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Small-biz e-hubs combine offerings

By Published on .

The b-to-b small-business marketplace just got a little less crowded.

Last week, Chicago-based W.W. Grainger Inc. agreed to combine its small-business marketplace OrderZone.com with a similar offering from Works.com Inc., Austin.

The two companies were among the handful of sites launched last year to serve the business-to-business procurement needs of small-business buyers, including other notables such as Onvia.com and BizBuyer.com.

Though OrderZone.com and Works.com are targeting a similar market, they have taken a different enough approach to make a combination of the two companies an interesting fit.

For starters, OrderZone.com has focused on the type of industrial supplies for which its parent company, Grainger, is best known. Works.com, by comparison, has focused on the product needs of more "white-collar'' office environments. The combined marketplace will offer 430,000 products.

"OrderZone deals with companies with concrete floors, such as manufacturing organizations. Works.com has fo cused on professional services, companies with carpet floors,'' said Works.com CEO Bo Holland. "Together, we can create the most comprehensive single marketplace. It's the worlds of concrete and carpet coming together.''

The other jewel in the deal is Works.com's workflow applications, which let small-business buyers manage the procurement and approval process via their Web browsers, with nearly as much sophistication as more expensive, standalone applications from vendors such as Commerce One and Ariba.

That workflow capability will now be available to Grainger's small-business customers, said Donald Bielinski, group president of Grainger.

Analysts agree the two companies make good partners.

"Works.com and OrderZone are a great fit,'' said Tim Minahan, analyst with the Aberdeen Group. "By moving OrderZone out from under Grainger's management, the deal finally frees up OrderZone to be an independent market place for indirect materials purchases.

"I have spoken with several MRO [maintenance, repairs and operations] distributors who had signed up with OrderZone but were hedging about participating there. They are extremely encouraged by the move.''

The deal between the two companies works like this: Grainger will hold a 40% stake in the new combined company, which will continue to operate under the Works.com name. Grainger will also invest $21 million in the venture. Users will be able to access the joint service via the Works.com Web site and Grainger.com.

But the long-term strategy is to market the procurement catalog and workflow engine to other companies as well. For instance, Merrill Lynch has built its small-business procurement offering on top of Works.com technology, said Holland, who will be CEO of the combined companies.

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