Event Summary
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?").
Commerce 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.
Many 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.
Future plans for the marketplaces built through this partnership include a full range of ancillaries, including financial and knowledge management services.
Market Impact
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.
The 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.
User Recommendations
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.
Others 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.