Commerce One Loses MCI Business

It was a win-some-lose-some week for Web marketplace vendor Commerce One.

Cut-throat competitor--and fellow recent IPO highflier--Ariba Inc. stole one of the company's most-prized clients, MCI Worldcom Inc. The fact that MCI was not only a customer, but also Commerce One's main network partner in building U.S.-based Internet marketplaces, makes the loss embarrassing and potentially painful.

Commerce One and Ariba both make enterprise software to enable Web-based procurement and purchasing and support trading networks for linking together buyers and sellers.

Commerce One did not respond immediately to the ramifications of the deal, and analysts were mixed on its impact due to the lack of information available at press time.

“It's got to be a tense time over there,” said analyst Erica Rugullies with Giga Information Group.

On a brighter note for the company, Commerce One rolled out a second version of its Common Business Library (CBL), a set of XML- based building blocks for business-to-business documents. The company gained endorsements of its technology from Microsoft, CommerceNet and other industry standards bodies.

But it was the MCI deal that had this space humming. According to Ariba, MCI Worldcom will be using its system as its enterprisewide Web purchasing application, replacing Commerce One.

Analysts pointed out that the loss of MCI as the marquee customer for its software doesn't necessarily impact the more wide-ranging, market-hosting relationship. Commerce One has made a big deal of its so-called MarketSite network partners, which also include BT, Nippon Telegraph and Telephone, and Singapore Telecom.

Observers speculated MCI--obviously a global player in its own right--may not be happy with sharing a MarketSite role with its competitors.

In the end, though, the loss of MCI to Ariba most directly hurts Commerce One's buy-side software business. But that market may not be the vendor's No. 1 priority, analysts said. Instead, it has spent a lot of time lately positioning its Web-hosted MarketSite as a potential trading-network backbone for not only its own buy-side software but for that of other vendors as well, Rugullies said.

Analysts also were mixed on the importance of CBL. Commerce One scored high marks for focusing on trading network interoperability. But if CBL is used mainly by Commerce One customers, and Ariba's customers use its XML product, cXML, then the two cancel each other out and become “almost inconsequential,” said analyst Vernon Keenan of Keenanvision.

“There's so much that needs to be analyzed in terms of market acceptance before these XML protocols make any difference for anybody,” Keenan said.

In addition to the MCI deal, Ariba also this week announced a partnership with technology provider Inacom Corp., which will sell a limited-use version of its software to Inacom's customer base.

Neither MCI nor Commerce One would comment on the deal at press time.