PHOENIX, Jan. 10 – The e-chase is on.  And a company whose name (appropriately, if coincidentally) starts with the letter "e" is in the lead.  And least when it comes to B2B[1] (sorry, not yet a bed-2-breakfast, nor bed-to-bed J) e-commerce: Electronic Data Systems.  Or more accurately, EDS' newly formed subsidiary EDS CoNext , which is trailblazing a new way to run net market businesses through its "e-Price Clubs" (our term) for various industries and geographies, dubbed Leveraged Sourcing Network (LSN).

Who'd have funk it… Well, Ariba did.  Who's Ariba?  One of those e-companies no one's heard of.  Until "yesterday."  But which is worth more than Xerox in today's crazy stockmarket ($17 billion vs. $16 billion market cap).  Yet, Ariba's revenue in its latest fiscal year was a mere $45 million (vs. $20 billion for Xerox).  And the Mountain View, California-based e-commerce software company lost $29 million (vs. $1.7 billion net profit for Xerox). 

Who cares… Certainly no one on Wall Street seems to.  Because Ariba's business starts with that magical e-, while Xerox is one of those Fortune 100 companies whose name stands for an ex-business great.  The result is a whole new stratospheric dimension which Wall Street has given to the term "crazy" (stockmarket).  Ariba's shares, for example, went from $30.50 on June 23, 1999, to $211.00 on Dec. 28, 1999.

Meanwhile, what did Ariba and EDS do today to warrant all the hoopla which boosted each company's stock today by 13% and 12% respectively?  They joined forces in what Keith Krach, Ariba's CEO, described as "a megadeal… potentially the largest group of net markets ever announced."

Dick Brown, EDS' CEO, said they were targeting $160 billion annually in managed collaborative purchasing by the Fortune 500 companies.  "We are playing a very pivotal role to drive and shape how these e-markets will evolve," he said during this morning's teleconference with analysts.

Brown said that the total on-line market by the year 2003 would grow to $3 trillion.  And that the Ariba-EDS partnership, which to us looks like 12 big "e-Price Clubs" (corporate buying consortia), would add about 1% to EDS' revenue growth rate after the first two or three "e-Price Clubs" (LSN was the actual term he used) go on-line.

EDS's first "e-Price Club" (LSN) opened last July with Bethlehem Steel Corporation, The Clorox Company, Entergy Services, Inc., Fort James Corporation, Kellogg Company, Prudential Insurance Company of America, Tyco Healthcare Group L.P., EDS and four other Fortune 100 companies as initial members.  Their spending potential at the "e-Price Club" is up to $17 billion.

Playing the Man, Not the Puck

That's an impressive figure, but it is still small potatoes compared to the potential for e-commerce in the small and medium companies markets.  That's because the Fortune 500 giants are on the 21^st century's endangered species list as industrial era dinosaurs.  And the smaller companies are the engines powering the U.S. and European economies. 

It's natural, of course, for the time being for the e-commerce providers to focus on the Fortune 500 companies.  Just as it is logical for banks robbers to rob the banks.  For, that's where the money is in both cases.  Today.

But a winning game strategy is playing the man, not the puck.  Or as hockey's all-time great, Wayne Gretzky put it when asked what the reason for his success was, "skating to where the puck is going to be."  Which means small and medium size companies in the B2B market, and consumer e-commerce when the Internet's C2O (chaos-to-order) promise is eventually fulfilled.

Market Applauds

EDS' Brown said that the money which his company is putting into the Ariba e-commerce joint venture will come from a $1.5 billion investment fund which EDS and A.T. Kearney have set up to target the e-business opportunities.  He added that over time, EDS may consider spinning off EDS CoNext as a separate company through an IPO (Initial Public Offering).

And the stockmarket lapped up today's announcement with gusto, showering both companies (Ariba, EDS) with cash and one-day laurels.  Ariba's stock surged by $22^13/16 (+13.48%) to close at $192.  EDS's shares soared by $7^1/4 (+12.18%) to close at $66¾.

Happy bargain hunting!

Bob Djurdjevic