GE GXS Enters the Sourcing Arena

Gaithersburg, MD  February 19, 2002  The e-sourcing market got a little more crowded today with the announcement today that B2B über-integrator GE Global eXchange Services (GXS) is offering a new suite of e-commerce services designed to automate the supply chain "source-to-pay" process.

GXS' Source-to-Pay Services suite will include facilities for posting and responding to requests-for-quotes (RFQs) and online auctions, as well as catalog purchases, invoice tracking and payment settlements.

GXS will host and operate the new services, which are intended to help companies lower procurement costs, compress procurement cycle times and lower working capital requirements. The service primarily targets direct materials.

The provider is bundling the services with a supplier enablement tools and services to interconnect buyers and suppliers so they can exchange documents such as purchase orders and invoices securely over the Internet or private networks, as well as integrate their information exchange with their back-office systems. GE Global eXchange Services, a part of the General Electric, already operates one of the largest B2B e-commerce networks in the world, with more than 100,000 trading partners conducting about 1 billion transactions worth $1 trillion annually through the network.

GXS also provides a Six Sigma assessment of a company's "areas of pain" in its procurement business processes, offers recommendations for improving those processes in connection with a GXS implementation and defines return-on-investment (ROI) projections that can be matched against actual results over time through a "digital cockpit" that visually presents various supply chain data.

General Electric has been using the GXS services internally since July 1999, according to Sandrine Bakos, general manager for the GXS solutions portfolio. To date, GE has connected with about 36,000 of its suppliers through the services and has conducted about 27,000 e-auctions worth close to $10 billion, generating cost savings from 5 percent to 10 percent, Bakos said.

Target customers for the new services include large, "Fortune 1000" companies in such industries as discrete manufacturing, the energy sector and to some extent in the retail industry, according to Bakos.

The sourcing offering brings GXS into competition with a variety of players already battling for share in the e-sourcing market, including providers of enterprise resource planning (ERP) systems, as well as a long list of sourcing outsourcers and e-sourcing software specialists.

Jennifer Chew, an analyst with technology consultancy Forrester Research, said the GXS offering could be a good alternative for companies that are unwilling to bring e-sourcing technology in-house. "If [a company] wants to wait a couple years for their ERP [enterprise resource planning] supplier to roll out a fully integrated sourcing, procurement, supply chain and payables solution, all within their own four walls, this is certainly a reasonable alternative for a few years," Chew said. "Because you don't have the upfront technology investment that you would [since] it's a hosted solution, it might be less painful as a temporary solution for one to three years."

For her part, Bakos suggested that, as a hosted solution independent of a company's internal systems, the GXS offering could be a good option for companies with multiple ERP systems that otherwise would need to select a sourcing module from one of its current ERP vendors. She also said the GXS offering would be appropriate for "a company that really wants to put in place a multi-phase e-commerce strategy, starting with auctions and integrating those into their own processes and having their own private supplier community, then moving from that to automating the settlements process and then the procurement process."

The cost of the service will vary, depending on the amount of integration that a company wants to do into its backend systems, but Bakos ventured that startup costs for the service would range from the low six figures, plus a three-tiered subscription fee based on the number of suppliers to be integrated with the company. GXS is offering a pilot program that allows a company to try the service with little customization or integration as part of a proof-of-concept or proof-of-ROI project.