Lighting Its Fire
Ben Coes has made a career out of being the middleman in tough negotiations. Throughout the 1990s, Coes was a principal of Iron Road Railways, a Washington, D.C., holding company that specialized in acquiring railway assets and other transportation companies across North America.
He also earned his stripes in the public policy arena, serving as an aide to California Gov. Pete Wilson and as an assistant to Admiral James Watkins, the Secretary of Energy under former President George Bush.
So when Coes turned his mind to the business transformations made possible by the Internet, he saw the potential to use the technology to automate and streamline extremely complex negotiations.
"Most of the contract management solutions that had come out had focused on how you negotiate the data in a process," Coes says. "What was missing was the people part of the equation. We saw an opportunity to develop a human-centric approach to solving the challenges of improving and speeding up contract negotiations."
With backing from an impressive venture capital group including Bessemer Venture Partners; Cisco Systems CEO John Chambers; Comdisco Ventures; J.P. Morgan Partners; and Navis Partners, formerly Fleet Equity Partners Coes founded Beachfire in November 2000.
The company only recently completed its Collaborative Agreement Builder product, but has already managed to secure a groundbreaking customer the International Swaps and Derivatives Association.
The ISDA is a global trade group that represents companies, brokerages and financial institutions engaging in privately traded derivatives financial instruments based on commodities, currencies, interest rates and other mechanisms. While not as well publicized or as well understood as the trading of shares in companies, the derivatives market is huge, amounting to more than $100 trillion in 2000.
The ISDA selected Beachfires software to serve as the global technology standard for the online negotiation of derivatives master agreements, which set the rules under which companies, financial institutions and brokerages will trade derivatives.
The negotiation software will be hosted by Beachfire and operated under an application service provider model. Parties will essentially log on to the system and use its tools to discuss terms and conditions, edit contracts and finalize agreements.
The ISDA hopes the system will greatly reduce the amount of time it takes to negotiate master agreements, and provide greater security than the process of exchanging messages and documents via e-mail, fax and phone.
"Right now, the process [of finalizing a master agreement] can be extremely time-consuming," says Emily Jelich, who until giving up the post last week for personal reasons was general counsel of the ISDA.
By providing a platform that will standardize and streamline the process, Jelich says, members can begin trading derivatives sooner and that will ultimately serve the associations goal of growing the global derivatives trading business.
Beachfire wont actually gain revenue unless association members use its platform to negotiate master agreements. However, the company believes the ISDAs backing will help it win that business.
"We believe this will lead us to a number of customer wins down through that market," says Sara Meyer, Beachfires vice president of products. "The ISDA is a big win for us, but our software can be used for a much wider range of applications."
Beachfire is not alone in chasing the market, and faces competition from such vendors as diCarta, I-many, Moai Technologies and, increasingly, the big Enterprise Resource Planning vendors. In June I-many formed a partnership with J.D. Edwards & Co. to include its contract negotiation and management software in its enterprise applications aimed at the life sciences sector.
The rewards could be large, however. The Goldman Sachs Group estimates the market for contract management applications could grow from $250 million today to as large as $3.1 billion by 2005.