Business-to-business e-commerce is on the cusp of exploding, and
established services and consulting firms are rushing to seed the sector
with venture funding.
EDS is the latest company
aiming to capture a slice of the lucrative niche, widely perceived as the
next big thing on the
Internet. The information technology services firm today announced it is setting up a venture fund with as much as $1.5 billion for
business-to-business (B2B) investments.
The EDS-A.T. Kearney Ventures fund will focus its investments on Internet
and B2B companies over five years, taking equity stakes in its
"EDS sees the need for innovative services and opportunities to be
developed to help further its own offerings and to better serve its
clients," Dick Brown, chief executive at EDS, said in a statement. "The
fund will foster the development of these services."
The move comes on the heels of rival consulting firms setting up similar
venture funds. Earlier this week, Andersen Consulting set up a new unit,
Andersen Consulting Ventures, with plans to invest up to $1 billion
over the next five years to create similar Internet businesses. And last
week, Cambridge Technology Partners announced plans to
in return for a cut of their public offerings.
The larger services and consulting firms, facing competition from smaller
firms like Scient, Viant and Razorfish, have been slowly shifting their
focus from traditional back-end implementation and consulting projects to profitable Internet-driven projects.
Internet venture firm CMGI earlier this week encroached on the role of services
and consulting firms by creating a subsidiary, CMGI Solutions, to help
companies take their businesses online.
With services and consulting firms setting up venture funds, and pure
venture capitalists also shifting their focus to B2B opportunities, the
outlook for many seedling B2B companies is quite rosy.
The first companies to win the support of EDS' new fund are EDS CoNext and
Tradex Technologies. EDS plans to fund the ventures with half of the
necessary seed money over the next five years, with the other half coming
from clients and select private equity funds.
Separately, Ariba, which operates a Web-based transaction service for
corporate purchasers, announced yesterday its agreement to acquire Tradex in a
stock deal valued at $1.65 billion. Closely held, Atlanta-based Tradex
matches large numbers of buyers and sellers online.
The fund will be co-headed by Rick deNey, currently senior vice president
at EDS for corporate strategy and development, and by David Asper, an A.T.
Kearney vice president.
The unit will have offices in Plano, Texas; Menlo Park, Calif.; New York and London.