In 2000, Commerce One was to take the e-commerce market handily. Competitor Ariba was the only perceived rival, as IBM, Microsoft, and Oracle weren’t yet major players. The world had survived Y2K and the dot coms were taking over, the perfect playground for Commerce One to grow and prosper. So, what happened? What can we learn from the light speed rise and equally fast fall of this business-to-business software company?
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Situation
Mark Hoffman was fired as CEO of Sybase in 1996. Unlike many of his counterparts in the software industry, he was readily embraced by both old school business people and the new and upcoming dot coms. Hoffman signed on to lead DistriVision into their rightful place as the industry leader in e-commerce software solutions, due to their innovative software. He changed the name of the company to Commerce One, and embarked on cranking out software solutions packages with neckbreaking speed.
Approach
Commerce One produced their software packages so rapidly that they didn’t even bother with a beta phase. They quickly garnered media attention by signing on as the software provider of choice for General Motors. Using the media buzz generated by the hype over the rivalry between Commerce One and Ariba, they employed aggressive marketing strategies and hosted outlandish parties for their employees and customers.
After signing General Motors, Commerce One no longer had to beat the streets for clients — clients competed to be the next customer of this upcoming sensation. Eventually, Commerce One teamed up in an unprecedented companionship with SAP. The not-exactly-a-merger companionship between SAP and Commerce One gave the company credibility to forge ahead with rapid fire product offerings.
Stocks in Commerce One gained value faster than any other stock in the history of NASDAQ trading. By 2001, some of the lowest ranking employees in the company owned stock options worth hundreds of thousands of dollars. The company was worth $29.5 billion and still gaining. But once they reached the top, some inherent problems in their business strategy took their toll.
Impact
Since Commerce One had a policy of rushing out new products without beta testing, they ended up with a product line that was neither compatible with their other software offerings nor compatible with offerings by Oracle and others who were entering the industry. This caused customers to become disillusioned, damaging their reputation irreparably. As problems within Commerce One came to the surface, the terrorist attacks on September 11, 2001 shook the entire technology industry.
At this point, SAP decided to pull out of their partnership agreement, leaving Commerce One broken and bleeding. They never became industry leaders in the important business to business software sector, and were essentially sold for parts. Their patents were auctioned off in 2004, and what was left of the company was bought by Novell for the only thing it was really worth: the technology they had developed.
Aside from the age-old story of a company that grows too quickly and can’t properly develop, there are other lessons to be learned from the rise and fall of Commerce One. First, it’s critical to fully develop a family of compatible products to remain at the top of your industry. Second, testing phases can’t be skipped to get a product to market, because problems left uncovered by your company lead to unhappy customers, who may not come back for more.
Finally, Commerce One’s merger with SAP was dangerous. When SAP pulled out, it gutted Commerce One’s operations, leaving it unable to survive alone. Hopefully, these lessons won’t have to be repeated by other companies. [/show_to]
