Commerce One bids for profits with sourcing software

E-marketplaces out, sourcing software in, says CEO...

Struggling B2B vendor Commerce One is banking on its new sourcing software to plug a serious shortfall in 2002 revenue. CEO Mark Hoffman said he was confident Commerce One 5.0 - the sourcing software launched last week - will account for 70 per cent of revenue by the end of this fiscal year. Last year e-marketplaces accounted for almost 100 per cent of Commerce One's revenue, but the company has shifted its focus away from marketplaces to individualised e-procurement applications, after revenue slumped more than threefold during 2001. In Q4 2000 the company reported $191m in revenue. By Q4 2001 that had fallen to $56m. Half of version 5.0 revenue - or over one third of all Commerce One's 2002 expected revenue - will come from new customers, according to Hoffmann. While half of all annual revenue currently comes from its alliance with SAP, Commerce One's confidence in version 5.0 is part of a longer term effort to distance itself from SAP. Despite insistence from company officials over the past few weeks that little in the alliance has changed, Hoffman said he expected SAP to contribute less and less to Commerce One revenue in subsequent quarters. "Absolutely, it is a sign of independence, we want to be recognised for what we are," said Hoffman. "We were focusing too narrowly on SAP's customer base. I want to expand our penetration into non- SAP areas. SAP acknowledges that we have an independent strategy and that we will compete against them in some areas," he said. While no forecasts for 2002 revenue were offered, Hoffman said he expected an increase on the $56m reported in Q4 2001. Hoffman also declined to offer targets on the profit that has so far eluded Commerce One, saying the company had enough cash for another two years. "We do need to get profitable. You can cut expenses and you will be profitable, but you get to a stage where you've crippled the company so much you're part of the living dead. We need to balance profitability with long-term sustenance."