Event Summary
Commerce
One, Inc. NASDAQ: CMRC] was first out of the gate with its announcement that
it will team with Shell (NYSE: RD) to create a new, as yet unnamed, company
that will build and manage a Web-based marketplace for the energy industry.
Shell will own 75 percent of the company; Commerce One will own 10 percent and
15 percent will be used for employee stock options. In addition, Shell will
have an option to buy 4.3 million shares of Commerce One in exchange for shares
in the new company, if the venture goes public.
Slipping
in next was ERP behemoth SAP (NYSE, ADR: SAP). SAP is joining with Den norske
stats oljeselskap a.s (Statoil), a Norwegian state company that is the world's
second largest supplier of crude oil, to develop the mySAP.com Marketplace for
the Oil and Gas Industry. SAP will host this new Web-based marketplace for the
energy industry A select group of Statoil suppliers will be invited to join
in the pilot.
Last
but not least was Ariba, Inc. (NASDAQ: ARBA) who is joining with Chevron Corp.
(NYSE: CHV) to create Petrocosm Marketplace, a company that will build and manage
a Web-based marketplace for the energy industry. Ariba and Chevron will each
hold minority stakes in Petrocosm, with the majority of ownership to be in the
hands of other energy industry participants, based on their size and the alacrity
with which they join the venture.
Each
marketplace is expected to by running by the second quarter of 2000.
Market
Impact
In
each of these deals what we have is similar to earlier announcements involving
the automotive industry. In each case the primary beneficiary is the energy
industry partner, which looks forward to significant savings on its own purchasing
activities, as well as other operational improvements to be gained by enrolling
its entire supply chain. However, opening the marketplace to all comers is an
obvious move that only benefits the partners. (It would be improper not to mention
the potential downside in case one or the other of the base products cannot
scale up to the size required. Blaming an oil shortage on a software company
instead of on oil producers would be a new experience for the mainstream media.)
There
are two positioning statements being made here. On one hand, SAP is implicitly
claiming to be an equal player with Ariba and Commerce One in the business-to-business
E-commerce world. On the other, both Commerce One and Ariba are claiming attention
on a global stage that is new to them but old hat for SAP. While SAP certainly
has the stamina to keep fighting on new fronts, it is less clear that Ariba
and Commerce One can keep up a fast pace of engagements of this magnitude without
straining themselves.
User
Recommendations
When giants fight over food, the little people should stay out of the way and
grab for any crumbs that are thrown off. While there is nothing in these announcements
that directly affects the procurement software choice for any individual company
(except one in the energy sector), the progress of all three developments bears
watching. Each of the vendors will be tested by these developments.
SAP
will have to become much more open in its purchasing application that it has
been; to attract a significant share of the market it will have to be able to
work with companies that do not have or want SAP's ERP solutions.
Ariba
and Commerce One are going after the big time here. Will they be able to develop
these large marketplaces without diverting resources away from supporting their
other current and future customers?
How
each company works its way through these developments - which will occupy them
far beyond the second quarter launches - will tell you a lot about how well
they will be able to handle other, smaller, engagements.