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Procurement and Office Supply Companies Ink Deal

Written By: D. Geller
Published On: October 21 1999

Event Summary

PurchasePro.com, Inc (Nasdaq: PPRO) and Office Depot, Inc (Nasdaq: ODP) announced a strategic relationship to capture the purchasing dollars of corporate America's small and mid-sized businesses. Under the terms of the arrangement, Office Depot will be featured as the preferred provider on PurchasePro's business-to-business marketplace, and Office Depot will mass market PurchasePro's software. In addition, Office Depot, which already held 500,000 shares of PurchasePro, will make an additional equity investment of up to 600,000 shares.

Market Impact

This is not simply about more business for Office Depot, as it might first appear. By joining the PurchasePro network, businesses will be able to buy from and sell to any other company belonging to the network. The network provides them with a venue to advertise, bid, buy, sell and source. While many details remain to be worked out, it is clear that buyers will interact with the marketplace from computers or kiosks physically located within Office Depot stores. Besides providing a valuable service to its customers, Office Depot will gain featured positioning within the marketplace's web pages. Also, for customers accessing the marketplace from Office Depot stores, Office Depot will be the only supplier of office goods from which they can buy. A spokesperson from PurchasePro pointed out that one of the benefits to Office Depot customers is that they will receive a single report showing all of their purchases for the year (or for any smaller time period).

With businesses with fewer than 500 employees expected to account for two-thirds of Internet business by 2003, PurchasePro has made an artful approach to a large segment of this market. This move will bring more companies into E-procurement at an earlier stage, as both buyers and sellers. It also has potential benefits for Ariba (See TEC News Analysis Article: "Ariba Reaches Out to the Little Guy" September 28th, 1999) which, because of its own positioning within the PurchasePro network, may be the natural next step for the companies which are brought to E-procurement through PurchasePro and Office Depot but which grow to need more sophisticated services.

User Recommendations

Larger organizations that are interested in this market will definitely want to take a look at listing in PurchasePro's marketplace, or Ariba's Network. It may be wise to wait until the vendor details are announced, but the general guide is that those needing to integrate their Internet sales activities with backend systems will gravitate to Ariba and those with less complicated requirements will join PurchasePro directly.

 
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