GE and Commerce One Turn on the Lights - But You Ain't Seen Nothin' Yet
The newly formed Global Exchange Services (GXS) unit of General Electric
is partnering with Commerce One to provide B2B marketplace products and
services to a wide range of industries. GXS was formed recently from the
former GE Information Services company (See "GE
Comes to Lunch. Want to Guess Who the Appetizer Will Be?").
One will contribute its software and expertise for building and operating
B2B exchanges, and will also host buy-side and sell-side software for
those customers - expected to be the majority - who choose a hosted solution.
GXS will provide the infrastructure for passing documents and enabling
transactions, something it does at present for 100,000 trading partners.
It will also make its Purchasing Expert product available for customers
who wish to purchase and manage their buy-side software. Initial availability
is expected for the third quarter of 2000.
details of the partnership are still being worked out, including whether
GXS will realize revenue from marketplace transactions; such transactions
are a significant component of Commerce One's business plan. (See "Commerce
One: Everything but Profits"). Also unclear is how the partnership
will provide supply chain transparency; TEC has been told that this issue
is being addressed at present through a combination of internal development
by GXS and negotiation with prospective partners. GXS is also working
out final details on a major announcement to be called EC Breakthrough.
This is a comprehensive plan to enable smaller trading partners to join
and fully participate in trading networks, including support for document
exchange. The marketing for this service will focus on enabling small
businesses to achieve significant ROI from participating in exchanges.
plans for the marketplaces built through this partnership include a full
range of ancillaries, including financial and knowledge management services.
Since competition is necessary for a healthy economy, we're sure that
the troika of IBM, Ariba and i2 (See "B2Big
Deal for IBM, Ariba, and i2" ) were very pleased to hear this
news. GXS has a huge almost captive market based on their EDI infrastructure
and the financial strength to go the course. The fact that they don't
need to engage in a major integration project should help them get moving
quickly, whereas the integration and implementation efforts of IBM and
pals seem to be moving slowly, if inexorably. With GXS and Commerce One
putting their initial focus on existing customers and lacking a supply
chain solution, we don't think that they pose much immediate competition
for sales targets of the IBM/Ariba/i2 partnership.
battle between these two behemoths will come later. The opening salvo
may be the forthcoming EC Breakthrough. It is simply not easy for small
businesses to get into these big exchanges. If GXS truly has a new kind
of solution they could make tremendous inroads in that space. In any event,
it is hard to see a battle-to-the-death between IBM and GE having a winner
and loser, except for those who measure market share in fractions of a
percentage point. But a breakthrough in providing e-commerce to small
businesses could certainly hurt other companies that specialize in the
small-to-medium sized businesses space and are now rolling their own marketplace
support, primarily using Commerce One or Ariba for the trading exchange.
GXS' current customers, who have probably wondered how their commitment
to EDI would affect their ability to move forward in a largely XML world,
should be cheering. Having GXS take on the burden of integration for them
will be a real benefit, and will probably capture their loyalty (and their
dollars) for a long time to come.
who might have been looking at IBM and Ariba (and who have no current
need of Supply Chain integration) should certainly let GXS and Commerce
One make a pitch. Smaller companies thinking about e-procurement or other
kinds of marketplace participation need not wait for GXS to make its announcement,
as there are other alternatives currently available.