Jostling for a prime spot in the IT market

With fortunes to be made from the e-commerce market, technology providers from all sides of the high-tech communications sector are leaping in for a slice of the action.

You can take your pick from the estimates of the eventual value of the business-to-business e-commerce market, but at anything from $3 trillion to $7 trillion the numbers look mind-boggling.

With sums like these at stake, it is no surprise that supplying the technology needed to make it happen has become the holy grail of the global IT industry.Hundreds of hardware, software and network providers, along with innumerable consultants, analysts and other specialists, are jostling for a prime position in the market.

These range from established giants such as Microsoft and IBM to businesses just a few years old which have yet to make a profit.

From all sides of the high-tech communications sector technology providers are leaping in for a slice of the e-business action. Some, such as SAP, have been helping companies use IT to manage their enterprise for years. Others, like Ariba, are pure products of the internet age.

It quickly became apparent that — for the moment at least — no single provider has all the answers to the questions posed by web-based commerce. Can I use e-business to deal with my suppliers? What about my customers? How can I use the internet to showcase my products? Can I connect to an online exchange, or even build my own?

This led to one of the most striking features of the developing B2B market — a string of alliances, mergers and takeovers that makes the industry as volatile and gossip-ridden as Hollywood.

Take i2 Technologies and Ariba for instance. The first has a heritage in managing supply chains, the second in web-based procurement. Last year they decided that by working together they could offer a more complete ‘solution’ — the software industry’s favourite word — to bewildered businesses wanting to move their processes to the internet. IBM joined in, and a high-profile alliance was born.

But all is not well. In January Ariba bought Agile, a collaborative software specialist hovering around i2’s territory. The US press has been saying for months that IBM has often been forced to play referee to keep the alliance on course, and the Agile deal could be the final straw.

The companies featured below crop up more than most where B2B e-commerce is concerned. They are not dotcoms, but have suffered in the current backlash against technology stocks in the US, and some have warned of short-term profits dips. However, they look as well-placed as any to reap the long-term rewards.

AribaAnnual sales*: $279m

Ariba has only been around since 1997, but has carved out an impressive — and highly-lucrative — niche for itself in the world of B2B e-commerce. The company’s founders realised early on that businesses would want to use the internet to automate their dealings with suppliers, and set about developing software to allow them to do so.

It now provides services to customers including VW, Philips, IBM and Cisco Systems. Ariba’s growth has been phenomenal. In 1998 it turned over $8.4m, while in the first quarter alone of fiscal 2001 the company did $170m worth of business. It celebrated the new year by buying collaborative software specialist Agile.

Cisco Systems Annual sales: $19bn

Founded in 1984 by a husband and wife team (who later sold out for $200m), Cisco is the world’s biggest supplier of computer networking products. It dominates the market for hardware devices such as routers and switches which form the backbone of the internet, and also supplies servers and networking software. Cisco’s core customers are large enterprises needing to create complex computer networks, and large-scale carriers of data and communications such as internet service providers.

Commerce OneAnnual sales: $401m

Commerce One is where many of its rivals would like to be: at the heart of the Covisint online exchange. Its MarketSite trading portal technology was selected to power the automotive exchange, and two of Covisint’s founders — Ford and General Motors — liked the look of Commerce One so much they each bought 7% of the company. It has a deal to take a share of revenue generated by Covisint, which could be huge. Like Ariba, Commerce One helps companies shift functions such as procurement onto the internet. It has a powerful ally in enterprise software giant SAP.

EnigmaAnnual sales: undisclosed

Backed by a range of major investment houses, this privately-held B2B specialist has taken the web maxim ‘content is king’ to heart and built up an impressive list of customers in the manufacturing sector. These include Rolls-Royce, Bombardier, GE Aircraft Engines and Motorola. Enigma banks on the fact that one of the key priorities for equipment manufacturers is providing aftermarket support to their customers. Its technology helps them manage their complex content to provide online catalogues for equipment and spares, interactive electronic technical manuals and web-based support and service facilities.

IBMAnnual sales: $87.5bn

Best known as a leader in computer hardware, IBM is also a major software provider and has an increasingly heavy presence in e-business.

Big Blue has made a variety of strategic alliances with companies such as i2, Ariba and Siebel, and is increasing its focus on the e-commerce needs of smaller enterprises as well as its traditional customers among big corporations. IBM hopes to end up as the beneficiary of a virtuous circle. As companies demand more and more from their e-business applications, they will need an equivalent ramp up in performance from their IT infrastructure — IBM’straditional area of strength.

i2 TechnologiesAnnual sales: $1.1bn

i2 has successfully made the transition from supply chain software specialist to a big noise in the world of online marketplaces thanks to its TradeMatrix platform. The company is involved in developing private e-business networks for a range of major customers, notably VW, and is a leading technology partner in high-profile industry exchanges such as MyAircraft and e2open. Over the past two years i2 has attempted to consolidate its place in the e-commerce arena through a series of acquisitions and alliances, including a high-profile link-up with Ariba that looks extremely shaky.

MicrosoftAnnual sales: $23bn

Bill Gates’s software giant has no intention of being left behind in the rush towards e-business. Using its ubiquitous Windows operating system and .NET range of enterprise servers as springboards, it now has ambitions far beyond the desktop PC. Microsoft is especially keen on the emerging market for mobile e-business, and is heavily involved in the race to develop next generation mobile platforms. Its commitment to the B2B market was behind Microsoft’s $1.1bn purchase last year of Great Plains — an established specialist in applications for medium-sized businesses.

Nortel NetworksAnnual sales: $30bn

Nortel is positioning its fibre-optic and wireless internet systems to be at the heart of the eagerly-awaited broadband revolution. The Canadian telecoms company — which claims its equipment already carries 75% of web traffic in north America — expects the market for optical internet to reach $150bn a year within five years. Nortel says it will soon be able to deliver optical internet speeds 20 times faster than even today’s most advanced networks. The company also sells network management and e-business software.

OracleAnnual sales: $10bn

Oracle’s heritage is in database software — allowing computers to manage and distribute complex information — and its success has helped make flamboyant chief executive Larry Ellison one of the world’s richest men, worth nearly $60bn. Oracle wasted no time in spotting the potential in helping enterprise customers make the transition to e-business.

The company markets a range of software geared towards online exchanges, e-procurement and customer relationship management, and has made much of its readiness for the next wave of wireless e-business through its OracleMobile division. The company sees big potential in application hosting, providing its programs and services to businesses via the internet as and when they need them.

SAPAnnual sales: $5.7bn

One of the most venerable names in enterprise resource planning, Germany’s Sap had no choice but to embrace the internet or have its market share undermined by new web-savvy rivals. Its response was slower than some analysts would have liked, but in 1999 it launched mySAP.com, a B2B platform supporting enterprise applications via the internet. It has also set up SAPMarkets, a joint venture with Commerce One to help companies establish online marketplaces.

*Annual sales figures relate to 2000