Compuware to acquire Covisint B2B exchange

Compuware Thursday announced its intent to acquire Covisint, the business-to-business exchange and Web portal used primarily by the automotive industry, for an undisclosed sum.

The deal, expected to be concluded in about a month, will end the financial involvement of General Motors, DaimlerChrysler, and Ford, which launched the privately held B2B portal four years ago. Compuware Chairman and CEO Peter Karmanos said his company wanted to acquire Covisint because he’s confident its e-commerce portal products and services can grow from roughly $20 million per year to $100 million over the next few years.

Compuware, which offers product quality assurance, management tools and professional support services, intends to expand use of the Covisint portal, said Karmanos.

Covisint offers access to dozens of applications to auto industry suppliers and manufacturers. The auto-industry messaging and document-delivery services will remain in place for the approximately 135,000 users in 95 countries that access them. But Compuware would like to expand the portal-based services to include other industries, including healthcare and financial.

Covisint Chair and CEO Bob Paul is expected to remain head of Covisint, and Covisint employees are expected to join Compuware.

Paul said Covisint’s board last year decided to begin looking for a buyer. In December, Covisint sold the online auction portion of its business to FreeMarkets, and Covisint terminated its relationship with software provider Commerce One. Both Paul and Karmanos said the auction portion of the portal business did not go over well with the automotive industry’s suppliers, who felt squeezed by price markdowns in fast-paced online bidding.

“Nobody liked the auctions,” said Karmanos. “It’s a crappy way of doing business.”  Karmanos said this was the one mistake he could see in the Covisint business model.

Covisint and its portal have been slow to take off. The Big Three automakers that launched it at the height of the dot-com era, with hopes of a quick, lucrative IPO, often bickered over B2B services. DaimlerChrysler, General Motors and Ford also often left their suppliers confused about whether the B2B portal would replace their separate legacy online supply-chain systems.

Nevertheless, Covisint has steadily gained momentum in adding applications and services, and according to Paul, it became profitable in May last year. While privately held Covisint has generally kept its financials under wraps, the company did disclose that it sees about $25 million in revenue.