 shows, services are rapidly becoming a less important part of Commerce One's business.

The new marketplaces in Canada and Mexico are also strong moves, and are in accordance with Commerce One's other international marketplace partnerships. Being known as the first in a country or region is a powerful marketing tool, and one that Commerce One seems to have down pat.

User Recommendations

It is obvious that Commerce One won't give up opportunities to sell into organizations that use ERP systems other than PeopleSoft. But we do think that a prospective customer in that situation has to ask some hard questions before signing a contract. How will Commerce One guarantee continued compatibility with your back end system? How quickly can they guarantee that you'll be able to upgrade to the newer versions from your ERP vendor? What would be the cost to you if such upgrades were slowed significantly because of integration difficulties? As ERP vendors leap into the E-procurement space these will increasingly be questions to be asked about any best-of-breed E-procurement vendor.

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