NEW ORLEANS (04/12/2000) - At a joint press conference last night, Computer Associates International Inc. and trading and investing firm Nissho Iwai Corp. announced a joint venture to build a global, cross-industry business-to-business trading exchange.
The joint venture company, Cynomix Corp., will provide services such as logistics, financing, credit control and insurance to exchange participants under the banner eTrade Lifeline.
"Our aim is to have the company operational by May and the exchange up and running by July or August of 2000," said Charles B. Wang, chairman and CEO of Islandia, New York-based CA.
"The first business sectors to use the exchange will be consumer goods: stationery, paper and food," followed by metals, said Shiro Yasutake, president and CEO of Nissho Iwai.
Other portal software vendors, such as Commerce One Inc. in Pleasanton, Calif., have created similar exchanges, though most of those focus on serving a single industry, such as food distribution.
"The whole trend (toward e-markets) is driven by integration of the supply chain," said Paul Zagaeski, an analyst at Giga Information Group Inc. in Dallas.
But, typically, an exchange will grow up around a single business, then grow to include others. "They find they need a partner or several partners to become more cost-effective and more efficient," Zagaeski said.
Cost is important but only a small part of the picture, Wang said. Agreeing on a price is a small part of any deal, he said. "When was a deal done between two companies strictly on the basis of price?" Wang asked.
A company in the U.S., for example, may agree to buy cars from Japan, said Wang. But to get the cars from Tokyo to the U.S. requires transporting the cars, insuring the cars, getting letters of credit from banks, transferring funds to pay for the cars, routing, scheduling, arranging for warehouse space and many other details, he said, all of which will be done online at the new electronic marketplace.
CA will build the site using its Jasmine ii development environment, which was released this week. Jasmine ii succeeds and extends the reach of Jasmine TND, CA's object-oriented application software. CA bills Jasmine ii as an electronic-business platform.
Other CA products included in building and running the site will include Unicenter TNG for enterprise management, eTrust security suite, Neugents neural net technology and interBiz business applications for supply chain, financial and banking functions.
To participate, companies must be approved by Nissho Iwai, but they need only a Web browser to access the site.
Each company will initially supply $2 million of capital investment. Cynomix will collect fees on each transaction conducted on its site, with additional fees for services it provides through eTrade Lifeline. Nissho Iwai and CA said they expect customer transactions to hit $5 billion within three years and $18 billion within five years.
Tokyo-based Nissho Iwai has roughly 600 subsidiaries worldwide in industries ranging from steel manufacturing to cotton yarn spinning.