BUSINESSWEEK ONLINE : DECEMBER 11, 2000 ISSUE
BUSINESS WEEK E.BIZ -- COVER STORY

Q&A with Commerce One's Mark Hoffman
The Net software maker's CEO talks about the shakeout, plans for the future, and the background of the major deal with SAP

Commerce One Inc. has arrived. After years of slow growth, this maker of software for B2B e-commerce software has gone through the roof. Commerce One has grown more than 1,000% over the past year and 60% over just the last quarter.

Business Week Silicon Valley correspondent Jim Kerstetter recently spoke with Commerce One CEO Mark Hoffman about the linkup with SAP, how the market is changing, and where his company is going next.

Q: What's happening to Internet business right now?
A:
I think [there's] a shakeout going on. The market is definitely going back and supporting who they think are going to be winners in the marketplace. These are global 200 companies that are betting on this space -- and they are putting tens of millions of dollars in it. It may happen slower than we thought, but these companies need to find economies in their supply chains. The only way they can do that is automate their supply chain.

Q: Do you think a recession will slow you down?
A:
No. Not really. I saw this effect when I was at Sybase [where he was CEO] during a recession. People started buying databases because they had to automate. Our sales picked up in the midst of a recession. People were saying, "Gee, there's huge costs to be saved. I'll spend some money. But I could end saving tens of millions of dollars."

Q: But not everything is like it was at Sybase, is it?
A:
Not at all. At Sybase, we would plan for a major product release maybe once a year, if that. Now, we rewrite our business plan every six months. And our software is architected so we can make major changes every six months. You don't have to do these mega-releases anymore. You can do them in an incremental fashion.

Q: You are one of the few hot Internet-software companies to go with a Microsoft-based architecture rather than Java. Will that change?
A:
We're going to support both. We will have lines of code for both. I came out of the Unix world. But we have always had a good relationship with Microsoft. I felt when we started, and I certainly do now, that [Windows] NT is capable of running high-performance platforms.... But we will have a Unix version by the end of the year. A lot of our customers out there are 100% committed to Unix in the IS environment, and we will support them.

Q: How do you differ from archrival Ariba?
A:
I think the technology is very different when you get into it.... We even approach the marketplace differently.

Q: You're joined at the hip now with SAP. How did this happen?
A:
When I looked at the market in January, I saw Oracle coming into the market. I saw IBM and Ariba and i2. I also thought we needed a very sophisticated direct-goods strategy. So I called [SAP CEO] Hasso Plattner.

Q: Was SAP interested in working with you?
A:
No. I think Hasso thought they could do it on their own. They were working on their mySAP.com and didn't see much need for us. We wanted a direct-goods strategy so much that we almost bought a second-tier ERP [enterprise resource planning] company. But our customers and the analysts said, "No, don't do it. Just partner with someone."

Q: What drove Plattner to have such a dramatic change of heart?
A:
I was persistent. And he was being criticized in the marketplace for not being able to partner with other companies. He lost a lot of valuation in that time frame. He had pressure. He was not winning, mySAP was not taking off, and I was persistent. Hasso, to his credit, went through a mental change, too. A year ago, he was in a Larry Ellison, "We-build-it-all-ourselves," mood. He finally realizes that this market is different than the ERP world. It wasn't just an extension to the ERP marketplace.

Q: Did Plattner have to eat crow?
A:
Yeah, probably. But to their credit, their stock is going back up. Their employee turnover is a lot less. All those things were affecting SAP. And I don't want to overstate things -- we're benefiting from this relationship just as much as they are.



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