Fresh from its legal wrangling with the Justice Department, Microsoft Corp. is expanding its role in business-to-business electronic commerce.

"We've been very quiet about what we're doing," said Christy Reichhelm, B2B Enterprise Applications Industry Manager in the enterprise solutions group at Microsoft, of Redmond, Wash. "We've been out there building products."

Rebecca Kaske, director of e-business solutions at Microsoft, said the company has been focusing on three qualities that are important to financial services companies in electronic business: speed, simplicity, and standards.

One of Microsoft's first financial services customers in b-to-b is $69 billion-asset Wachovia Corp. of Winston-Salem, N.C. Wachovia has formed partnerships with Clarus Corp. and Microsoft to build an electronic procurement service for internal use, and by the first quarter of next year it expects to launch a trading hub on the Internet for corporate buyers and sellers. The exchange will have such offerings as office supplies, travel services, and even 401(k) services.

Wachovia, which unveiled its intentions this week, is following in the footsteps of two other partnerships announced in the past two weeks. One,, is a venture to be set up by yearend by Wells Fargo & Co., Citigroup Inc., and three technology companies to facilitate payments between Internet businesses.

In the other partnership, five companies - Bank of America Corp., ABN Amro, U.S. Bancorp, FleetBoston Financial Corp., and American Express Co. - have thrown their weight behind an Internet payment system being developed by Ariba Inc. to help negotiate deals between corporate buyers and suppliers. An Internet purchasing card service is to be piloted next month by the Ariba Commerce Services Network, and will be generally available in the fourth quarter.

"Most of these [initiatives] focus on small businesses," said Joanna Giacobbe, senior vice president in charge of Wachovia's eMarketplace. By contrast, Wachovia will target middle-market businesses and scale up to large corporations, she said. "Though we're keeping an eye on folks like Citi and B of A," she added.

An estimated 500 online business-to-business marketplaces help companies negotiate trades. Most of them, however, still require that payment be executed offline by check or wire transfer. will offer letters of credit, global settlements, and foreign exchange services.

Wachovia has yet to name its eMarketplace, venture which is still in beta mode, Ms. Giacobbe said. But it will be based on eXtensible Markup Language (XML) technology, will run on Microsoft's Commerce Server, will enable buyers and sellers to make purchases online.

As the sponsor organization, Wachovia will provide product catalogues and the processing engine, and will negotiate with the suppliers, Ms. Giacobbe said. In addition, it will provide financial services, including risk management, credit qualification, settlement, and electronic invoicing.

As a relatively conservative institution in the Southeast, Wachovia is concerned with "scalability, availability, and [being] focused on being there when our customers need us," Ms. Giacobbe said. "eMarketplace is a volume game."

Microsoft, she said, has enabled the banking company to run multiple applications on an enterprisewide system. Ms. Kaske said that more than 200,000 Internet sites run on Windows 2000; among secure Web sites, she said, 52% are run by Microsoft, and 11% by its nearest competitor, Sun Microsystems Inc.

Clarus' eMarket is the first digital marketplace framework designed for Microsoft Windows 2000 and the Microsoft Commerce Server 4.0. Steven Jeffery, president and chief executive officer of Atlanta-based Clarus, said his company "enables online seamless integration between buyers and sellers." Wachovia, he said, "is a great example of a customer taking advantage of the application and trading platforms we've developed."

David Medeiros, research director of TowerGroup's new global payments service, said getting into the trading exchange marketplace "is certainly a way for banks to maintain their currency in the world of electronic commerce, and to increase their payment volumes."

The danger for banks, Mr. Medeiros said, is to be pushed into the background by third-party organizations - such as online brokers, portals, and payment processors - that can come between them and their customers. Banks must "develop their own presence in electronic commerce by providing online information and payment capabilities," Mr. Medeiros said. Services they should provide, he said, include financial electronic data interchange, digital certificates, and support for merchants. "These alliances between banks and Web-based trading communities mean that their role is remaining more visible," he said. He expects to see more such alliances.

Wachovia's relationship with Clarus to offer electronic procurement internally is not unusual in the banking industry. In April, Bank of America teamed with Ariba to offer procurement through a separate subsidiary, Banc of America Marketplace LLC. Citigroup has entered an alliance with Commerce One to create an Internet portal, Citibank Procurement Connection.

In April, Wachovia went live with the Clarus eProcurement service in 21 days, its first working relationship with Clarus. It is now rolling out the service to all 24,000 employees to help them source and order goods online.

Ms. Reichhelm of Microsoft said her company has already had a return on investment for migrating to an electronic procurement system in-house. "We saved $30 million last year by having our own e-procurement system," she said.

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