Compuware buys auto industry hub Covisint

Software and services vendor Compuware Corp. announced Thursday plans to acquire Michigan neighbor Covisint LLC, an automotive industry e-services firm. Financial terms of the deal were not disclosed, but Compuware said it expects the acquisition to close within 30 days.

Covisint, based in Southfield, Mich., was created in early 2000 when a consortium of auto manufacturing heavyweights, including Ford Motor Co. and General Motors Corp., teamed to create a business-to-business supplier exchange. But as the tech boom backfired and enthusiasm for online exchanges faded, Covisint struggled to attract customers and redefine its goals. Under the leadership of CEO Bob Paul, appointed in June, the company’s assets went on the block. The company’s auction business sold in late December to FreeMarkets Inc., which soon after agreed to merge with Ariba Inc.

Compuware is acquiring Covisint’s Communicate portal software, its Connect EDI (Electronic Data Interchange) messaging system, and its Problem Solver dispute resolution technology. It will also pick up 100 of Covisint’s 120 employees, including Paul. Those employees will move to Compuware’s Detroit headquarters.

Covisint will operate as a separate business unit, run by Paul, and its products will be added to Compuware’s portfolio as an additional suite of offerings, according to a company spokeswoman.

Customer services won’t be affected by the transition to a new owner, Paul said.

“One of our issues is that we have very high SLAs (service-level agreements). If we shut down, we shut down (customer manufacturing) plants,” Paul said. “There won’t be any decrease for customers. On the increase side, we now have access to a vast amount of resources that we used to have to go to third parties for, in the professional services area.”

Compuware’s backing will also give Covisint the resources to expand its business internationally. So far, it has been focused on the North American market, though discussions are underway with several companies in Europe about the logistics of forming a messaging consortium there similar to the one Covisint has in the U.S., Paul said.

AMR Research Inc. analyst Kevin Mixer, who predicted in a research note last month that Covisint would soon be acquired, said the takeover should benefit both Covisint, which faced an uncertain future, and Compuware, which gains 135,000 end-users and credibility as a business applications vendor. The deal is also advantageous for Covisint’s current customers, he said.

“It allows them to start enforcing SLA requirements, since Covisint will now have the wherewithal to back them,” he said. “The win for the industry is that for most people that were betting on Covisint, it’s going to have a sustainable future.”

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