Baby Bells Jump into B2B Marketplace

Hot on the heels of the acquisition of business-to-business (B2B) software provider Sterling Commerce by telecom giant SBC Communications, two other former “Baby Bells” have jumped into similar waters.

BellSouth has unveiled a plan with Commerce One to create a B2B marketplace for the telecommunications industry worldwide, while US West has cut a deal with Vsource, Inc. to develop an electronic procurement service for its small and medium-sized business customers.

The deals clearly signal that the Baby Bells plan to shift from selling information pipelines to providing value-added application services, such as electronic purchasing. The Baby Bells still provide the overwhelming majority of local telephone service in the U.S. and are also strong players in providing broadband Internet access through frame relay and DSL services.

The BellSouth Deal

At the center of BellSouth’s deal with Commerce One is $16 billion (US$) that the telecom giant says it spends in procurement every year. The company expects to save $1 billion yearly by becoming a leading user of its new online marketplace.

BellSouth and Commerce One, however, plan to share the wealth in the new venture by selling minority equity positions to six or seven other major telecommunications firms that will become “anchor partners” on the service. BellSouth said that equity would be based on the level of activity.

The marketplace is expected to be operational in the second quarter of 2000.

“BellSouth truly understands the power and potential of global, electronic trading communities,” said Commerce One president and CEO Mark Hoffman. “They are doing the right things both internally and externally to legitimately declare leadership status as an e-business enabler.”

The global telecom trading network is BellSouth’s second venture with Commerce One. BellSouth previously announced the development of an Internet trading community for small businesses throughout BellSouth’s nine-state region, based on the Commerce One MarketSite portal.

BellSouth said it will offer a Web-enabled application that offers small business customers access to global markets as both buyers and sellers. BellSouth estimated that its 1.2 million small business customers generate revenue in excess of $1.3 trillion annually and procure over $200 billion in goods and services. The Internet-based trading community for small businesses is scheduled for launch this quarter.

US West Chooses Newcomer as e-Procurement Partner

The US West deal is similar to BellSouth’s planned marketplace for its small and medium-sized customers. The distinguishing factor in the deal is that US West has partnered with a newcomer to the electronic procurement marketplace.

That newcomer, Vsource, claims to have a “pure” Internet-based procurement system that operates using a Web browser in contract to systems from well-known e-procurement firms like Commerce One and close competitor Ariba. Both use a client-server model that requires an application program that runs on the user’s PC.

US West and Vsource said they will develop a “Virtual Source Network” that enables “eProcurement,” including the “processing of Requests for Information (RFI), Requests for Quote (RFQ), Requests for Proposal (RFP) and other procurement documents via a Web page interface,” US West said.

“That makes it possible for any number of suppliers to review the documents, check specifications, ask questions and get clarification from the buyer and ultimately bid on the requests,” US West added.

US West said that its eProcurement service, which will launch later this year, will be the first in a series of “eBusiness” services that it plans to introduce.