Luring the big fish: Automaking's biggest supplier exchange morphs itself from an auction house into the hub of the industry's sourcing transactions. (Supplier Business).

In early 2000, General Motors Corp., Ford Motor Go. and DaimlerChrysler AG formed a global business-to-business, Internet-based supplier exchange that was supposed to change the world. Covisint, as it was ultimately named, promised to cut costs and time with a goal of integration, collaboration

Since that time, Covisint has grown to include 11 automakers. There are also more than 5,000 suppliers using the exchange, with 2,000 generating revenue. Having reached this critical mass, Covisint is in the process of defining and improving how it can best serve its members. But even as it continues to sell its attributes to investors and new prospects, many of the world's automakers and suppliers have taken a wait-and-see approach.

Some companies have even started their own exchanges.

"There are a lot of options out there," says John Hoffecker, vice president, global automotive practice leader, AT Kearney. "Everybody's taking it a bit differently. Some companies are choosing to do it in and of themselves, others are looking to go into a consortium like Covisint."

"Covisint's perspective is unique in the industry," explains Kevin English, Covisint chief executive and president, "We don't see things only as an OEM does -- nor as only a supplier does. We see what the entire industry sees."

English acknowledges that Covisint is primarily known for its auctions, which have suppliers reverse bidding on components for automakers (see sidebar, p.38). But he says Covisint is now taking a step away from being an auction house. In fact, auctions will be significantly lower than 50 percent of revenue in the future.

"We want to really look at what a sourcing specialist does in a major company today and how can we make that process more effective," adds Mark Duhaime, vice president global product management for Covisint. And to implement that goal, Duhaime says the exchange now offers a broad range of tools organized into "Solution Suites" that extend far beyond its auction activity.

"Covisint is trying a bunch of different things. It's not just a procurement niche," says Kevin Prouty, research director, auto strategies, at AMR Research, a Boston, Mass.-based research company specializing in business application and technology research. "They are being a development hub. They are trying to be a supply chain executive hub. They are trying to be really the hub of the transaction processes in the automotive industry."