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The latest rattle in the business-to-business e-marketplace shakeout came last week when Covisint LLC, the flagship exchange for the auto industry, secured investments from both of its major technology providers.
Commerce One Inc. announced a deal that gave it not only $1.6 billion in cash from Ford Motor Co. and General Motors Corp. and an equity stake in Covisint but also a portion of the exchanges gross revenue. Covisints other technology provider, Oracle Corp., announced a day later that it, too, will get an undisclosed piece of equity in the exchange. However, there was neither an investment from the automakers nor a share in Covisint revenue included in that deal.
The deal is a huge one for Commerce One, of Pleasanton, Calif., not only for the cash infusion, but also for the boost it gives the young companys reputation and standing in the world of B2B exchanges and e-marketplaces.
Using a strategy of developing cozy relationships with its customers and, wherever possible, getting a piece of the revenue pie, Commerce One is moving quickly to establish itself as a technology vendor for online trading communities. In the process, it may be muscling Oracle aside in this lucrative market.
“Commerce One is the only technology partner that will share in the revenues of Covisint,” said Rico Digirolamo, interim CEO at the Southfield, Mich., exchange. “That will remain a unique relationship.”
After the failure of several e-marketplaces recently, online exchanges do not have the luster they had six months ago. But they still have a place in many corporations e-commerce plans. According to a study released last week by Chicago consultancy Arthur Andersen LLC, more than a third of company executives surveyed said exchanges will play an increasingly larger role in their e-business strategies next year, and half said e-marketplaces will play a critical role in their companies competitive positioning.
For its part, Oracle is comfortable with its position as a loner in an industry dominated by two large alliances—Ariba Inc., IBM and i2 Technologies Inc., and Commerce One and SAP AG—and officials said Oracles deal with Covisint is just the way they want it.
“We have a richer set of applications than Commerce One and come at this market from a lot of different angles,” said Mark Salser, senior vice president of the advanced technology group at Oracle, of Redwood Shores, Calif. “Were dominating in this space, but its kind of an oh, by the way business for us. We do a lot of other things.”
Salser said he does not believe that Oracle missed out by not getting a piece of Covisints revenue, as Commerce One did. “We didnt want to depend on future revenues. Our software has been bought and paid for [by Covisint],” he said.
Oracles other businesses give it an advantage over companies such as Commerce One and Ariba, both of which are dependent on the e-marketplace. If the shakeout among these trading sites continues, which many observers believe it will, it could leave Commerce One and others vulnerable.
“This isnt the end-all for [Oracle]. There is a need for both [Oracle and Commerce One],” said Jeff Mason, CEO of VertiCity.com, a New York exchange for IT services. “There are different ways of building these things, so theyre not all the same.”