Chase Manhattan Corp. reinforced its commitment to becoming a leading provider of business-to-business electronic commerce on Wednesday, announcing that it and Deloitte Consulting LLC will start a company that will help businesses buy goods and services over the Internet.
The venture, which has yet to be named, will join the growing ranks of companies trying to profit by facilitating electronic commerce between businesses, a market that Forrester Research predicts will total $1.3 trillion in 2003.
The company is to be launched in the second quarter and is Chase's second stab at building a business around electronic procurement. Chase was a founder of Intelisys Electronic Commerce Inc., established in 1996, and still has a 33% stake.
Officials at Chase.com, the division behind the venture, said the new company will go beyond current capabilities by integrating procurement software - such as that offered by Intelisys - with a business' invoice and payments systems. The Chase-Deloitte venture will offer procurement software from Intelisys as well as software from other vendors, depending on the clients' needs.
Chase and Deloitte Consulting, a New York unit of the Deloitte Touche Tohmatsu tax and management consulting company, said their venture will also create communities of buyers and connect them to various on-line exchanges and marketplaces so they can take advantage of their combined purchasing power.
"You have to have flexibility, because every corporation has a different approach to this," said Denis O'Leary, executive vice president of Chase and head of Chase.com, a division created to incubate technology companies and possible spinoffs.
Chase and Deloitte said their company will save Fortune 1000 clients $200 million to $350 million a year by helping them streamline what they called the "chaotic" procurement process most large businesses use.
The partners face stiff competition in the form of Ariba Inc. and Commerce One Inc., both fairly established providers of business-to-business procurement. Combined, Ariba and Commerce One have a market capitalization of about $30 billion, against about $195 million for Intelisys.
In an interview with American Banker last month, Intelisys said it expected to have 21 million users within two years and 10,000 suppliers by yearend, up from 7,500 and 1,000 suppliers currently. Clients that recently have signed up to use the system include Starwood Hotels and Resorts, with 700 locations, and AutoLink.com, with 300,000 auto dealerships.
Laurie Orlov, a research director at Forrester Research in Cambridge, Mass., said Intelisys appear to be running behind its two rivals, most likely because it has failed to market aggressively.
"Intelisys is facing a problem of critical mass," Ms. Orlov said. "You have to have the attention buyers as well as suppliers."
The Chase-Deloitte venture will focus on automating the purchase of "indirect" goods and services, or those that are not used to manufacture a company's products. Office supplies and telecommunications services are indirect goods used by automobile makers, for example, while steel to build cars are direct goods.
The company will start off serving the indirect procurement needs of Chase and Deloitte Consulting, which total $8 billion, the companies said.
Officials of the venture partners said the business already is benefiting from the efforts of more than 50 Chase and Deloitte employees. They will help clients communicate with other businesses, make electronic requests for goods and services, and automate orders, invoices, and payments.
Ms. Orlov said the new venture sounded "unfocused, in the sense that it was whatever you want it to be." Still, she said Deloitte brings to the table considerable knowledge of efficient procurement and software integration expertise, while Chase brings its payments-settlement know-how.
