A Thursday morning breakfast meeting with GXS’ chairman/CEO Harvey Seegers and marketing director Reid Walker saw both men in a relaxed yet excited mood regarding the company’s future following its split from General Electric. Datamonitor’s Martin Atherton found out more about the B2B vendor’s plans for expansion…
Four weeks after Fransisco Partners’ $800 million purchase of GXS – GE’s former B2B global exchange services arm – the company has had hugely positive feedback from clients and employees alike. Its managers are now talking of controlled diversification, and increased visibility for GXS into the future.
This move, coupled with the potential of emerging web services standards, should catalyze renewed enthusiasm for the ‘marketplace’ elements of the B2B story – with the following caveat: ‘if it’s done properly’.
A great concept… but how to build on it?
Datamonitor has long believed that setting up GXS was a stroke of genius on GE’s part. It was an eBusiness venture, grown out of a huge global company with strong roots in engineering.
This mean that at a time when users trusted new technology slightly less far than they could throw it, the offering of a technology-backed set of market services from an engineering firm trading on traditional virtues such as solidity, precision and reliability, translated nicely into the new electronic business era. It formed a halfway house offering digital business backed by solid and reliable roots.
So what comes now it no longer has GE’s backing? Staffing is one key area – and GXS says it is positioning itself to attract and retain the best in class when it comes to staff. Several innovative compensation schemes in the pipeline will set GXS apart from the norm, while Mr Seegers also points out that a good way of attracting the best brains in the IT sector is through equity-based incentives – and GXS can now do this.
At the top level (although this hasn’t been set up yet), two GXS, two Fransisco Partners and two ‘outsider’ members, will constitute the board. Mr Seegers will give up his role as chairman, but will remain CEO – a development that he is keen on.
Hungry, but not greedy
Externally, we are promised a hungrier and more outgoing GXS. Will its strategy shift as a function of the outside influence of the new board members? No. That’s not GXS’ style. Controlled expansion and diversification will be the vehicle that takes GXS through the next three or so years and into an eventual IPO.
GXS notes that a vast percentage of the world’s payment transactions are still executed in a traditional manner. Here is an area of opportunity, and a chance to fill in some of the gaps in GXS’ B2B story. To fulfill this, GXS is not adverse to the potential of partnership, or even acquisition.
The same comments can be applied to the company’s desire to broaden its EDI business line. GXS has many opportunities to expand and follow ‘marginal’ diversification within its current remit.
Making eMarkets make money
Interestingly, Fransisco Partners has reported much interest from other exchange and eMarketplace operators keen to discover how to ‘work more closely’ with GXS. This has much potential – GXS is one of the few service vendors that did not underestimate the huge amount of investment and work required to create and maintain a global infrastructure to support its trading services.
The combination of its transaction-enabling infrastructure, with region or industry-specific marketplaces could allow the currently unfashionable eMarketplaces to re-address their original vision of the many-to-many trading model – and this time round, it might work.
GXS quietly created the world’s largest online trading community, with many of its would-be competitors having never heard of it. Bucking the trend for dotcom boom-style self-promotion with excessive PowerPoint slides and brightly colored stress-busters, GXS got on with the job instead – and it’s worked.
Mr Seegers’ aim, post buy-out, is to take GXS to the number one spot in global B2B eCommerce. Unlike some in the business, he is not afraid to call a spade a spade: B2B is what GXS does. The company doesn’t need to invent a new name to camouflage its business aspirations or entice cautious investors into the eBusiness space, because its strengths are obvious anyway.
According to Mr Seegers, his company is a half-billion dollar startup. The comment points to things to come, while acknowledging his company’s enviable revenue and cash position. Fransisco Partners knows that.