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Commerce One Returns To Its Roots

Release of E-procurement software may signal a reduced focus on E-marketplaces
As the market for trading exchanges slows, Commerce One Inc. is returning to its roots as a provider of E-procurement software. The vendor, whose vision has been to build a network of interconnected E-marketplaces spanning the globe and collecting tolls on worldwide sales, has released a product that lets suppliers sell privately to customers, without incurring any transaction fees.

Commerce One's renewed focus on conventional application sales signals that the as-yet-unprofitable company, which posted mounting losses last quarter, is rethinking its business model. With few investing in new public E-marketplaces and existing exchanges developing slowly, revenue generated through Commerce One's Global Trading Web may not get the vendor in the black.

With its new Collaborative Procurement software, Commerce One addresses a major hurdle in E-commerce adoption: supplier participation. Suppliers on the Global Trading Web have been saddled with the burden of transaction fees, even though buyers have traditionally had the most to gain from online auctions and procurement. That bothers Fastenal Inc., a $746 million industrial supplies distributor using the Global Trading Web. "We're keeping and growing business, but it cuts into our margin," says Mark Kaske, content manager in Fastenal's E-business development group.

Collaborative Procurement includes a supplier portal, which is set up by the buyer to let suppliers check for order changes, respond to requests for quotes, update catalogs, and send shipping notices and invoices to customers-all for free. The question remains whether the product offers suppliers an advantage over picking up the phone or faxing their customers. "The supplier portal isn't necessarily more convenient for the suppliers; it's just not punitive," says Laurie Orlov, an analyst at Forrester Research.

The Collaborative Procurement suite also introduces functionality to let companies change orders that have already been placed online, as well as procure and track the cost of contract labor. The suite is available now, starting at around $1 million.