Supplynet not affected by firm's demise

By ADAM GIFFORD

New Zealand electronic market hub Supplynet has inoculated itself from the imminent demise of technology vendor Commerce One.

Carl Mitchell-Turner, head of Supplynet parent PSB Group, said while it paid $5 million for Commerce One's marketplace software, Supplynet invested a further $10 million to build the online exchange, which connects 20 customers to 800 suppliers across New Zealand, Australia and further afield.

Customers include another PSB subsidiary, public sector procurement specialist GSB Supplycorp, and Optus' inCITE market site.

The most recent records filed with the Companies Office, covering the year to June 30, 2003, show a profit of $25,000 on revenue of $6.1 million after years of losses.

"We have the Commerce One source code in escrow, and we have been self-supporting on the platform for almost three years," Mitchell-Turner said.

"In the early days it was our whole solution set, now it is probably half, and the rest we have developed ourselves or sourced elsewhere."

Commerce One's software is similar to that now offered by application suite vendors SAP and PeopleSoft, both of which had alliances with Commerce One before developing their own procurement modules. Other significant vendors include Oracle and Ariba, which now offers a broad range of procurement services over and above its software.

"I could look for support from SAP if required but we have never needed it. Supplynet has been self-supporting," Mitchell-Turner said.

"The whole premise of Supplynet is to look at the needs of procurement professionals, and if new tools are needed, we will develop them ourselves, buy them or host them, whichever is most appropriate."

Commerce One last Thursday told the United States Securities Exchange Commission it was down to US$700,000 in cash - a far cry from its heyday in the dotcom boom, when the market valued it at US$20 billion.

"Businesses were always going to electronically enable their supply chain. It was just a question of how to do that. If Commerce One or Ariba hadn't existed, it would have been harder for third-party service providers like us," Mitchell Turner said.

Electronic procurement did not prove the bonanza software vendors and marketplace providers expected, but it changed the way large organisations buy things.

Apart from cutting down the number of internal processes required, it allowed them to exercise greater control on who can buy and who they can buy from, which opens the way for negotiating bulk discounts and better delivery and service options with preferred suppliers.

"E-procurement puts centralised control over decentralised purchasing processes," Mitchell-Turner said.