Covisint is not the only consortium-backed exchange that's struggling. Whether because of shortcomings in leadership, marketing or application development, the bulk of the 255 operating industry-backed exchanges are experiencing arrested development, experts said.
"There's a general malaise in the marketplace of marketplaces," said Jim Monastero, leader in exchange initiatives at KPMG Consulting Inc.
The next 12 months will be critical for consortium exchanges, said John Ferreira, b-to-b practice co-leader at Deloitte Consulting L.L.C.
Even though they've been unsuccessful at creating significant value for the industries they serve, these large initiatives could eventually give way to the more focused private exchanges being created by Wal-Mart Stores Inc. and others, he said.
"Big exchanges are focused on solving industry issues that call for common standards and common business processes, but one of those things will create competitive advantage for a member," Ferreira said.
Purchasing managers are a stumbling block to the success of exchanges, said Jean-Gabriel Henry, senior analyst at Jupiter Media Metrix. A recent survey of corporate buyers found fewer than 20% planned to buy anything online this year or next, he said.
"The public exchanges are getting flushed because they were founded on the promise of taking tolls," said John Rymer, principal consultant at Upstream Consulting. "None are generating enough business off tolls. The level of activity is very disappointing."
However, the automobile industry is far from disappointed with Covisint.
Dan Jankowski, head of corporate communications for the exchange, noted the exchange logged $350 million in transactions in the three months ended in December, and more than 800 companies had originated or participated in auctions through February.
A total of 250 catalogs with 2.5 million individual items have been posted to the site, and the 200 collaborative applications are allowing the automakers to manage product quotes and design projects virtually, Jankowski said.
An extensive b-to-b marketing campaign, begun in October and orchestrated by Young & Rubicam, Detroit, has raised awareness of Covisint, especially in Asian and European markets.
Regarding executive leadership, Jankowski said a Federal Trade Commission review of Covisint was concluded in September, and that a CEO will be announced soon.
Covisint's momentum is also indicated by new partners. The company now has six partners, including the Big 3. The others are: a joint venture of automakers Renault-Nissan Motor Co.; Oracle Corp., which is managing user registrations, application servers and databases; and Commerce One Inc., in charge of transactions. Covisint expects to announce new partners within days, including Automobiles Peugeot.
Covisint won't disclose how much capital the partners are putting into the venture, but about 350 employees are on loan from member companies. The exchange confirmed it seeks 300 to 500 full-time employees, many of whom will likely come from the ranks of those now on loan.
Of the auto industry's 30,000 suppliers, about 40 are currently members of Covisint. The majority of those members are primary, or so-called "tier-one" suppliers. Covisint plans to introduce a self-registration page within a few months, which could dramatically increase the number of suppliers participating.
Barring unforeseen changes or continued unfavorable conditions on Wall Street, Covisint will go public by the middle of 2001, Jankowski said.
"We accomplished a great deal in a short time frame," Jankowski said. "Those in industries other than technology are skeptical about capabilities, so it is important for us to show our viability, capability and resilience to the industry and the world."