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E-hub builders pick partners

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It takes a village to raise a Net market.

Vendors trying to deliver on the massive promise of e-marketplaces are realizing they can't do it alone. As a result, high-profile alliances have become commonplace in the b-to-b world.

These teams are assembling and disassembling to win marketplace deals at such lightning speed that Net market watchers need a scorecard to keep it all straight.

Get your pencils--and erasers--ready. Here's how the partnerships appear to be shaking out:

At the top of the heap is a troika composed of Ariba Inc., i2 Technologies Inc. and IBM Corp. Ariba recently reported a blowout quarter featuring no less than nine mega-exchange wins, the majority landed as joint deals by this powerful trio.

Vying to put together its own dream team, Commerce One Inc. in June agreed to chase marketplace business with SAP AG. The two won their first joint deal last week. Commerce One also recently inked another high-profile deal, recruiting GE Exchange Services to its crew.

"So many alliances just don't mean much. A simple press release is sent out saying [vendors] will be supporting each others' products and technologies, and that's it," said Albert Pang, an analyst with IDC Inc. "Alliances just don't mean anything if companies aren't willing to invest heavily in each other in business development and research and development."

What's different about many of the largest e-marketplace alliances, said Pang, is a high level of commitment. Pang singled out Ariba and IBM for kudos in this regard.

Indeed, those two vendors recently unveiled plans to tie their respective server and marketplace platforms together. And just last week they won yet another joint deal when they were chosen by Transplace.com, a global logistics marketplace formed by six U.S. transportation companies. The bid was won by Ariba and IBM without the involvement of third wheel i2.

Said Nick Solinger, Ariba's director of product marketing: " The glue to this dream team is to align with each other along a common front. This is not just about co-marketing."

In addition to partnering on deals, Ariba, IBM and i2 have promised to integrate their disparate marketplace products. Some simple workflow integration has been completed, with much tighter linkage to come.

Ariba has been more fluid in its second-tier partnerships, working on an ad hoc basis with a variety of sell-side, catalog and middleware vendors, plus equally with all of the major accounting/system integrator firms.

To win the high-profile WorldWide Retail Exchange it went even further, bringing on board vendors with retail industry experience, such as Syncra Systems Inc., viaLink, QRS Corp. and Retek to be part of its winning bid.

In addition to its partnerships, Ariba has created several units that specifically target big marketplace opportunities. An industry solutions team of about 20 people constantly analyzes supply chain issues in a variety of industries, focusing most closely on telecommunications, high-tech electronics, consumer packaged goods, pharmaceutical and healthcare and manufacturing sectors. A separate team goes after°and in some cases helps incubate large exchange deals. Finally, a third "liquidity" team stays on after the fact to help the marketplace attract buyers and sellers.

"We have a deep interest in making our partners successful," said Solinger, including a financial interest. (See sidebar above.)

Commerce One, meanwhile, is relying on an expanded relationship announced in late June with giant SAP AG. As with Ariba, Commerce One is not only going to market with its new partner but is integrating technology and services as well, said Tom McCleary, Commerce One's senior director-complementary partners.

"The SAP deal is as strategic a deal as you can get. We are working on joint development and joint product offerings," McCleary said.

The pair won its very first joint deal last week: energy consortia Enporion, led by Allegheny Energy, New Century Energies, Minnesota Power, Northern States Power and PPL Corp.

Several weeks ago, Commerce One inked another key partnership, this time with GE Exchange Services, which provides network and EDI services for the world's largest companies.

"We felt GE lent us a unique opportunity. They have relationships with more than 100,000 suppliers, and they needed a core front-end technology that we can provide," said McCleary.

Commerce One is committed to partnering broadly. In fact, last week it agreed to team with BroadVision Inc., which the week before launched its own procurement and marketplace applications that compete with Commerce One products.

Taking a different tack is Oracle Corp., which has decided to go it alone. The vendor has a strong technology base, with industry-leading database and application server technology, plus an array of e-business, enterprise resource planning and supply applications that puts it in unique position.

In building its exchange platform, "we've taken the approach that we have almost the complete set of functionality and technology in-house," said Sean Rollings, Oracle's director of b-to-b applications marketing.

To fill in the gaps, Oracle has made some important partnerships as well, including Requisite Technology Inc. for catalog content and management and webMethods Inc. for application integration. Getting paid for building an exchange

Just as they have different partnering strategies, the major e-marketplace vendors have different approaches to pricing their products and services.

Commerce One is well known for its desire to charge basic transaction fees, in essence a small fee for each business document it delivers. At the other extreme, Oracle charges only software license and support fees to customers buying its exchange platform.

Though generally relying on software license fees as well, Ariba execs say they are now taking a "sliding scale" into exchange negotiations. Customers can move up and down the percentage that software, transaction, subscription and network service fees contribute to any deal.

All the vendors have taken--or considered taking--equity in Net market makers in lieu of payment. This payment mechanism can go in reverse, too. For instance, Commerce One gave General Motors warrants to buy Commerce One shares in exchange for its business.

Another common thread among almost all marketplace vendors, especially ones that hope to gain revenue beyond software licenses, is the recognition that transaction fees are going to be driven toward zero eventually.

That makes "network" fees for services such as logistics, auction match-making, credit, payment and other services an important value-add to any marketplace revenue stream.

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