IBM Heads Electronics Exchange

SAN MATEO (06/07/2000) - Hoping to set off a supply-chain revolution for the computer, electronics, and telecommunications industries, IBM Corp. today is launching e2open.com, a global Internet business-to-business exchange that will be underway by mid-July, said officials at IBM and the many backers of this new venture.

IBM Global Services, Ariba Inc., and i2 Technologies Inc. will take the lead in building the infrastructure, while major industry players such as Hitachi Ltd., LG Electronics Inc., Matsushita Electric Industrial Co. Ltd. (Panasonic), Nortel Networks Corp., Seagate Technology Inc., Solectron Inc., and Toshiba Corp. have thrown their support behind the effort.

John Mumford, acting CEO of the expressly independent exchange, said the new exchange will have major strengths as it goes into battle, including the technologies of Ariba, IBM, and i2 and the existing business relationships of those committed to the exchange, which will drive usage of e2open.com.

"And third," said Mumford in a prepared statement, "we are well financed, with more than $200 million of financing commitments from the founding partners and our financial partners, Crosspoint Venture Partners and Morgan Stanley Dean Witter." Mumford is a founding partner of Crosspoint.

Details about the initial operations, location, and management structure of e2open.com were not immediately available. But officials did say that the initial functions would be added to over the coming year.

The new exchange will exploit an IBM-run electronics component exchange based in Singapore, which is expected to help the exchange service "more than $1 billion in annual transactions," IBM officials said. IBM, i2, and Ariba are likely to offer additional licensing of their technologies as the exchange progresses.

The new exchange promises buyers reductions in infrastructure costs, unauthorized buying, and working capital requirements via lower inventory. The backers are also expecting transportation and logistics efficiencies, officials said.

For the sell-side suppliers, the exchange's backers are promising an array of improvements: lower transaction handling and processing costs as well as a drop in customer acquisition costs; more avenues to smaller customers; an immediate link to customers; and the major, underlying benefit of global trading.

Ariba will provide parts of its B2B Commerce Platform, such as the Ariba Dynamic Trade for auctions, reverse auctions, and bid-ask exchanges. Exchange participants are also expected to use the hosted ASP (application service provider) offering, Ariba Buyer, ASP Edition, for indirect electronic procurement.

The new exchange will make use of supply-chain planning vendor i2's TradeMatrix e-marketplace software for demand and supply-chain management via the Internet.

A company that is soon to be part of i2, Aspect Development, will offer up its Discovery search engine, expected to be used for the retrieval of information about the various participants in the exchange.

IBM will provide its WebSphere Commerce Suite software, its Singapore-based components exchange, and an IBM-owned subscription service for electronic component manufacturers that want to collaborate on design and business opportunities, IBM officials said.

The founders and the technology and financial partners have each signed a letter of intent to form e2open.com.

The e2open.com founders will contribute as much as US$125 million in equity capital to the e-marketplace, officials said. As for e2open.com's equity, half of it is expected to be shared equally among the founders. As the exchange gets underway, each founding partner's equity is "conditioned on the transaction volume generated by the founders for e2open.com," according to a press release.

The e2open.com exchange can be reached at www.e2open.com. IBM Corp., in Armonk, New York, can be reached at www.ibm.com.

Eugene Grygo is an InfoWorld senior editor.

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