Electronic Data Systems subsidiary CoNext and Ariba, plan to co-develop Web-based business-to-business procurement sites for big corporate customers, the firms said last week.
CoNext and Ariba want to create what they call Leveraged Sourcing Networks for more than 400 companies. The networks will offer a wide range of goods and services - from office supplies and computer systems to travel and energy services - for purchase and auction.
Greg Spray, the director of operations procurement at Hewlett-Packard, has been using Ariba's procurement network since last February. Spray said the system made transaction processing more efficient by using electronic forms and offering one spot for users to order goods.
"The other efficiencies are important, but the real upside is the environment of competition we're building with our supplies, and we expect that to translate into lower prices," Spray said.
EDS has demonstrated that it can lower costs by driving efficiencies into many business processes and managing systems effectively, said Stan Lepeak, a vice president at Meta Group. "Their consultants are better negotiators, and they know how to strike a good deal [with suppliers]."
EDS, Bethlehem Steel, The Clorox Co., Kellogg Co. and eight other firms have signed on to participate in the first of 12 planned sourcing networks, with the first site launch slated for June. The next four networks - one each for companies in Asia, Europe and South America and a fourth for industry-specific procurements - are expected to open for orders later this year.
Ariba and EDS will charge registration and per-transaction fees to firms that buy goods through the network. Company officials declined to provide specifics.
Ariba operates an extensive online catalogue of office supplies that will be tailored to meet the specific purchasing needs of each buying consortium. Participating buyers will install Ariba's software and electronic purchasing forms on their intranets and purchase supplies via a Web browser. The deal calls for EDS, and Ariba, to swap stock warrants. EDS could gain a stake in Ariba of up to 7.3% depending on the revenue stream generated from the procurement sites, while Ariba could gain a 5% stake in CoNext.