Why Ford won't break the bank with B2B

Ford has just given a $90m stamp of approval to auto industry exchange Covisint. $90m is the estimated annual worth of transactions going through Ford's private supplier exchange, and as of next year that private exchange becomes very public as it merges with Covisint.

It is hardly surprising that Ford is moving its private exchange onto a public hub. It helped co-found Covisint along with rivals General Motors, Daimler Chrysler, Nissan and Renault a year and a half ago.

Ford claims it saved $70m last year in procurement costs by using Covisint for all its indirect procurement needs. It says this price tag more than covered its initial investment in Covisint.

So all the signs seem to look good. Industry exchanges such as Covisint hovered in touch-and-go mode for a while. Suppliers were reluctant to get involved, liquidity was low, rival companies were often failing to co-operate and exchanges were nowhere near meeting the multi-billion dollar savings targets predicted for them by vendors and analysts.

When Ford moves its network of 4,200 suppliers and 42,000 end users on to an unproven public platform it is giving a big thumbs up.

Some industry observers say it will only be a matter of time before the whole posse follows, and B2B exchanges become the big collaborative happy communities they were always meant to be.

But there is a flip side. Ford has always been hailed as a pioneering force in the development of B2B. It was instrumental in founding Covisint and has always forged ahead with its own private network - mainly because it can afford to.

Analysts have been quick to point out that the much touted savings of $70m - apparently proof that exchanges like Covisint do work - is merely loose change for a multi-billion dollar, global institution like Ford.

But Volkswagon is also a company not short on a few quid. Yet it remains reluctant to join its counterparts in Covisint, citing lack of proof of value and efficiency. Maybe it has a point.

Ford forecasts savings of $350m next year from Covisint, but these savings will continue to come from indirect procurement - essentially the purchase of office supplies. The move towards the more lucrative collaborative direct procurement is still - by everyone's estimates - years off.