Technology marketplace shifts into overdrive

Feb. 3, 2004
Technology marketplace shifts into overdrive It sounded like a good idea at the time the Big Three automakers would link up all of their supply chains

Technology marketplace shifts into overdrive

It sounded like a good idea at the time — the Big Three automakers would link up all of their supply chains through one common online trading exchange. Covisint they called it, attempting with one awkward-sounding name to conjure up simultaneous images of collaboration, visibility and integration — the three great buzzwords of supply chain technology. It was seen as the capstone of the online marketplace heyday of 2000.

Problem was, Covisint seemed to be stuck in idle. It took months to even come up with a corporate name, and more than a year to appoint a chief executive. Regulatory concerns had to be addressed both in the U.S. and abroad, which ultimately slowed down any momentum the initial idea had. Ultimately, though, Covisint was done in by a faulty strategy — its Tier One suppliers were scared to death of having their products commoditized through online auctions, which meant Covisint had to constantly restate its intentions.

Ultimately, despite the hype of a Big One auto exchange, Covisint skidded too far from its original mission, and to survive as a corporate entity, the company has sold off its auction services to supply management solutions vendor FreeMarkets Inc. Those auction services represented roughly 70% of Covisint's revenues. While Covisint hopes to live on by developing transaction services and collaboration portals for the automotive industry, Kevin Mixer with analyst firm AMR Research Inc. thinks it just as likely that what remains of the company will also be sold off.

Covisint's bumpy ride is certainly not unique in the online marketplace. Cordiem, an exchange formed by many of the major U.S. airlines, shut down in February 2003, while Omnexus, an exchange formed by a consortium of major plastics manufacturers — including BASF, Bayer, Dow and DuPont — was shut down late last year, with its assets picked up by SpecialChem.

Adding a wrinkle to the Covisint acquisition, at presstime it was learned that spend management vendor Ariba Inc. has acquired FreeMarkets for $493 million.

Meanwhile, 3M Co. (www.3m.com), a diversified manufacturer of such items as Scotch tape, medical supplies and telecommunications products, has added supply chain execution software to its portfolio via its acquisition of HighJump Software Inc. (www.highjump.com). Financial details were not disclosed, although HighJump's CEO Chris Heim dismissed the reported figure of $70 million as being “too low.”

No reorganization of HighJump is planned; instead, the warehouse management system (WMS) vendor will become a wholly-owned subsidiary of 3M and will retain its corporate identity, henceforth to be known as “HighJump Software, a 3M company.” HighJump hopes to benefit from the increased marketing muscle of a $16 billion giant like 3M.

On 3M's side, the company ventured into software a year ago with the 3M Integrated Packaging Tool, and it sees the HighJump acquisition as a prime opportunity to expand its software offerings into other industries and geographies.

In related news, OMI International Inc., another WMS vendor, has been acquired by Retalix Ltd., a provider of enterprise solutions for the retail food industry, for $18.6 million.

As for the still-pending blockbuster acquisition of PeopleSoft Inc. by Oracle Corp.... well, it's still pending. Oracle extended its tender offer to Feb. 13. LT

February, 2004

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About the Author

Dave Blanchard | Senior Director of Content

During his career Dave Blanchard has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeek, EHS Today, Material Handling & Logistics, Logistics Today, Supply Chain Technology News, and Business Finance. He also serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2021), which has been translated into several languages and is currently in its third edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

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