The death knell began to sound last week for old-guard proprietary networks when buttoned-down GE Information Services announced plans to emerge as an open Internet platform for e-procurement and trading communities.
In a major restructuring, GE Information Services' brand was retired and the company split in two: GE Systems Services will focus on back-end software and services to migrate GE's current customer base from proprietary networks to open systems, and GE Global Exchange Services will implement e-commerce systems, including Internet-based trading exchanges.
"One of the things that we've seen over the last several months is an increased intensity in our customer base to get Internet commerce solutions implemented at Internet speed," said Harvey Seegers, CEO and president of GE Global Exchange Services.
Yet the question remains whether GE can move nimbly from the proprietary world of electronic data interchange (EDI) to an open business-to-business Internet platform that competes with established players like Ariba Networks and CommerceOne.
"This is the classic example of when you have a legacy system in place you can't just throw away - and GE has a very large installed base of EDI customers," said Shawn Willett, senior analyst at Current Analysis, in Virginia. "It's going to be a challenge moving these guys to an IP-, Internet-based system based on XML and open standards. You've got to spend a lot of time moving your customers to this new system."
Willett also said that Commerce-One and Ariba have a competitive advantage over GE because they have more experience in setting up open- trading communities and e-procurement solutions.
However, another analyst said GE has several factors in its favour as it enters the trading exchange realm: the company's main strength being its understanding and leveraging of its EDI history, according to Carl Lenz, an analyst at the GartnerGroup.
"But can they capture a very large vertical industry?" Lenz asked. "If they can land a big fish, they might have a shot." GE will also have to aggregate buyers and sellers to build liquidity, and appear willing and able to leverage its impressive supply chain, he said.
"It comes down to the fact that everyone is trying to say me too', " Lenz said of the rash of exchanges since the start of the year. Like the other exchange pioneers, "[GE] is looking at another revenue channel", he said.
Scott Witmoyer, a current GE customer who manages EDI services at VWR Scientific Products, a US-based laboratory supplies distributor, said his company has ambitious plans for automating its entire supply chain.
Witmoyer, however, said there are still many issues to resolve. "No one has yet found a way to easily integrate a new e-commerce system with your existing back-end systems. Unless you are in a position to replace everything with a brand-new, vanilla system you are going to have major headaches with all your back-end custom invoice and reporting systems."
GE's Seegers has acknowledged that the transition won't happen overnight. "My view is that this will be a transition anywhere in the neighborhood of two to five years. Some customers will move faster than others, but it certainly will be a transitional period."
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