Persuading European suppliers to link with Covisint has been Lars Olrik’s chief challenge since becoming managing director of Covisint’s European operations in March. He faces two uphill battles:
1. Few of Europe’s automakers have endorsed the U.S. system.
2. He is trying to sell the idea at a time when businesses are reducing capital outlays.
“Everyone is taking a deep look at what they are spending money on,” says Olrik, 39. “But I think people will spend money when they see a clear return on investment.”
Conceived at the height of the Internet revolution, Covisint was to become the dominant global automotive e-business entity. It was touted as the one-stop portal for parts auctions, product development and supply-chain management. And it was to give Ford Motor Co., DaimlerChrysler, General Motors, Nissan Motor Co. Ltd. and Renault SA dominance over competing exchanges.
But months of delays last year, waiting for government approval and a slow rollout of products, caused skepticism among some European automakers and suppliers. Some would not wait. They formed their own trade exchanges.
Covisint faces overseas competition. Olrik admits the closeness European automakers have developed with their suppliers remains a barrier to Covisint’s European plans. “Those relationships aren’t going away,” he says.
“A marketplace like Covisint isn’t going to substitute that.”
Outside sales helpBut Olrik’s job as a persuader might become a little easier. Covisint is talking with three major consultants — PricewaterhouseCoopers, Deloitte & Touche and Cap Gemini Ernst & Young — about offering Covisint’s software products to their major customers.
Covisint views such relationships as another way to sell products and services in Europe. Discussions are in the preliminary stage, and the focus is only on Europe. If the consultants offer Covisint's products, they would be compensated in some form.
AMR Research in Boston predicts Covisint will become a significant force in Europe as well as North America. But suppliers and automakers will not let Covisint become their only choice.
“Automakers and suppliers, especially in Europe and Japan, view their design, manufacturing and supplier management practices as significant competitive advantages,” says Kevin Prouty, a senior analyst at AMR.
“Because of this, these automakers will continue developing private exchanges that will handle those processes that each company considers as a proprietary and competitive advantage.”
PSA takes stakeIn May, Covisint managed to crack the market by winning over PSA/Peugeot-Citroen SA. PSA took an equity stake in Covisint that is, in the French automaker’s words, “big enough to influence strategy.” In addition, PSA obtained a seat on Covisint’s European Advisory Board.
But Olrik admits Covisint Europe still is not expecting much business from BMW AG or Volkswagen AG. Both German automakers have developed private exchanges.
“We would, of course, love to be in deep discussions with both VW and BMW, which are very prestigious organizations,” Olrik says. “But the reality is we are not in direct discussions. We are focusing on launching the business with the players we are involved with today. Hopefully that doesn't exclude any future collaboration with those companies.”
For now, Olrik is working on:
Those who have worked with Olrik say he is good at explaining the value of Covisint technology back to the suppliers.
“His challenge is working in multicultures,” says Christopher Moritz, chief executive of SupplySolution, a U.S. supply-chain software firm. “Of all the people that they had in senior positions before Kevin English (Covisint’s chief executive) got there, Olrik’s probably the best-kept secret. He understands the customer in Europe intimately.”
Enthusiastic supporterIn the first six months of the year, Covisint says it managed $36 billion in transactions worldwide. Olrik declines to provide specific revenue, cost or usage figures for European operations, but he speaks about Covisint with an almost infectious enthusiasm. This comes from a man who admits he is not a car guy.
“I'm not an automotive guru by far,” he says. “But I think I'm surrounded with very able, insightful people from around the auto industry. I bring another skill set that, together with the competence of my colleagues, both in the U.S. and over here, hopefully matches up to what we’re trying to achieve.”
Olrik believes in the online exchange, to the point that he left a secure job as vice president of Cap Gemini Ernst & Young U.K. Olrik worked there for seven years in a number of roles, the last one in its business-to-business line.
“The value proposition, the concept of vision behind what Covisint wants to achieve, makes absolutely perfect sense,” says Olrik.
“Yeah, it is a risk. I’ve got a wife and two young children, but for me this was a really easy decision.”