IBM, Nortel Help Fund B2B Exchange for Electronics

BOSTON (06/07/2000) - IBM Corp., Nortel Networks Corp. and several Japan electronics manufacturers have launched a business-to-business online trading exchange to buy and sell computer components, electronics and telecom equipment.

The venture, dubbed e2open.com, will compete with a similar planned business-to-business exchange that Hewlett-Packard Co. and Compaq Computer Corp. announced last month. Some $200 million in funding will come from the eight founding members, along with investors Crosspoint Venture Partners and Morgan Stanley Dean Witter & Co.

The founding member of e2open.com together do about $205 billion in annual spending, and they expect the system to handle millions of dollars worth of procurements when launches this July, said Stephen Ward, general manager of IBM's global industrial sector division.

The founding members are Hitachi Data Systems Corp., LG Electronics Inc., Matsushita Electric Co. Ltd., Nortel, Seagate Technology Inc., Solectron Corp. and Toshiba Corp. The main technology partners providing software and support for e2open.com are Ariba Inc., IBM, i2 Technologies Inc. and Aspect Development Inc., which i2 is set to acquire.

IBM's Ward said the exchange would evolve out of a few existing business-to-business Web sites already in use today. The first is called Component Knowledge, used by about 4,000 industrial manufacturers to exchange information about products.

The second is the Singapore Virtual Component Exchange, where manufacturers can consign surplus electronics for sale while not fully disclosing their identities, if desired.

John Mumford, partner in Crosspoint Venture Partners, has been named acting CEO of e2open.com, which has launched an executive search to make a permanent management appointment.

"I have the view this is going to be the dominant player in the industry," said Mumford, acknowledging the growing competition in business-to-business exchanges.

At the same time, IBM, Nortel and other e2open.com founders sought to emphasize that the new exchange will seek to use standardized technologies to further interconnection with sites outside e2open.com.

These technologies would include XML and the high-tech industry's specific XML document type, RosettaNet, to ensure interaction with outside exchanges as well.

"It would be nice for all of this to consolidate into one exchange, but that is unlikely to happen in the near term," commented Phil Fok, CEO of staff operations at Selectron Inc. "We'll be lucky if we get down to just half a dozen."

As it evolves over the next 12 months, e2open.com is expected to be able to host product catalogs, process transactions, handle online auctions and support workflow-enabled procurement requests .

The e2open.com venture intends to make money by charging membership fees and per-transaction fees, but these are not yet disclosed.

As to whether the e2open.com founders would try to force their suppliers to participate in the exchange, IBM's Ward said that was a decision left solely to each exchange member.

Nortel's chief marketing officer Charles Childers spoke out to say his company would definitely not force its suppliers to use e2open.com, commenting that the efficiencies of online trading would spur interest in its use.

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