CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Software firms gear up to run the e-commerce race

Companies such as J.D. Edwards have found themselves behind in a race to win in the business-to-business e-commerce market--but they are making strides to catch up.

    Big software makers are increasingly realizing that to cash in on the future, they need to quickly build on the past.

    Companies such as J.D. Edwards, Oracle, SAP and PeopleSoft have found themselves behind in a race to win in the business-to-business e-commerce market?-a market that is expected to surpass the trillion-dollar mark by 2003.

    The firms are hoping to use their large customer bases as a way to jump-start their entry in the business-to-business world. Additionally, the companies are looking to offset what's expected to be slower growth in the market for enterprise resource planning (ERP) software.

    J.D. Edwards, for one, is ready for the competitive marathon. The Denver-based company, which has traditionally relied on selling back-office software applications to midsize businesses, yesterday announced it would form a new business unit solely focused on building online trading exchanges.

    ERP companies made their fortunes selling human resource, supply-chain management and financial applications to big businesses. Making the link to online exchanges, analysts have said, would be a natural extension of the group's existing business.

    Business-to-business ventures typically deal in nuts and bolts--literally--and other industrial and commercial items. Firms offering specialized software and online exchanges promise to drastically decrease the cost of doing business, thereby increasing profits and making new, more economically sound ventures possible.

    For the most part, however, ERP companies are still lagging behind players Ariba and Commerce One--the business-to-business market pioneers--and are fighting a heated battle over recognition in the fast growing market.

    For J.D. Edwards and others, the trick will be to move quickly in the new market and convince customers that they understand it as well as other seasoned specialists.

    "Gaining mind share is the No. 1 challenge (for ERP makers)," said Rod Johnson, an analyst at Boston-based AMR Research. "They can't afford to make this a slow transition. They have to move quickly and need to provide some real value or investment (to their customers) to shift their business."

    Johnson said Oracle so far has been leading the ERP group in the transition to the business-to-business market.

    Joshua Greenbaum, an analyst who heads Enterprise Applications Consulting in Berkeley, Calif., said that most of the ERP players carry a massive customer base, representing a ready-made market for business-to-business services. But there is no guarantee customers will stick around.

    "They have to have the vision that extends out to the market, which will be a hard job against Ariba and Commerce One," said Greenbaum. "The installed base of ERP vendors only acts as an anchor for the short term."

    Add to those challenges the potential pitfalls of the business-to-business market in general. Analysts say that despite the hype, the business-to-business model may be adopted slowly because of the inevitable compatibility problems between company networks and software infrastructure.

    Yet as a serious enticement, the leading research firms have the business-to-business market pegged between $2.7 trillion and $7.3 trillion by 2004, from about $131 billion in 1999.

    With these expected huge revenues, firms like J.D. Edwards are moving fast to get ahead. The company plans to integrate its customer relationship management (CRM) software and other business applications into its existing partnership with business-to-business software providers Ariba and Tradex to help build online trading exchanges, or marketplaces, for its customers.

    J.D. Edwards, even with its recent plans, may still lag behind the pack. Oracle and SAP have been active, inking a number of deals to build online marketplaces that serve the automotive, chemical, gas, health and pharmaceutical industries.

    Two weeks ago, Oracle teamed with retail giant Sears and French retailer Carrefour to build an online marketplace serving the retail industry. The database software giant also recently joined forces with automakers Ford, General Motors and DaimlerChrysler for a large, online marketplace linking auto manufacturers and suppliers.

    SAP has formed numerous alliances to build its own marketplaces in conjunction with mySAP.com, its suite of Internet-based business applications. Rival PeopleSoft last year formed an online apparel marketplace with clothing designer Guess and software partner Commerce One.

    Both Johnson and Greenbaum agreed that even though Oracle is well ahead of the pack, the judges have yet to determine which company is better poised to win the race.

    "The problem is that the rules of the game are being written the same time the game is being played," said Greenbaum. "Right now, it's difficult for anyone to protect a market position."