After two decades in the
technology industry, Mark Hoffman faces one of the hardest
challenges of his professional career.
As chairman and chief executive of business-to-business
software maker Commerce One, Hoffman is at the helm of a
company feeling the weight of an economic downturn and
sluggishness within its own market.
As one of the co-founders and former chief executives of
Sybase, Hoffman managed the company's dramatic growth from a
software start-up to the No. 2 relational database
management-system maker and sixth-largest independent software
company in the world.
Tapping that experience, Hoffman has led Commerce One to
become a major player in the business-to-business software
sector and a strategic partner of one of the largest software
companies in the world, SAP. He also has had to make tough
business decisions to trim his company as it navigates through
the current economic turmoil.
In a recent interview with CNET News.com, Hoffman described
his company's growing relationship with SAP and explained why
he believes Commerce One can survive the market slump.
Q: How would you assess the current high-tech downturn,
and how long do you think it will last?
A: I think you
are already seeing some early signs of better conditions with
some of the statements last week from Intel and others
regarding the PC business. But even as the market
recovers, companies are still focusing squarely on investing
only in technology that delivers clear, almost immediate
return. This is the reason there's been what we'd consider
short-term pressure on the development of public
Companies are much more comfortable implementing Commerce
One's auction capability or an e-procurement application right
now because the results are so immediate. Six months ago,
customers had a much longer-term view and were willing to make
investments in a public exchange that might take six or eight
months to construct, but ultimately provides a far greater
long-term benefit and return.
You have trimmed your staff and received more backing
from SAP. What else can your company do to weather the
The most important thing to do in any
economic environment, but especially in a downturn, is to
focus on making customers successful--helping them save money
and become more competitive. That has always been our focus,
and in spite of all the media negativity, our customers
continue to see amazing results.
We've seen reports indicating that a founding member of
Exostar recouped its initial investment in less than a year.
At the same time, big companies such as Deutsche Telekom and
Siemens are already seeing significant ROI (return on
investment). Deutsche Telekom has seen a 67 percent reduction
in purchasing costs, and Siemens recently ran its largest
bidding event to date through its enterprise e-marketplace and
generated a 20 percent savings on a $12.6 million reverse
How have your belt-tightening measures been received on
To impress Wall Street, you have to do two
things: Grow and get to profitability. To grow, we have to
focus on delivering the products our customers and prospects
need and on demonstrating the tremendous value they bring. At
the same time, we're focused on running a very efficient
organization. As we demonstrate that over the coming quarters,
I expect we'll see an appropriate response on the Street.
How important is your relationship with SAP?
partnership with SAP is a perfect match for our enterprise
strategy. What our customers are focused on is dramatically
improving their ability to do deep supply-chain collaboration
over the Internet directly with their partners and customers.
The combination of our platform, which fundamentally enables
collaborative e-commerce, with SAP's supply-chain applications
delivers those key capabilities.
For us as a company, SAP provides a tremendous channel,
which will be increasingly important as the economy turns
around and competition gets even fiercer. That's why our joint
solutions are gaining traction even in tough economic times
with leading companies including Nihon Unysis, Cable &
Wireless, Akzo Nobel and Reliant Energy.
Where do you see your relationship with SAP in two or
We'll continue to deliver innovative joint
products to address the needs of both enterprises and
industries. Our R&D efforts together are, as far as we can
tell, unprecedented in the history of this industry, and we
feel pretty good about the products and technology we have in
the pipeline together. At the same time, we're continuing to
accelerate our channel strategy with SAP to leverage the
thousands of SAP employees selling joint product to SAP's
installed base of 13,000-plus enterprises worldwide.
Analysts say SAP has plans to purchase your company and
make your product into middleware for its ERP product line.
How do you respond to this?
SAP invested in Commerce
One because they understand the tremendous, fundamental value
of our platform for enabling collaborative commerce. They
appreciate our contribution as an independent company with an
open platform. While the analysts speculate, we're focused on
working with SAP to expand our joint product offerings.
In what areas do you see your product footprint
We will continue to advance our marketplace
operating environment, MarketSite, as the as the de facto
standard for e-commerce and collaboration inside and outside
the enterprise. We continue to extend the development of our
XML library, which has the support of industry leaders such as
Sun, Microsoft and SAP. And we'll also continue to build upon
our success with marketplace applications such as auctions and
During your latest quarterly earnings report you said
that despite the wider-than-expected losses, you still believe
your company's vision is on target. Could you briefly explain
your vision and why you think the company can survive through
these tough times?
vision has always been about enabling collaboration, process
automation, and e-commerce both within and between
enterprises. There's huge potential for new savings and new
business opportunities by moving these activities onto the
Think of it this way: ERP focused on streamlining internal
business processes, which is important. We're focused on
enabling and streamlining the activities between
companies--where product is bought and sold and ultimately the
money is made. Every company everywhere is going to need to
move their business onto the Web, not just to be competitive,
but to be viable. We're going to be a big part of that
Where do you see your company beating out Ariba in the
business-to-business software battle?
Customers want to
be able to invest in e-commerce solutions today that deliver
immediate ROI, with a path to richer capabilities for
collaboration with trading partners long term. Our
e-marketplace platform, our e-procurement platform, our
applications, and our relationships with SAP and Microsoft
provide that kind of immediate benefit coupled with long-term
opportunities for competitive advantage. You can't get that
from a one-dimensional e-procurement application company.
Where do you see your company losing to Ariba or
We don't. The bottom line is customer
experience. We have the most amazing base of customers in the
business: Boeing, GM, Lockheed, Siemens, the Navy. They're our
most important resource in terms of giving us the direction to
continue delivering the best e-commerce platform on the
planet, and I don't think our competitors come close.
How has the push by ERP software makers into the
e-procurement space affected your market?
As you know,
we work closely with SAP on joint e-procurement offerings, and
as the largest ERP vendor, that gives us a tremendous leg up
in working with their 13,000-plus installed base. In general,
though, most of the ERP approaches to e-procurement have
focused on internal administration, which is fine, but it
doesn't really address doing business beyond the firewall.
Our ability to connect companies together via e-procurement
or an e-marketplace, on the Internet, actually enables a
company to expand its capabilities to buy and sell products
and services--far beyond just automating a few processes
behind the firewall.
Do you believe, like most analysts, that the private
exchange market will outgrow the public exchange market? And
how will that affect your vision?
I think there is a
lot of speculation right now about public vs. private
e-marketplaces, but it all comes down to the fact that
companies want to have the ability to collaborate and do
business with their partners, suppliers and customers via the
What we're seeing is three things. First, the industry and
regional e-marketplaces are really gaining significant
traction. Some of them, like Covisint, are operating with
billions of dollars in transactions. And companies like
Siemens are building out enterprise exchanges to do similar
activities and already seeing major savings.
But probably the most interesting activity is the new class
of private exchanges, like the Navy's, for example, which is
connecting to the Exostar public exchange for the aerospace
and defense industry. So long term, we see growth in both
areas as companies build their own hubs and connect to
industry or regional marketplaces to take advantages of their
Where do you see Commerce One in two years?
think as the economy recovers and companies really start to
see the ROI from e-marketplaces take off, we'll see a big push
to invest in these types of strategic e-commerce
systems--private exchanges, public e-marketplaces, auction
applications, e-procurement, collaborative supply chain, and
so forth. As for Commerce One, we'll do what we always do:
focus on making our customers successful and focus on building
and delivering the best e-commerce technology and solutions in
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