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Aerospace, defense giants team for B2B services

Four of the largest aerospace and defense companies are teaming up to build an online marketplace for mechanical parts and services.

Four of the largest aerospace and defense companies are teaming up to build an online marketplace for mechanical parts and services.

As previously reported, the joint venture--including heavyweights such as Boeing, Lockheed Martin, Raytheon and British Aerospace (known a BAE Systems)--will connect industry suppliers and buyers via the Internet.

Software provider Commerce One, which makes software that allows companies to buy and sell everything from office equipment to maintenance supplies online, will help build the site.

The companies will each have an equal ownership stake in the venture. Analysts say that the worldwide aerospace and defense industry is worth more than $400 billion in commercial and military sales.

The move follows a similar strategy by Big Three automakers General Motors, Ford and DaimlerChrysler. As part of their joint venture, GM and Ford, which both had separate trading exchanges already in the works, decided to form a single, massive open marketplace, inviting all buyers and suppliers in the industry to participate.

Business-to-business (B2B) marketplaces have also been growing in such fields as chemicals, paper goods, construction and pharmaceuticals. Companies have been jumping into the online market to reduce the paperwork, costs and time involved in purchasing and inventory management.

Forrester Research industry analyst Laurie Orlov said that for the most part, large corporations rushing into the business-to-business sector are primarily exploring ways to cash in on what is pegged to be a highly lucrative market.

"It's a land grab," said Orlov. "The land they're grabbing is the potential market value of the entity to be created. There's a current obsession with B2B in terms of the valuations. (Companies ask) how can we create something that in fact pays back to us many times over?"

Yet the rapid popularity of the business-to-business sector, a market that is expected to surpass the trillion-dollar mark in the next three years, has thrown a number of hurdles in the way of industry firms. Some companies have voiced concerns about the potential need for government regulation over new marketplaces that concentrate tremendous purchasing clout among a handful of large companies, opening up the possibility of collusion.

While today's marketplace announcement is not the first dedicated to the aerospace industry, it could potentially become the largest based on the sheer size of its founders. In recent weeks, similar online marketplaces have popped up.

United Technologies, Honeywell and i2 Technologies recently announced plans to launch, an electronic marketplace for aerospace products and services. General Electric also launched a new online exchange that will allow major airlines to buy and sell parts over the Internet.

The online marketplace is expected to open for business in the middle of this year.