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SAP to invest in Commerce One

E-commerce vendor Commerce One plans to announce that enterprise software giant SAP will make an investment in the company, analysts say.

3 min read
E-commerce vendor Commerce One today announced a Web version of its online purchasing system as well as relationships with two software giants, enterprise software developer SAP and Microsoft (MSFT).

SAP will make an equity investment of an undisclosed amount in Commerce One, and the two companies are working on joint development so Commerce One's procurement software will integrate seamlessly into SAP's flagship R/3 enterprise software.

With Microsoft, Commerce One, headed by former Sybase chief executive Mark Hoffman, will do comarketing efforts. Commerce One's software runs on Windows NT, was built with Microsoft development tools, and runs on top of Microsoft's e-commerce platform, Site Server Enterprise Edition.

Microsoft and Commerce One previously announced a joint initiative to promote online procurement on Microsoft's operating system.

"These three companies, two of them the biggest software companies in the world, are working together to create this electronic commerce environment, which we believe is pretty powerful," Hoffman said.

Price Waterhouse's SAP electronic commerce unit will be available to provide systems integration for customers using Commerce One software with SAP, and Price Waterhouse also is working with developers from both companies on integrating their offerings.

Ironically, the SAP announcement also will boost Intel, SAP's partner in an Internet commerce firm called Pandesic. Pandesic also will get access to Commerce One's technology, which allows suppliers to create custom catalogs for regular corporate customers to make routine, repetitive purchases of office supplies, computers, and business services.

"SAP is working with Commerce One to license some functionality in the business-to-business arena, and business-to-business is on our horizon for 1998," Bryan Plug, Pandesic's CEO, said in an interview. When Pandesic was announced in August, the joint venture said it would focus initially on consumer-oriented Internet commerce.

"We will get access to Commerce One technology," Plug said. "It has the potential to bring additional functionality to the business-to-business arena."

Commerce One's system customizes catalogs, listing only negotiated prices and items approved for purchase by the buyer's procurement department. After a user selects a product, the system automates online purchases. Commerce One collects $2.50 per sale.

The system isn't cheap. Buying organizations pay $50,000 to $2 million to set up the system, and the rate is about $750,000 for a company with 500 to 750 users and about 500 suppliers. Commerce One also charges each supplier about $3,000 for setup plus $2.50 per sale.

Since Hoffman joined Commerce One early this year, the firm has signed to use MCI's Internet backbone so Commerce One customers can host a purchasing server, linked to their back-end systems, at MCI rather than on their own premises.

MCI's systems integration unit, MCI Systemhouse, also agreed to resell and install its Commerce One software, as have systems integrators Ernst & Young Technologies, Cambridge Technology Partners, and BSG Alliance/IT.

Commerce One also has allied with enterprise software developers Indus International and Walker Interactive Systems to build Commerce One's technology into their enterprise software.

The business-to-business procurement space is getting crowded. Other players on the software side include Ariba Technologies, Open Market, Fisher Technology Group, Netscape Communications, and InterWorld.

Intel is an investor in CNET: The Computer Network.