E-marketplace builder Commerce One Inc. and GE Global eXchange Services, the nation's leading electronic data interchange processor, have inked a broad alliance that analysts say will extend both companies' business-to-business capabilities.
The deal gives Global eXchange a leg up in Internet technology and new reach into small and midsize companies that heretofore could not afford its services. At the same time, Commerce One will benefit from GE's historic expertise in transaction processing and a mammoth network of global customers who have been using EDI for years.
The Extensible Markup Language "has not been a widely implemented standard, so there aren't a lot of systems ready to accept XML transaction data," says Harvey Seegers, Global eXchange president and CEO. "But we have the capability to accept XML-based inputs from Commerce One and convert them into protocols like X.12 and Edifact, which have represented the lingua franca of B-to-B E-commerce for over a decade."
The alliance will let customers not only buy but also pay for their purchases online. It will support pre- and post-transaction collaboration and the downloading of purchasing data into internal accounting and enterprise resource planning systems, Seegers says.
The deal calls for the two companies to share technology, sales, marketing, and professional services. "Our customers recognize that the No. 1 critical issue around exchanges is liquidity--the initialization, execution, and completion of a transaction," says Kevin Schick, Commerce One's VP of product marketing.
While the alliance isn't exclusive, Commerce One "views this relationship as unique and will not have another of this nature around transaction services," Schick says.
News of the partnership was well-received on Wall Street. Global eXchange "has a very proprietary system that Commerce One can make into a more open platform, really leveraging the billion annual transactions that account for $1 trillion in goods and services that go across GE's EDI platform," says Jon Ekoniak, an analyst for U.S. Bancorp Piper Jaffrey. "GE has established a network for large companies to transact electronically, but as with other EDI systems, it's mostly for tier-one suppliers and large ... companies. It hasn't been affordable by smaller companies. Commerce One can marry that platform with more cost-effective ones while still tapping into GE's wealth of experience and knowledge."
In its last quarter, Ekoniak says, Commerce One lagged just behind market-leader Ariba Inc., with $63 million in revenue in the quarter ended June 30, an 80% increase from the previous quarter, compared with Ariba's $80 million, a 100% increase from the previous quarter. "It's really a foot race between them; they're both having tremendous success," Ekoniak says. "It's a phenomenal area of growth, and we're seeing great traction by both companies." Unlike Ariba's technology alliances with IBM and i2 Technologies Inc., Ekoniak says, the Commerce One/Global eXchange deal "is more of a relationship with people who are actually doing electronic transactions today, and it will give Commerce One a leg up."