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Verizon Business announced last week that it is teaming with GXS, a provider of B2B e-commerce applications, to extend its menu of network management services to include B2B and supply chain functionality for its customers. The idea of adding business process functionality to the network infrastructure and management services of large telecommunications companies isn’t new. AT&T acquired GXS competitor Sterling Commerce with the same goal: increase value in the eyes of the customer by adding network-based offerings that enhance and streamline business process performance.

To date, the synergies that those two companies anticipated have yet to be fully realized. This, however, is a long-term play where the value proposition has to be extremely tangible and targeted.

The paths of network administrators and line-of-business (LOB) managers rarely cross. The potential buyer of combined services such as these must be able to transcend functional areas and recognize the benefit of network-based applications resting on a highly secure and dependable network infrastructure. Few exist today within the corporate world. They will have to be cultivated. Verizon initially will bring to market GXS’s invoice automation services, which allows suppliers to send invoices electronically using the format and protocol requested by the customer. This is the first service offering of many that are based on GXS Trading Grid, the technology platform that is the hidden jewel in this partnership.

Verizon brings to the table what it claims are strategic relationships with large, multinational corporations, along with a sales force numbering in the thousands. Thanks in part to its acquisition of MCI in 2006, Verizon Business, the division charged with managing corporate clients, can lay claim to managing network services for over 3,600 customers in 142 countries. The sales coverage and quality of relationships Verizon brings could open up opportunities GXS could never create for itself.

Partnerships such as these typically fall apart very quickly if the rules for account control and support aren’t clearly defined. That doesn’t seem to be the case here. Verizon will be responsible for the prospecting and qualifying of prospects for GXS services. GXS personnel will be initially involved in application development, but even here Verizon plans over time to train its own experts on the GXS Trading Grid. All first-line support issues will be managed by Verizon Business personnel, with GXS staff acting as technical advisors.

Verizon salespeople are already presenting the expanded service menu to customers. Operating with a partner of Verizon’s size and scope will create challenges as well as a need for adjustments in the way GXS goes to market. The market opportunity the partnership opens up, though, is vast enough that it would be surprising if GXS can’t accommodate the business model changes that will be required.

The services both companies bring to market are highly complementary. While neither will discuss the possibility of an acquisition by Verizon of GXS, it’s hard not to contemplate, particularly if this joint initiative begins to pique customer interest.

http://www.amrresearch.com/Content/View.asp?pmillid=20488