Supply Chain Matters had the opportunity to recently spend some time participating in a two-way briefing exchange with B2B network support and managed services provider GXS, Inc. This author was first introduced to this provider’s capabilities when the company was spun out of General Electric. We continue to be impressed with the breath, scope and future potential of GXS.
For the few of our readers who may be unfamiliar with GXS, this trading networks support provider has garnered over 40,000 customers including 75 percent of Fortune 500 customers. In 2011, this B2B technology services provider indicator customer adoption among 23 of the Gartner’s declared Top 25 Supply Chains. GXS direct materials and associated services networks today processes over 12 billion transactions representing a highly significant dollar volume of electronic commerce.
This company’s heritage stems from the late sixties with its initial founding as General Electric Information Services (GEIS) providing computer time-sharing to general users, migrating to support value-added network (VAN) services such as EDI for both GE and external clients. By 1998, GEIS’s global electronic trading community exceeded 100,000 trading partners, and in 2002, the renamed GXS was spun out as an independent technology services provider purchased by venture capital firms Francisco Partners and Norwest Venture Partners.
Since becoming independent, GXS has acquired a number of other broad B2B and supply chain technology providers to include Celarix and HAHT Commerce in the early 2000’s, the former IBM Information Exchange Business providing EDI services in 2005, and enterprise community management and SaaS services provider Rollstream in 2011. We were highly impressed with Rollstream’s technology capabilities in 2010, before the acquisition by GXS and remain impressed with continued product technology efforts post-acquisition.
The company launched GXS Trading Grid, a global platform to support e-business integration, in 2004, and a year later launched GXS Managed Services to assist customers in their efforts to move from basic EDI based transaction support to broader B2B integration support. Customer names are impressive and include many top-ranked manufacturing and services focused supply chains to include names such as Cisco, Costco, Dell, FedEx, Foxconn, General Motors, Honda, Macy’s, Samsung, Toyota, UPS, among others.
GXS’s fiscal 2011 total revenues were $480 million, roughly half of which was derived from EDI-based services with the other half derived from a faster growing collection of Managed Services, B2B Integration Software and SaaS based applications. Over half of total revenues are derived outside the U.S. with direct operations spanning 20 countries. While operating income has been consistently positive, net income performance has been negative due to ongoing needs to support customer growth as well as a number of structural write down issues. The company employs over 2400 employees on a global basis and has a rather hefty capital investment plan forecasted in the range of $45-$50 million in the current fiscal year.
In our view, the core asset of this B2B services provider lies in the GXS Trading Grid. Its ubiquitous connections among multiple suppliers, buyers, logistics providers, design and trading partners as well as financial institutions manifests a true B2B platform. The Trading Grid helps customers to quickly cut through the complexities of how to electronically connect with partners, support multiple information exchange protocols, messaging and security standards. In addition to various B2B support services, GXS continues to also build out a portfolio of GXS Active Applications to support business process needs in product catalog, pricing, order fulfillment, logistics, electronic invoicing and consolidated payment processing needs.
Many of the large ERP and enterprise providers have been actively engaged in acquisitions of B2B network providers in order to augment the scope of their value-chain support services for customers. The latest has been SAP’s announced intent to acquire B2B procurement services provider Ariba, and prior to that came IBM’s acquisition of procurement services provider Emptoris and B2B network services provider Sterling Commerce. These are all indicators of the increasing importance for global based manufacturers and retailers having a cohesive and externally broad-based B2B electronic network that can seamlessly integrate transactions, process collaboration, payments, information integration and network-wide business intelligence.
We believe that GXS is the hidden gem in this ever more valuable landscape of B2B and B2C business enablers and we anticipate continued growth and positive news in the months to come.
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