Reverse auctions on business-to-business marketplaces have the potential to cut suppliers' profit margins to the bone, but Maxager Technology Inc. says it can help. The company today unveiled alliances with three Net marketplaces as it repositions its Maxager profitability-analysis software as an E-business tool for industrial suppliers.

The alliances lets Maxager target suppliers doing business on the e-Steel, MaterialNet, and SupplierMarket.com exchanges; Maxager says it's seeking similar deals with other industrial marketplaces. The company says its Maxager software, which enables detailed profitability analysis at the product level, is a natural for the dynamic pricing that takes place in Net auctions. Such analysis can help suppliers determine when to stop bidding in an online request-for-quote event or figure out which RFQs are likely to result in a profitable sale.

"These online exchanges really are for the buyers," says Zack Lynch, Maxager VP of marketing. "There's a tremendous amount of downward pricing pressure. Suppliers need a competitive weapon for playing in these marketplaces."

Maxager has 10 customers in the United States and Japan, all large industrial suppliers that sell components to other manufacturers. They include Goodyear, Motorola, Seiko Epson, and Wheeling-Pittsburgh Steel.

Maxager is betting that the expansion of online industrial bidding on sites such as the Big Three automakers' forthcoming megamarketplace will spur demand for its software. "Real-time profitability analysis used to be a hard sell; many CEOs and CFOs didn't see the need," Lynch says. "But now the question is an E-business profit strategy. They know they need to think about that."

The Maxager software runs on Windows NT and requires the Oracle 7.3.2 database or higher. Most installations cost approximately $1 million and are installed in four weeks.