Virtual market sites aimed at businesses are turning into hot property, with vendors swapping share stock and offering huge endowments to secure big name customers, writes Ambrose McNevin. Virtual markets work by hosts, such as Ford or Federal Express, using web-based networks for their own procurement needs and then earning commission revenue when their suppliers buy from each other over the same network. But such matches are leading to strains as big names enter the market, creating an overlap between suppliers' competing technologies, and companies racing to attract users to their portals. A new breed of pioneering vendors such as ecommerce software house Commerce One and Ariba offer virtual markets where business buyers view online catalogues and purchase goods. Ariba and Commerce One have been joined in the market by Oracle, SAP and Baan, which are all running or planning online virtual markets that will offer hosting services. Commerce One's recent link-up with General Motors (GM) shows how important alliances have become. GM sealed the deal with a cash investment in Commerce One. Commerce One is setting up and hosting GM's MarketSite project, and represents the motor giant's first move into ecommerce since it launched its eGM unit in August. Commerce One announced the deal on 2 November, but did not disclose the stock swap. Ariba, however, says it is not interested in handing over sizeable chunks of its stock to customers. 'Ariba is not interested in doing deals on that basis,' said Larry Mueller, the company's newly-appointed chief operating officer. In a filing with the US Securities Exchange commission on 12 November, Commerce One said: 'In connection with the establishment of the portal, Commerce One anticipates granting rights to General Motors to purchase up to 4.8 million shares of Commerce One common stock at a purchase price of $0.0001 per share. 'The rights will not be exercisable, however, until certain milestones related to the operation of the portal are achieved. 'Commerce One will also agree to nominate a representative of General Motors to serve on its board of directors,' the company added. Stock swaps or not, the scramble for alliances is hotting up. Take Ariba, for example. Ariba and Hewlett Packard (HP) had a cosy relationship, having partnered in March this year to set up the Ariba.com network. HP is also an Ariba customer for Ariba's enterprise procurement package. HP provides the hardware, support and marketing assistance to the Ariba.com network, which it gave Ariba for free in return for a cut of revenues generated by the service. Then in August this year HP announced that as part of its Internet catch-up strategy, it was developing a service called espeak with Oracle. Espeak automates online transactions, and Oracle plans to use it in its Oracle Exchange online marketplace in direct competition to the Ariba.com network and the Internet Business Xchange (IBX), which Ariba is due to launch in the first quarter of next year. Oracle Exchange was originally due to launch at the end of this year but is now scheduled to launch sometime early in 2000. Car giant Ford has announced plans to use Oracle Exchange as the basis for AutoXchange, its own foray into the virtual market hosting business. Mueller says Ariba was not in the running for the deal, which he describes as a consultancy deal requiring 300 Oracle consultants to set up shop in Ford. When it announced the development of espeak, HP said it would become part of the Ariba network. Mueller now says Ariba has no plans to incorporate espeak into the Ariba.com network.
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