Commerce One

According to Means, corporations are well on their way to setting up the online exchanges and other systems that will allow them to create "virtual supply chains." As an example of what's coming, he points to the way Porsche builds the Boxster, its popular roadster. Porsche does little more than design the car and arrange for construction - outsiders do the rest. "They have this huge network of outside relationships," he says. "Final assembly is in Finland, then it's shipped to you - Porsche touches virtually none of it. You think it's made by Porsche, but it's not. It's a complex vehicle, with many model variations and complex delivery issues. But they're able to make it all work."

Means thinks the creation of that kind of "virtual supply chain" - combined with the use of Internet exchanges - is about to become commonplace.

"For large-scale manufacturers to drive a good earnings multiple, they'll need to assemble supply chains outside their four walls and let exchanges drive costs down."

The move to remake supply chains explains a lot of what's going on in the economy, he says. Means maintains that the Fed's rate cuts aren't working because they don't address current economic conditions.

Here's why not: Cutting rates provides cheaper access to capital. But as Means points out, a shortage of capital has not been an issue. "Lowering rates doesn't do anything - the issue isn't a capital shortage," he says. "Trade exchange leads to decapitalizing of businesses," which is to say that in the brave new world of b-to-b, exchanges need less capital, not more.

Means sees good times coming, though. "We're going to see a pickup faster than people would guess," he says. "The building of trade exchanges in every major sector is well under way - we're 18 months into what will probably be a 24-month process."

In other words, things should turn up by early next year. "We're not in a recession," he says, "but rather the largest economic transformation we have ever seen."

And he thinks the changes will come with a far more robust business climate. "We will see much higher productivity, averaging 4.5 to 5 percent growth."

I want to believe, I really do. In the long run, Means is probably right that Web-based exchanges will play a key role in improving corporate efficiency. But I suspect he is miscalculating on the timing: It is hard to imagine the role of the online exchanges changing both the basic engine of the broad economy and the internal business practices of the country's largest companies as quickly as he expects. A new and improved economy by January? Possibly. But not this January.

www.thestandard.com/article/0,1902,27887,00.html