***Alert! New B2B Diary entry 14 March 2000

Commerce One (CMRC) is in the business-to-business electronic commerce market. They build trading communities and have developed a portal platform which really centralizes all the services that buyers and suppliers need in order to trade. Yup. Whether it be the need for content or the need for transactions or for any other services. Amazing stuff.

To get this done, they sell an application that is out on the desktop, or that can be on the desktop for every individual in an organization. The portal actually is hosted by either CMRC or one of its many partners. The portal really becomes the platform that provides communication between buyers and suppliers. It also is leveraged to provide services for entire trading communities. Damn stuff of the New Economy. HyperPumper cannot be more impressed! Think about this. Then read on.

Trading itself can be implemented in many forms. One form is an auction. Going, going, gone. People can buy and sell directly or they can utilize auction services in order to buy and sell. So when you think of a portal, think about a centralized community of both buyers and suppliers. There are many different services that can be provided, auction services just being one of them.

But the beauty of CMRC is the many dimensions of transactional serves they ALSO provide on top of auctions. A company wants to be able to sort a purchase order, an invoice, possibly a payment, back and forth between its trading partners. They'll also have content services where they're able to put content in catalog format with certain search parameters. The most visible is General Motors (NYSE: GM). Yup, that is the Big Honcho in Michigan! General Motors is actually creating a business they're calling the GM TradeXchange around this platform. The way we promote this platform architecture is that it can be used by a third party. GM will use it to develop their own initiatives in a large vertical market like automotive, or possibly in a much smaller vertical segment as well. It's about creating a branded market site or exchange.

Manual procurement processes (MPP) are incredibly inefficient and costly. In some companies it can cost as much as $150 to generate a single purchase order. HyperPumper feels that CMRC can drive that cost down to between $6 and $10. That's just on the buying side. CMRC can automate things like document creation, the approval process, the communications process between entities, so you'll no longer have to pick up the phone or fax something. You have a direct connection to the supplier. There are so many costs that can be cut out of the supply chain and that's why people are so excited about the potential for electronic commerce. It's really the Internet that's made this much, much more cost effective. There have been other techniques in the past but they haven't been nearly as cost effective. So what's different about this from supply chain management. Supply chain management only deals with the management of information behind the firewall of an organization. ERP can link to an inventory system in order to judge supply needs. But then you actually have to go out and place those orders and communicate directly to your vendors. This really provides order placement and direct connection capability. The technology that had really been utilized before was called electronic data interchange [EDI]. It's really a point-to-point connection, very inflexible and very expensive. The Internet has cut the costs by an order of magnitude -- around 90%. It's also created the ability to have leveraged exchanges, where large groups of people are coming together rather than just a single point-to-point connection.

Organisations want to tailor the things they buy, such as the price points they have negotiated. So it almost becomes an issue of who's controlling things, the buyer or the supplier. The supplier in this new electronic age is going to have to cede a little bit of control. When a buying organization comes into a website they're really under the control of the supplier, right? If products are sitting out on an exchange, the supplier has a little bit less control and the buyer has a little bit more. This is our belief: The buyer is really king in electronic commerce. But it will also give suppliers a much broader reach.

Where is CMRC getting it's cut? CMRC is the infrastructure provider. It'll share in the profits of that exchange. CMRC developed this portal technology and they've also built this application, which HyperPumper would call the on-ramp to the portal. CMRC has built the technology in such a way that it can be used and branded by a third party, so they can develop a business around it.

At this point, it is public information that CMRC has about 12 exchange partners. When they first attacked this we were looking globally. The first participants were telcos interested in getting into the electronic commerce space, having missed some of the other Internet waves. So CMRC signed up British Telecommunications (NYSE: BTY), and Nippon Telegraph and Telephone (NYSE: NTT), and Deutsche Telekom (NYSE: DT) just recently, BellSouth (NYSE: BLS), and others.

CMRC's clients do everything from acquiring products and services for themselves to facilitating transactions and services for other companies. Prolifically. Yup. This becomes a business venture for each one of these telcos. In their local area they will sign up customers to be a part of their exchange, and Commerce One will provide the infrastructure. CMRC will help them sign up customers and then participate in the revenue streams. Sneaky. Just the way HyperPumper likes it.

As you can imagin, with the GM contract, CMRC has its hands into the auto industry. They also recently signed up Shell in oil and gas. Got two vertical plays in healthcare. They're attacking the market broadly and the general interest level is really significant.

Readers may recall that CMRC "swiped" GM away from FreeMarkets (FMKT), another HyperPumper favorite. Why did GM divorce FMKT in favor of CMRC? Simple. CMRC provides many more things besides just auctions. See above. CMRC is more like a e-market cum consulting firm. They competed against Oracle (Nasdaq: ORCL) and Ariba (Nasdaq: ARBA). GM took a look at the exchange and realized auctions could be a part of it. It would have been redundant to have both.

So, you want to invest in CMRC? What numbers are important for Commerce One investors to track? HyperPumper believes that right now it's about establishing customers and partners that are driving CMRC's solution to the marketplace. Ultimately, partners' success will be important. When HyperPumper checks YHOO news every day, HyperPumper does not head to the stock price. No, HyperPumper checks to see if CMRC and FMKT have added more customers. There is no better news than to see that CMRC signed a couple of new customers, whether it is an up or down day in the market.

Incidentally, CMRC has already announced publicly they'll hit breakeven in the fourth quarter of 2001.