DETROIT -- Covisint will have a new owner in Compuware Corp. But Covisint, the online automotive hub, still has the same challenges that have plagued it from the outset -- finding customers and turning a profit.
The automakers that created Covisint in 2000 -- primarily the Big 3 -bailed out as equity owners earlier this week. Compuware, a software and technology services provider based in Detroit,bought the company for an undisclosed amount.
The motive behind the purchase is clear for two of the three parties. The automakers used Compuware as their exit strategy. Compuware sees it as a way to get its applications and services deeper into the auto industry, and possibly, into entirely new industries.
As for Covisint, which will become a subsidiary of Compuware, it will continue to focus on two products. The data messaging service is designed to help automakers exchange data, like shipping schedules, with their suppliers. Its portal technology is used by suppliers to access all of an automaker's applications, such as a vehicle ordering system.
Bob Paul, Covisint's CEO, says the company has its first signed contract with a major automotive company to use its new data service, but is not yet ready to formally announce the deal.
General Motors, one of the automakers that has tested the new data exchange service, says it has not yet decided whether to use it.
Paul and about 100 employees at Covisint's Southfield, Mich. office will now transfer to Compuware's headquarters in Detroit. Paul has not ruled out changing the company's name saying he's not tied to the name Covisint.
Now that the automakers are out as Covisint owners, the automotive supplier community may now feel more comfortable in using Covisint products.
"Suppliers perceived that Covisint was just another tool to beat down supplier prices and rightly or wrongly Covisint was saddled with that reputation because of who owned them," says Neil De Koker, president of the Original Equipment Suppliers Association. He anticipates that suppliers will consider using Covisint's new data messaging service. Lear, Johnson Controls, and Delphi have tested the service.
"As a tool that will help in communications, I think the messaging service will be very useful," De Koker says.
But Covisint must contend with many competitors who already offer data exchange services to automakers and their suppliers, says Kevin Mixer, research director at AMR Research of Boston. Global eXchange Services, AgilisysAutomotive and ANXeBusiness Corp. are just a few companies that already provide this kind of service.
"Covisint is going to have to take revenue from somebody," Mixer says. "But now the target is off their forehead."
Covisint wants to grow its revenues to $100 million within three to five years, Paul says.
In calender year 2004, Covisint is expecting $18.9 million in revenues. Covisint has kept its revenues secret in the past, but Paul says that Covisint has been operationally profitable since May 2003, and is projecting net income profitability in the second quarter of this year.
During Compuware's next fiscal year, which begins April 1, Covisint expects revenue of $21 million to $22 million.