German business software giant SAP AG and U.S.-based electronic commerce specialist Commerce One Inc. have decided to re-orient their partnership, and are fine-tuning their plans to develop online marketplaces for customers.
"I don't think I would use the term 'scale-back.' We've re-examined the partnership, though the alliance is still strategic and important to us," said Laurie Doyle Kelly, spokeswoman for SAP.
Though the companies remain partners, they are refocusing their efforts in the online-exchange arena, said Mikael Arnbjerg, an analyst with International Data Corp. (IDC).
"SAP is focusing on supplier relationship management (SRM) while Commerce One is looking at different types of procurement and sourcing," Arnbjerg said. "It would be wrong to conclude that this is the end of the relationship. They are bringing out different messages but it's not really in violation of what they've been doing all along."
Commerce One could not be reached for comment.
SAP and Commerce One will divide their e-procurement efforts, and while the two companies will still support and sell their jointly developed MarketSet online marketplace software, they will be catering to a changing market. While formerly there was a demand for broadly based public online marketplaces, corporate customers are now demanding tools to build online exchanges that are more private in nature, according to SAP spokeswoman Paula Stout. "This is not news, we've been doing this for awhile," Stout said.
Companies had initially developed Web-based marketplaces that allowed businesses to exchange or sell products and services, hoping to generate revenue by opening up the marketplaces to anyone willing to pay a fee. Increasingly, however, corporations want marketplaces that are developed for them and perhaps a few select partners, according to industry analysts.
The market in general for online exchanges is moving away from public to private online marketplaces, according to Arnbjerg. "Typically, a private online marketplace is one that's owned or sponsored by some major industry or player. Publically run online marketplaces have been in decline because nobody wants to invest in them anymore," Arnbjerg said.
"About a year ago Commerce One was really into open exchanges but that has changed somewhat. Commerce One is now looking to sell something that's like a public marketplace but has more controls and is more private in nature," Arnbjerg said.
The 20-month-old partnership between SAP and Commerce One was first announced at the SAP user conference in Las Vegas in June 2000 and since that time SAP has increased its investment in the Pleasanton, California-based company. Last June, SAP increased its stake in Commerce One to just over 20 percent and said it would inject up to $250 million in new investment capital into Commerce One.
"We still have a 20 percent investment in Commerce One, that hasn't changed. What has changed is the marketplace. Two years ago, everyone thought that online exchanges were going to be the best thing and now that has changed. The customer is no longer interested (in public marketplaces)," Doyle Kelly said.
As part of the strategic partnership, Commerce One and the SAP Markets division of SAP established 17 codevelopment teams, based in Palo Alto, California, Pleasanton and Cupertino, California. The resulting MarketSet product, made up in part of a combination of Commerce One MarketSite, BuySite and SAP New Dimensions products, was intended to compete with the online public marketplace products being developed by the partnership established between IBM Corp., Ariba Inc. and i2 Technologies Inc.
Last May, IBM, Ariba and i2 ended their collaboration because they no longer believed that online marketplaces had a viable future. Ariba instead decided to focus on procurement, supply-chain management and CPFR (collaborative planning, forecasting, and replenishment).
As for customers currently using the MarketSet product from SAP and Commerce One, Doyle Kelly stressed that they would not be left high and dry. "Folks who have bought the joint solution from us will see no change. This decision is more about where we're heading rather than dismantling what has already been established," she said.
MarketSet currently has about 40 customers.
In the near future, the customer focus will be to look at private exchanges that give enterprise customers more controls over their exchanges, Doyle Kelly said. "Though customers want exchanges, it's not necessarily about opening up everything to your partners. In the future, the exchanges are not going to be as public and open as people originally thought," she said.
Earlier this month, SAP Markets Inc. announced its new SRM product, which though building on the mySAP E-Procurement offering developed with Commerce One, to a certain extent put SAP in competition with Commerce One.
"I think its more a matter of us saying 'Commerce One, you sell green apples and SAP will sell red apples,'" Stout said.
Both Doyle Kelly and Stout said that Commerce One software used to link trading partners inside a marketplace will be included in SAP e-commerce products, and that the Commerce One technology remains an important part of the alliance. "We're talking about the supporting technology of the online exchanges, to look at the exchange technology and where we are going to work together. People have made it into a head-to-head divorce thing when it's really a divide-and-conquer thing," Stout said.
SAP and Commerce One have had different fortunes in their attempts to weather the current economic recession. While earlier in the month SAP announced that it would be able to beat its full-year 2001 revenue forecast due to better-than-expected fourth-quarter software sales, its partner has been forced to reduce its workforce due to weak financial results.
According to a report published Wednesday in the Financial Times newspaper, Hasso Plattner, SAP's co-chief executive officer (CEO) told Commerce One CEO Mark Hoffman that due to its increasing reliance on earnings from SAP, Plattner felt it was time for Commerce One to develop business independently of the partnership, even if the move put the two companies into direct competition.
"I don't know what may or may not have been said between Hasso Plattner and Mark Hoffman. I do know that they still have a very good relationship, that they talk often and that they enjoy working together," Doyle Kelly said.