E2open has opened its doors.
The new electronics marketplace sports 10 high-powered founders, including IBM Corp., Hitachi and Nortel Networks. With this backing, e2open aspires to be nothing less than “one of the largest enterprises of the 21st century,” said John Mumford, partner at Crosspoint Venture Partners, the lead venture capitalist on the deal, and the ongoing chairman of the e-marketplace.
Bluster? Sure. But by mining the lucrative intersection of communications, computing and consumer electronics industries with almost $1 trillion in annual spending, this e-marketplace has the potential to be the largest of its kind, topping even Covisint, the massive auto marketplace.
E2open formally announced its formation as an independent company earlier this month and named as its new chief executive officer Mark Holman, a former executive with e2open founding company Solectron Corp., a contract electronics manufacturer. It also named Paul Sterne, formerly director of corporate development at IBM, as its chief financial officer.
“E2open is in a great position. These are powerful players that understand the market. Their [industry] is one of the fastest in moving online,” said Bruce Temkin, analyst with Forrester Research Inc.
The e-marketplace has aggressively moved from idea to reality. In June, the company announced its intention to move online, led by IBM and with help from Morgan Stanley Dean Witter & Co., McKinsey & Co. and $200 million of venture-capital funding. IBM, Ariba Inc. and i2 Technologies Inc. were picked as the e-market’s technology providers.
The company will be running its first online auctions this month, but is already operating a service it calls Design Win Collaboration, which lets companies and their suppliers jointly work on engineering projects together. The service is an outgrowth of an IBM e-marketplace dubbed Component Knowledge Exchange, and already has about 500 subscribers paying $995 a month.
Ultimately, e2open envisions service offerings in four different areas: Design Win Collaboration, MRO Procurement, Open Market (auctions and spot buys) and Supply Chain. All of those services, at least in some limited form, will go live this year.
For instance, e2open is working with two of its founder companies to move their i2 Technologies-based supply-chain technology onto the marketplace. That will allow the companies to more easily craft supply-chain links with other members of e2open without having to create connections one at a time, said Holman.
The goal for e2open is to integrate all its services, so that a chip designer might start by posting an idea on the site, draft suppliers to help him with the design and then source and procure parts through the site via both one-time auctions and standard catalogs.
While Covisint has been bogged down in regulatory scrutiny, e2open took great pains to avoid anything that might attract the government’s attention.
“We think we can create a tremendous amount of value without venturing into spaces that get people worried,” said CEO Holman.
Not buyer-centric
One key decision was to not make e2open a buyer-led market like Covisint. “We wanted to make sure we had a balance, even among our founding members, between buyers and sellers,” Holman said. “We don’t view folks like distributors as a target we want to put out of business. Everyone’s role will evolve in the supply chain.”
E2open’s open approach means a significant role for business-to-business marketers as well, Holman said. “For a start, we hope to lower their cost of doing business, including outbound sales and marketing. Secondly, we want to enable new business models and provide opportunities for companies to think about their businesses differently.”
For instance, today about 20 percent of an electronics company’s product demand falls outside its forecast plans. “I look at that as an industrywide problem. We want to help suppliers plan for that. They may not know where their supply is going to come from, but with a liquid spot market they can be sure they can get what they need,” Holman said.
E2open has a direct competitor in eHitex.com, a similar e-marketplace launched the same week this past June and led by Hewlett-Packard Co. and Compaq Computer Corp.
Speculation has centered around eventually folding those two e-marketplaces into one another, but don’t expect that any time soon, Holman said.
“Since I’ve been CEO, we haven’t had discussions like that,” he said. “It’s probably not the right thing to do, at least initially.”
In the end, e2open, and other e-marketplaces like it, are going to have to decide exactly what kind of company they want to be when they grow up.
Agreeing that there are many different roles his new company could ultimately take, Holman nonetheless said he’s shooting for the moon. “We want to be the operating system for our industry’s supply chain,” he said. “If we do our job correctly, we’ll be the way companies interact in the supply chain.”
E2open is currently looking for headquarter space in Silicon Valley. The full lineup of founding members includes: Hitachi, IBM, LG Electronics, Lucent Technologies, Nortel Networks, Matsushita Electric (Panasonic), Seagate Technology, Solectron, Toshiba and Acer America Corp.
Richard Karpinski is a reporter for BtoB, a sister publication of RCR Wireless News.
