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Andersen, Sun spin off e-commerce services unit

The consulting giant teams with the computing leader to launch a new business e-commerce venture aimed at helping companies cut their purchasing costs by using the Web to link to suppliers.

Andersen Consulting today said it has teamed with Sun Microsystems to launch a new business e-commerce venture aimed at helping companies cut their purchasing costs by using the Web to link to suppliers.

Under the agreement, the as-yet unnamed venture will buy up to $300 million worth of Sun's hardware and products in addition to e-commerce software and services from iPlanet, the alliance between Sun and Netscape Communications, the companies said in a statement.

The new venture will provide companies with iPlanet's e-commerce software and Sun's servers and storage hardware, combined with consulting, systems integration work and outsourcing services from Andersen. The spinoff has received a majority equity investment from Andersen's AC Ventures unit and a minority stake from Sun.

The move underlines a growing trend among consulting firms, many of which have been scrambling to team with e-commerce software providers in an effort to get a piece of the business-to-business pie. Several major professional services and consulting firms have jumped into the e-commerce market, which researchers predict will be worth between $2.7 trillion and $7.3 trillion by 2004.

In recent months, most efforts in business-to-business have taken place in the area of building online marketplaces or trading exchanges for specific industries. Companies selling specialized software and offering online exchanges, such as iPlanet, Commerce One and Ariba, promise to dramatically cut the cost of doing business by helping companies move their existing supply chain, which includes their partners and suppliers, to the Internet.

Today's move is also part of Andersen's recent strategy to invest up to $1 billion over the next five years in Internet companies through its AC Ventures unit, which was established last December. The unit also helps Andersen capture more lucrative e-commerce engagements, a necessary shift that old-line consulting and professional services firms have been dealing with for the past two years as more and more companies move their businesses online.

The joint venture between Andersen and Sun is expected to be fully operational by this fall, with the initial goal of providing its products and services to companies in various industries, such as automotive, food and chemical. The companies said the new company will be led by Dow Bauknight, former managing partner of Andersen's supply chain practice.