Business trading gets competition

Jim Manzi, meet Mark Hoffman.

Commerce One--an electronic commerce provider Hoffman joined in September after being bounced as CEO at Sybase--today joins the hunt for interbusiness trading over the Net, targeting the same market segment that former Lotus CEO Manzi does with Nets Incorporated.

The first battleground will be the multibillion-dollar equipment and repair services sector, which keeps the manufacturing engines of American industry humming. Manzi's firm is working on a purchasing system for the sector, and now Commerce One is heading in the same direction as well as towards vertical markets in transportation and utilities.

"It's a paradigm shift," Hoffman said of how electronic commerce will affect business-to-business trading. "Now, it's an elitist group because only the big guys can afford to do it. With [Commerce One's] technology and the Internet, we can drive e-commerce to the masses [of smaller businesses]."

Commerce One, founded in January 1994 as DistriVision, today unveiled new management, products, partners, and strategy for low-cost transactions over the Internet. The company sells software and services and will charge $2.50 per sale completed using its system, much cheaper than pricing on most electronic data interchange (EDI) systems over secure private networks.

The company's biggest argument? "We can save you a lot of money," said Hoffman. "We can get you in at a very low cost and allow real-time communication with buyers or suppliers."

Like others pushing online commerce, Commerce One aims to cut through the glut of paperwork that clogs most commercial transactions. Giga Information Group estimates that U.S. corporations spend $250 billion processing purchase orders, invoices, statements, and other paper.

CommerceOne's Commerce Chain family consists of software for both buyers and sellers, including SupplySite, the multimedia catalog for sellers originally marketed by DistriVision; a secure transactions server called REOS 5 (Real-time Electronic Online System); and BuySite, a proxy catalog server for purchasing organizations to host catalogs from multiple suppliers.

BuySite, for example, lets purchasing departments compare price, availability, terms, and other criteria from various suppliers and then make purchases electronically using the transaction server.

The three products, plus consulting services to set them up, are licensed, but Hoffman expects revenue from the $2.50 transaction fee to become Commerce One's biggest revenue stream within two years.

With under $1 million in 1996 revenues, Commerce One's new managers expect it to hit $10 million this year and continue from there.

Hoffman may need to hit those numbers to keep his venture capitalists happy. Caanan Partners, Morgan Stanley Venture Partners, and Lion Investments have sunk $7.3 million into the company.

But growth may not come quickly from existing Commerce One customers who used DistriVision CD-ROM software for catalogs. "With the activity on the Internet, a lot of things will migrate in that direction too," said Carl Abrahmson, vice president of specialty light bulb manufacturer Ushio of America, adding that his implementation of Commerce One's full suite for Internet commerce is lagging.

Commerce One's senior managers include the father-son team that founded DistriVision and a predecessor systems integration firm, Tom Gonzales Sr. and Thomas Gonzales Jr., the company's CTO. Other senior executives were drawn from Sybase, NEC Technologies, and KPMG Peat Marwick.

The company also announced partnerships with financial services software vendor Walker Interactive and Geac EnterpriseServer, formerly Dun & Bradstreet Software, which will embed Commerce One software in their purchasing applications by year's end.

Other partners include $2.4 billion technology services firm Comdisco, which will develop turnkey packages with Commerce One's software, and catalog developer Black Dot Group, a subsidiary of $300 million Devon Group.