The new site, run by Citigroup with software provided by Commerce One, will be introduced to 1,800 multinational companies that are global clients of Citigroup. It will link buyers and sellers of goods and services and process transactions. Citigroup will also become the main financial services provider on Commerce One's online marketplace for businesses.
New York-based Citigroup wants to tap the growing demand for services that will help companies do more business over the Internet. Companies bought $109 billion of goods online last year, and that number is expected to rise to $1.3 trillion by 2003, according to Forrester Research.
"Customers are very anxious to move to electronic commerce," said Denise McLaughlin, vice president in Citigroup's e-Citi unit.
That enthusiasm has spread to investors as Walnut Creek, Calif.-based Commerce One's shares have risen nine-fold since its initial public offering last July.
The two firms didn't disclose the financial terms of the venture, but Citigroup will make money from processing payments in various currencies, presenting invoices and arranging letters of credit. It will also charge companies subscription fees to have access to its online marketplace, McLaughlin said.
Internet marketplaces are gaining in popularity as they allow companies to manage prices and inventory better, which cuts costs. Companies that have used Commerce One's products show that savings on the cost of goods purchased average 5 percent, according to analysts.
McLaughlin said the savings for Citigroup's customers could be even greater than that and depends on how ready they are to do business online.
The Web site's auction feature--which will allow companies to buy and sell everything from trucks to computer chips to office equipment to chemicals and other commodities--could provide the biggest savings, said McLaughlin.
Citigroup shares fell $1.06 to $52.56 in midday trading. Commerce One rose $7.50 to $191.75.
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