The two primary providers of technology to Covisint are taking different paths in their relationship with the automotive e-marketplace.
Oracle Corp. and Commerce One Inc. each own 2 percent of Covisint. But that is where the similarities end.
In December, Commerce One agreed to provide Covisint with the software for the procurement component of the trade exchange. Commerce One will get an undisclosed share in Covisint's gross revenue for 10 years.
As part of the deal, Ford Motor Co. and General Motors eventually will own a combined 14 percent stake in Commerce One. Each gets a block of 14.4 million shares of Commerce One stock, valued at about $630 million.
Oracle, which has annual sales of more than $10 billion, has chosen a different strategy. The software company has not relinquished an ownership stake to Covisint and it will not do so in the future, says Mark Jarvis, Oracle's senior vice president and chief marketing officer.
'Our strategy with Covisint was similar to our strategy with every single customer that we have worldwide, which is we charge you for the software that you buy from us,' Jarvis said. 'Once you've purchased it and paid for it, you can do whatever you want with it and we won't come and put our hand in your pocket. We won't give you a part of our company as well.'
He said the company isn't interested in revenue sharing.
'The general consensus of our customers is, `We don't want you in our pocket.' With Oracle, we charge customers once, and from that point on they have the software in perpetuity. And we have built ourselves into a $10 billion company on that basis.'
Covisint will use 55 Oracle software products to run its internal business operations.
'It's a big deal, a very important deal for Oracle,' Jarvis says. 'It's another confirmation that our technology and our applications are critical to any company working in an online environment.'
Jarvis likened Oracle's role in Covisint this way: 'When you buy a house, there's plumbing in the house. Oracle has provided all the plumbing. Then there are faucets. Basically Commerce One has sold a single faucet, and we have sold 55 faucets to Covisint.'
Commerce One's role
Covisint is using Commerce One for procurement tools such as online auctions and catalogs, including:
The MarketSite e-marketplace infrastructure platform.
The Enterprise Buyer Desktop Edition, an e-procurement application that will be hosted by Covisint for use by participants, and auction and catalog content software.Neither Oracle nor Commerce One, which in the first three quarters of 2000 had $210 million in revenues and a net loss of $147 million, would divulge the value of software sold to Covisint. Nor would Commerce One project what it expects to earn from revenue sharing. The trade exchange is expected to handle more than $200 billion in transactions annually.
Rico Digirolamo, Covisint's interim CEO, says: 'Commerce One has a unique relationship with Covisint. It's the only technical partner that's going to share in the gross revenues of Covisint. So Commerce One's success is directly tied to the success and the direction of Covisint.'
Chuck Donchess, Commerce One executive vice president and chief strategy officer, says the revenue-sharing provision is important to his company. 'That is going to be made up of a variety of different kinds of charges, including transaction fees, subscriptions, access fees and the like,' he says.
Since Covisint went live in October, the trade exchange has handled transactions worth $1.5 billion, Donchess says. That makes Covisint the largest Internet-based marketplace.
'Obviously that has resulted in significant revenue streams to the partners,' Donchess says.
As more functions are added to Covisint and it becomes a more collaborative environment, the Commerce One procurement piece will become less important, says Kevin Prouty, senior research analyst at AMR Research in Boston.
Says Prouty: 'I think two to three years down the road it will probably be a secondary function to some of the collaborative tools - especially the supply-chain collaboration tools - that I know Covisint is working on.'