Issue: Dec 2002


Covisint is Dying



by Gerry Kobe

Nearly three years ago, Detroits Big Three automakers dumped hundreds of millions of dollars into creating Covisint, the now familiar business-to-business (B2B) supplier exchange that promised to revolutionize the way companies bid for business. At the time, I asked several prominent supplier CEOs how they felt about the new exchange and to a person, they all said Covisint needed a clearer mission statement.

The consistency of that message always stuck in my craw. Here was Covisint, fat with hundreds of millions of dollars in OEM seed money and yet it didn't even know what it was all about. It made the whole venture seem like a device for the Big Three to shear the wool of suppliers which, by the way, was fairly transparent to the supply community. And then the fact that it took such a well-funded enterprise 14 months to find a CEO, certainly didn't help solidify in my mind that this was a company on a legitimate mission

As it turns out, Covisint had no real mission. At least nothing worth throwing that kind of money at.

Today, the B2B exchange is floundering. The investment money is nearly gone, suppliers have been burned by OEMs in manipulated online auctions, brokered sales are a fraction of what was expected and competition has eroded the value of the auction service itself. Covisint has reduced its workforce by 35 percent and is relocating to smaller and cheaper office space. Covisint is slowly dying, its as simple as that.

What boggles my mind however, is that the company is making one last desperate ditch effort to provide a new service that could validate its existence. And while I'm not knocking Covisint 's right to try to survive,I am knocking the fact that its new raison detre is just as utopian as its original unfulfilled premise of revolutionizing the bid process.
The latest effort, which is scheduled to launch in October, 2003, is a service that will translate coded OEM and supplier information that is now sent over the Electronic Data Interchange (EDI) network into a common language. Currently that work is done in house, so in theory, Covisint would provide a service that is cheaper and faster than the one that now exists.

The problem, as I see it, is twofold. First of all, Covisint has as much brand equity these days as K-Mart. After burning its customers, establishing a revolving door for CEOs (current CEO Harold Kutner will retire by June) and failing miserably in its primary mission, why should it be trusted to execute something as important as a messaging standard? You'll never convince me that Covisint is the first best source for improving communication, especially when it can't even communicate its mission.

Second, as was true of its purchasing process. its messaging proposal assumes all automakers really want to use the same system. Thats just not true. Maybe the Big Three want to do that since they jointly funded this thing, but aggressive, competing companies will see this as an opportunity to gain an advantage over anyone locked into the Covisint model. Thats exactly what happened with the auctions and it will happen again.

I promise you that if Covisint pulls this off and the Big Three lock into it, the Japanese, Koreans and Europeans will develop a better and more efficient system and leave the domestics hamstrung.

Covisint has a knack for identifying industry problems, but the big question is does automaking really need a company that earns its living applying Band-Aids? The answer is no. While its true there may be some common problems in the industry, there is no one-size-fits-all answer and Covisint's strategies largely depend on that being true.

Mr. Kutner, I think you did the noble thing and postponed your retirement to perform CPR on Covisint. Now its time to enjoy your hard-earned repose and let Covisint rest in peace.

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