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Defining The Business Value Of Technology
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August 7, 2000 |
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Covisint's Rough Road
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Most suppliers agree they can wait for the full-blown Covisint offering--they had more pressing concerns about the auto companies being the only ones to set the rules for the exchange. Auto-parts maker Delphi Automotive Systems Corp. signed a letter of intent to join Covisint in June, more than three months after the exchange was unveiled, says Rick Radecki, director of E-business. Delphi knows firsthand the cost and complexity of installing private EDI systems and other proprietary IT initiatives for auto companies, and welcomed the idea of a single exchange based on Internet standards. So did many smaller suppliers who couldn't afford EDI systems, says Weiss, who adds that only 30% to 40% of auto suppliers today use EDI--most of them tier-one suppliers.
Still, Delphi, in Troy, Mich., was concerned about the vagueness of Covisint's plans when they were announced, Radecki says. Delphi didn't sign on until the auto consortium formed the Customer Advisory Council, a suppliers group with input into the way the exchange is run, and held a Memorial Day conference to explain its vision. "They assured us there would be more neutrality in the future, and we became a lot more comfortable with the idea," Radecki says.
Dana was also in no hurry to join Covisint until it became clearer that the exchange's goals were a good fit with its own. With technology partners Ariba Inc. and i2 Technologies Corp., Dana has been building its own exchange to do business with its suppliers. Grimm says Dana's supply-chain software will link all tiers of the company's supply chain in real time and let it and its suppliers link to other exchanges. Grimm needed to be sure Covisint's architecture would be open enough to let his company continue to exploit its own exchange; Covisint assured him it would, and Dana has agreed to use Covisint as its primary interface to the automakers. "As Covisint gets into more advanced supply-chain products, we'll take advantage of what they offer," Grimm says.
While suppliers may feel better about Covisint's direction, the same can't be said for the exchange's software partners. Tensions between Oracle, Ford's teammate in its AutoXchange marketplace, and Commerce One, GM's sidekick in its TradeXchange venture, are said to be high. AutoXchange and TradeXchange are still operating, but eventually are to be rolled into Covisint.
In June, SAP--DaimlerChrysler's long-time supply-chain software-development partner--invested between $250 million and $400 million to increase its equity stake in Commerce One. The two companies are making a joint effort to go after Covisint's supply-chain management, fulfillment, and logistics applications business--the engines that will drive the exchange beyond version 1.0. Oracle is aiming at the same target. But Covisint officials were so interested in what SAP could bring to the table that they jumped on a plane to Las Vegas when SAP disclosed the investment in Commerce One and met with executives from both companies. The software selection process continues.
Analysts Greenbaum and Peterson say the worst problem is that Covisint officials haven't stated which of the software vendors will provide which parts of the technology for the evolving marketplace. "Covisint is just not making decisions on applications, and the bitterness among the software companies won't quiet down until they do," Greenbaum says. Weiss acknowledges there have been conflicts, but says they're often resolved by having the software companies lay out the features of their products side-by-side to see which would work best in "the Covisint vision." Weiss declined to say when Covisint would reveal its technology decisions.
For its part, Oracle denies having problems with Commerce One; it won't comment on SAP's involvement. SAP and Commerce One declined to discuss their relationships with Covisint and Oracle.
Meanwhile, Covisint is struggling with the mechanics of making seven groups of people--teams from each of the five auto companies and the two software vendors--work as a team. The Big Three automakers assigned about 100 of their executives, including the three co-CEOs responsible for different operations, and technology experts to Covisint. The other two automakers, Oracle, Commerce One, and various consulting firms brought in another 100 people. Miles, whose responsibilities include sales, marketing, and customer issues, says each of the teams brought its own ideas on how the exchange should be built--ideas that often clashed.
Miles had been the lead executive responsible for Ford's Oracle-based AutoXchange; Weiss worked for DaimlerChrysler in Europe, in charge of a team planning an SAP-based exchange. Neither was prepared for the difficulty of moving from a group where everyone had the same goals to Covisint's more conflicted environment.
With Covisint's success dependent on getting the teams to work together, Weiss introduced change-management techniques to help managers and workers deal with problems. Miles says this is helping everybody work together better, but analysts tell a different story. Greenbaum says there continues to be bitter infighting among the auto companies about how the exchange is to be built. "Everyone I've talked to about this accompanies their comments with a rolling of the eyes or a throwing up of the hands," he says.
As Covisint managers struggle to get to know each other, the FTC wants to know a little more about Covisint and B-to-B exchanges in general. The FTC began an investigation in March and at the end of June held a public workshop on B-to-B competition policy. FTC commissioner Mozelle Thompson says FTC commissioners needed to learn the basics about online B-to-B operations to help determine whether they should issue guidelines for such exchanges.
While declining to comment specifically on Covisint, Thompson says it's important to look into the issue of regulating electronic exchanges because it's possible that anti-competitive behavior, price fixing, and collusion may be easier in the Internet world than offline. Miles says Covisint has assured the FTC that there will be no group buying in markets where the auto companies might exert enough force to control prices; that any supplier whose product passes the industry's rigorous quality-assurance processes will be able to do business on the exchange; and that it won't stand in the way of suppliers participating in other exchanges. The September go-live date for Covisint hinges on FTC approval.
Covisint's promises should comfort suppliers. "Trust is imperative," Dana's Grimm says. "Given that Covisint is owned by the auto companies, it needs to demonstrate that everyone can use the exchange and that it will be a secure environment for companies to do business privately."
Others are less optimistic. In analyst Peterson's opinion, Covisint's external problems with the FTC and internal conflicts among its software vendors and the automakers raise questions about whether it will ever meet its ambitious goal to be the real-time supply exchange for the auto industry.
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Illustration by Peter Horvath
Photo by Andrew Sacks
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