Siemens taps i2 in $868 million marketplace move

The German industrial giant turns to i2 Technologies software in an initiative to drive down costs by moving its complete supply chain and purchasing process to the Web.

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German industrial giant Siemens said Tuesday that it is pumping about $868 million (1 billion euros) into an initiative designed to drive down costs by moving its complete supply chain and purchasing process to the Web.

As part of the plan, Siemens, headquartered in Munich, said it has signed an agreement with Dallas-based software maker i2 Technologies to standardize i2's TradeMatrix marketplace system and its full suite of software. Siemens will also use i2's consulting services for all of Siemens' manufacturing and sales operations worldwide.

The companies did not disclose the financial terms of the deal, although i2 said the order is its largest software license agreement to date. The project is a sizable one, involving dozens of business units with operations in nearly 200 countries, the companies said.

i2's software helps trading partners and suppliers collaborate on transactions such as ordering headlights for vehicles or machine parts for plants. Like many other software makers, i2 has been focusing on the business-to-business industry, aiming to capture lucrative and complex online marketplace deals. Its supply-chain market competitors include Manugistics and giants SAP, Oracle and PeopleSoft.

The move follows a series of separate deals that i2 has won with automakers DaimlerChrysler, Toyota and Volkswagen to help build private Net marketplaces for each company. For Siemens, the announcement follows the May launch of its e-business initiative to transform some of its business operations to an Internet-based system.

As part of its $868 million plan, Siemens expects to funnel as much as 80 percent of its spending through online procurement, saving on the cost of goods sold.

Online marketplaces, or trading exchanges, whether public or private, have become popular with many companies and within specific industries because they are thought to help cut costs through improved price and inventory management as well as reduce the amount of paperwork typically involved in most transactions.

In related news, i2 on Tuesday strengthened its business-to-business alliance with IBM and e-commerce software maker Ariba, announcing a new reseller agreement that allows each company to resell the others' business-to-business software. The move expands upon reseller agreements between the companies that have been in place since March.

i2 said its software is designed to support other business applications that Siemens has already implemented such as SAP's core R/3 back-office system, which automates a company's financial, human resources and manufacturing processes. Siemens will begin installing i2's system and products across all of its units over the next three years.

For system integration, Siemens will use its computer-services arm, Siemens Business Services, as well as its technology partners, such as IBM and i2.

News.com's Erich Luening contributed to this report.