The popularity of on-line auctions is spilling over into business-to- business purchasing with the launching of a consortium that is seeking a bank partner.
The selected bank would work with three companies that have formed an alliance to let businesses bid for office supplies over the Internet. The partners would benefit by doing business they might not be able to develop on their own.
The alliance is in talks with Bank of Montreal and its U.S. subsidiary, Harris Bank of Chicago, according to John Jensen, president of Analytics Inc., one of the consortium's three constituents. It is seeking a bank to supply electronic funds settlement services and accounts-payable options, he said.
Harris has "excellent capabilities" to give detailed accounts of purchasing transactions, Mr. Jensen said. The alliance is talking to "a few other large U.S.-based banks," he added.
The consortium's purchasing system, E2E, is based on an on-line bidding network supplied by Interactive Buyers Network International of Ventura, Calif., a five-year-old company. Interactive Buyers' Virtual Source Network, started in December, lets suppliers post bids on-line in response to buyers' requests for quotes.
The other consortium members are Analytics of Madison, Conn., which is to analyze purchases and offer real-time reporting to clients, and PricewaterhouseCoopers, which is to supply technology support and integration of back-office accounting systems. The consortium plans to open a Web site in the next few weeks, E2Ebiz.com.
"We had a vision of the perfect solution," said Mr. Jensen, who led the consortium's formation. "Someone sitting in front of a computer needing to buy something, and choices appearing."
The E2E software is intended to automate all aspects of purchasing, including requests for quotations, purchase orders, invoicing, electronic funds settlement, and real-time analysis and reporting.
Interactive Buyers "has upside potential" over the next two to three years, though it is a "high-risk company," said Mark Yu, director of research at California-based Technology Coast Independent Research Inc.
"The company has the potential to do well in the long term if management executes," Mr. Yu said. "It needs to take time to develop alliances and sign more customers to add to the credibility of the company."
E2E differs from current electronic commerce applications, according to Mr. Jensen, because it does not assume that users know the names of the suppliers they want. "Our method from the buyer's point of view is passive," he said. Users post their requests into "a trading-floor-like environment and can ask, 'Who can supply me and who's got the best price?' It can cost less and happen faster."
Interactive Buyers charges a small transaction fee, normally in cents, for purchase orders placed on-line. Users who do not get a satisfactory bid do not have to pay, and suppliers are not charged for posting bids.
The software imposes spending limits, has approvals built in, and lets nonpurchasing people make purchases. "It is a single-entry system that can be used by authorized employees anywhere in the world," said Robert McShirley, president and chief executive officer of Interactive Buyers.
Analytics rounds out the ordering functions with a series of processes that help identify purchasing patterns. For example, it can identify specific items purchased, not just the suppliers that provided them.
One of Analytics' customers, a large financial firm in New York, found that 26 of its offices did business with 7,000 paper suppliers, spending a total of $52 million a year.
Financial institutions "quite frankly do not have professional purchasing organizations in place," Mr. Jensen said. "So time spent resourcing information can be overwhelming." With E2E, he said, "every purchasing location of a client can see where it is currently buying specific products. Users can see what companies the other business units are using, and this encourages the business units to work together."
Interactive Buyers and Analytics are fairly well established electronic commerce providers. Interactive Buyers, with 17 employees, has about 50 clients, including Technicolor, Warner Bros., CBS, and McDonald's California. Analytics has customers, mostly Fortune 100-size, in 36 countries; 15% of its clients are in financial services.
Aligning itself with a big-name bank and PricewaterhouseCoopers "adds credibility," Mr. McShirley said. "There can be a perceived risk in installing a small company's solution," he said.