In 1999 the big automakers founded Detroit-based Covisint with much fanfare. But there was open dread from their suppliers, who worried about how a forced march to online auctions would squeeze their thin margins even more.
Back during the dot-com boom, wild fortunes were made overnight as inventors of a new type of Web site got a cut of the action for bringing together buyers and sellers. Auto industry giants GM and DaimlerChrysler were awed, and jealous — didn’t they buy billions of dollars worth of supplier parts every year? Why couldn’t they run a business-to-business auction site for the car industry?
And so in 1999 the big automakers founded Detroit-based Covisint with much fanfare. But there was open dread from their suppliers, who worried about how a forced march to online auctions would squeeze their thin margins even more.
Dispensing contracts to e-commerce high-fliers of the time, such as the now-defunct Commerce One, Covisint struggled to set up an online auction, with bickering among software suppliers and automakers pulling down the effort.
By the time the bubble burst, Covisint was destined to ditch Commerce One and sell off what little there was of the auction assets to competitor FreeMarkets (which was sold to Aruba for just under $500 million in 2004). Covisint started looking at alternatives, such as establishing an auto-industry messaging and document-delivery service, to find a justification to exist.
The automakers offloaded Covisint in 2004 to Compuware, which retained Bob Paul as president and chief operating officer. In announcing the acquisition, Compuware chair and CEO Peter Karmanos proclaimed he was confident the e-commerce portal company could grow from $20 million per year to $100 million over the next few years.
That expectation proved exaggerated, but Covisint today can be counted as not only a dot-com survivor but also a valuable player in the auto industry’s e-commerce world — and it is branching out into other areas, including healthcare.
“We grew 65% last year to hit $33 million,” says Covisint’s President and CEO Bob Paul. “We’re on track for 2007 to be in excess of $50 million gross revenues, with profit of $6 million to $7 million.”
Paul says the tide started turning about four years ago when Covisint began focusing on building a collaborative supply-chain environment around Internet-based electronic data interchange, translating between manufacturers’ different formats and protocols when necessary.
Today, Covisint operates a Web portal and federated identity network for auto manufacturers to collaborate on scheduling, shipping, orders and other manufacturing tasks. In addition, Covisint has started wooing the healthcare industry to get insurers and hospitals interested in hosting electronic medical records.
“Blue Cross/Blue Shield of North Carolina is using our portal,” says Paul.
Covisint got a foothold in Shanghai, China two years ago to connect automakers there via a nine-language Web portal.Johnson Controls and Lear Corp., long-time customers of Covisint, say the firm has found its footing.
The auto industry’s
“It was the auto industry’s answer to the euphoria of the tech world in those [bubble] days,” says John Crary, vice president of IT at Lear. “But the auctions and supply chains — some were too grandiose.”
The auto industry never gave up on the basic idea that it needed a “single clearinghouse in terms of orders, shipments, payments,” says Crary.
Covisint came through with a service Lear now uses for EDI exchange all over the world, whether connecting directly through back-end enterprise resource planning systems or manually, to share business data with partners.
“The IP-based translation and forwarding are all done by Covisint,” said Crary. “They now have staying power.”
Sue Kampe, global vice president and general manager of information technology at Johnson Controls, says her company has saved 10% in its EDI costs by moving to Covisint. “Before, we had to build a highway to everyone else,” Kampe said. “But now we’ve pretty much outsourced our whole EDI to them.” She says Compuware buying Covisint brought to fruition what the auto industry players themselves did not, though they did have vision. “There was a lot of hype but also a lot of vision,” says Kampe.
Today, Covisint counts 45,000 separate corporate customers, with GM the biggest, and is pressing on into the healthcare arena through the acquisition of ProviderLink.
Some healthcare organizations say the segue to Covisint has been seamless.
“I log into my PC and send patient-specific information to any of the healthcare providers or insurance companies via this tool,” says Pat Mabe, director of care coordination at Winston Salem, N.C.-based Wake Forest University Baptist Medical Center. “It’s becoming more penetrated so a lot more billing and claims are being done electronically. For instance, there’s Blue Cross. And the doctors can log in and use the electronic-signing technology for a digital signature.”
United Physicians, the Bingham Farms, Mich.-based managed-care contracting organizations owned by 2,000 physicians, a year ago aligned with Covisint to provide electronic services, such as patient records and e-prescriptions, for its doctors.
“We’re finding doctors will use these tools if they’re interconnected with their office,” says John Vismara, vice president at United Physicians. “And they can get lab results electronically, such as those from Quest Diagnostics. Two hundred thirty doctors use the portal today, and we have 330 who just signed up.” The cost runs about $1,000 per doctor per year.
Where is Covisint headed in the future, now that the company is sharing its financials and discussing its operations more openly? The U.S. government and national intelligence, about which Covisint can’t talk a lot right now.
“The federal government uses a security platform for interagency exchange of information,” says Covisint President Bob Paul. “We have a project with the U.S. Department of Justice, FBI and CIA coming.”
