Rules Of The Road Still Apply To Covisint

Automakers will sell marketplace; supplier concerns slowed adoption
Back in February 2000, the creation of Covisint LLC was seen as one of those Internet-changes-the-rules events. Rivals DaimlerChrysler, Ford, and General Motors came together to create an Internet-based trading platform for automakers and suppliers all to use.

Turns out, the rules--like auto-parts suppliers being wary of their powerful Big Three customers--still applied, and Covisint struggled. Last week, business-software company Compuware Corp. said it entered into an agreement to acquire Covisint, which had evolved into a messaging data service and portal owned by the Big Three, Nissan, Renault, and tech partners Oracle and Commerce One. Financial terms weren't released.

Covisint reported becoming profitable in May 2003, but supplier adoption was slow. Suppliers worried that if Covisint saved them money, automakers might learn of that and want part of that savings passed on to them. "They were nervous about what data we might share with customers, like any cost reductions we might save their operations," says Bob Paul, Covisint's president and CEO, who will remain president of Compuware's Covisint subsidiary.

Covisint in December sold its auction-services business to FreeMarkets Inc., which is being acquired by software company Ariba Inc.

Though the jury is still out on whether Covisint can gain widespread adoption, this sale could be good news for its future. "This gives Covisint a chance to see if it really can survive and achieve its objective," says Kevin Mixer, automotive research director at AMR Research, which estimates investors put $500 million in the project.

Compuware CEO Peter Karmanos predicts Covisint will bring revenue of $25 million the first year and could grow to more than $100 million annually. The company will market Covisint to aerospace, finance, electronics, and health-care industries. "I've said this for years: Detroit and the automotive industry are the leaders in technology in this country. Not Silicon Valley, not somewhere in Texas, or at some New York software company," Karmanos says. Compuware is headquartered in the Motor City.

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