Covisint signs pacts with Commerce One, Oracle

By Kathleen Ohlson, Network World |  Business

Covisint formalized technology deals with Commerce One and Oracle last week, but analysts say the moves do little to address concerns about the online auto exchange's business operations and prospects.

"It's not exciting news because it's a general mark that [Covisint, Commerce One and Oracle] already agreed upon" in February when the exchange was founded, says Laurie Orlov, an analyst at Forrester Research. "It confirms that Covisint is slow in the decision-making process."

Thomas Hill, a spokesman for the exchange, says Covisint, Commerce One and Oracle couldn't announce the technology agreements until specifics were hammered out. "It was never a case [that Commerce One and Oracle] opted out," Hill says. Commerce One and Oracle were named "technology partners" when Covisint was announced in February, but their roles weren't defined until last week.

Covisint's complex deal with Commerce One includes exchange founders General Motors and Ford each receiving 14.4 million shares in Commerce One, or 14% of the company. The combined value of those shares is about $1 billion based on Commerce One's stock price last week.

Commerce One will own a 2% equity interest in Covisint and receive a percentage of the exchange's revenue during the next 10 years, though executives declined to say how much. Commerce One will implement its MarketSite, a procurement transaction engine, and auction and catalog content products into the exchange.

Chuck Donchess, Commerce One's executive vice president, says more than $1.5 billion in transactions have been made through Covisint, which began conducting business in September. However, that total includes transactions made through GM's TradeExchange, which the automaker formed prior to joining Covisint, and an auction service built for DaimlerChrysler, Donchess says.

Gartner Group's Thilo Koslowski says Commerce One could see more business for its consulting services if more automotive suppliers join Covisint, while the automakers will see lower technology costs by using Commerce One products.

Not to be outdone by Commerce One, Oracle last week announced its own technology agreement with Covisint. It will provide its Web-based business application suite to support Covisint's internal operations, including sales and human resources. It will also receive an equity investment in Covisint, but Oracle declined to specify the percentage.

Despite last week's announcements with Commerce One and Oracle, analysts say Covisint still has a long way to go.

"[Covisint] needs to build its credibility" by naming a CEO with a clear vision and ensuring those suppliers that signed letters of intent follow through with joining the exchange, says Dan Garretson, an analyst at Forrester Research.

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