GXS IPO face a Sisyphus-Like Uphill Trial

11/13/2013

Editor’s note: As everyone knows by now, GXS will not IPO, but will be sold off at a discount off book value, to the OpenText Corporation of Waterloo, ON, Canada. This is not the optimal outcome sought by the PE Fund’s investors, as the reported distribution is quite near the original investment of the Three PE Funds. A Token $100M USD will be sprinkled among the fund’s accredited investors, who have had their money tied up for over ten years by an underperforming GXS – a GXS that should have been able to run the table while building a brand and positive sentiment. But alas…..they are now the property of OpenText, a company that runs a tight ship, and one that is not at all shy of sweeping out an entire C-Suite….people, pencil holders, and all.

The old article follows:

Many Obstacles are being placed in front of a GXS IPO, the e-commerce giant’s PE masters are finding.

The underwriters who would normally be approached to take the issue to the exchanges, are reluctant to underwrite the offering, ‘due to underlying weaknesses in the company’s revenues, considering the length of time the venture has been operational’. My sources are cited here, mostly analysts at the investment banks.

Could the GXS shenanigans with VAN interconnects, more properly termed, ‘reciprocal message traffic exchange agreements’, particularly in regards to Loren Data Corp, the subsequent antitrust case, and the plethora of half-truths spouted by the GXS mouthpieces also be a factor in the underwriters reluctance to take the issue to the public exchanges?

In my personal opinion, yes; several inaccurate statements have been made by GXS product manager Steve Kiefer, regarding legal cost recovery of GXS from Loren Data Corp – perhaps GXS council should explain to Mr. Kiefer, that under the American system of Justice, costs are awarded only in the case of a verdict, or Judicial finding, and subsequent Judicial execution. Being unsuccessful in the process of bringing motions does not obligate a plaintiff for the defendant’s costs.

There is more disinformation: such as the daisy-chaining ersatz term-of-art, which any network engineer recognizes as claptrap. There is the dropped hint that GXS is owed back billing, again, claptrap, and actually, the case is the reverse. GXS owes Loren Data Corp. (for services rendered to GXS in 2008-09) connecting the GXS VANs to the Defense Logistics Agency, GXS stopped paying and never owned up to their debt.

But it is particularly the act of causing industry-wide disruption, in announcing their intention not to conduct and carry traffic to and from ECGrid, the ultra-proven, ultra-uptime, ultra reliable VAN used by Loren Data Corp’s premier client, SPS Commerce (the true target of all GXS adverse actions), that has caused the investment banks to balk at a GXS IPO.

In what is outwardly a complex issue, ie.e,  traffic routing between competing networks, actually, upon superficial inquiry we see clearly – –  “The cacophony of disinformation fomented by GXS may be reduced thusly:

Loren Data Corp carries the traffic of SPS Commerce. All else is mere commentary. The largest EDI service provider (SPS) with its immense traffic handling requirements, chose ECGrid. Having reviewed the facts, I can state with surety that winning the business of SPS Commerce required manifold merits on the part of Loren Data Corp: Technical  fitness, and a network architecture designed from the ‘git go’ to handle massive messaging volumes, while handling the baked in support requirements, all in, while operating as a viable entity.. Score Card: Loren Data ECGrid = Win. Serving SPS places ECGrid in the most exalted arena – in a different ball game from the stumbling GXS- TGMS if you will.

The SPS aggregation of spokes juxtaposed to GXS’ large industry “net buyer hubs’ took those particular messaging profits off the table, and they (GXS) wanted it back. So, using the OPM of Francisco Partners, they bought up 2/3 of the market, with the large net buyer clients, and built from that patchwork a vagrant, patched together, a DAAS, a “Downtime as a Service, named TGMS”. Trading Grid Messaging System – a VAN with support personnel numbering in the thousands – hardly keeping it together, according to this analyst’s end-user surveys, just completed.

In  threatening to disrupt the sector’s messaging continuity, in creating uncertainty among thousands of trading partnerships – behaviors all displaying GXS’ poor apprehension of what the EDI Communications Market is all about – reliability, predictability, Tractability, and above all – placing the needs of trading partners first.  All of this contributes to a growing list of GXS bad faith dealings in the industry, not limited to Loren Data.

Finally, you can’t claim leadership of a technical communications sector simply by raising capital and acquiring the attribute of “largeness”; Along with size and capitalization, the organization must show undisputable architectural vision and unassailable technological leadership –  and GXS monkeying with long-established practices of reciprocal, non-settlement message routing and exchange, does not evince leadership.

And, it seems to me that the underwriters I have spoken to do not like it, either. In  broadcasting to the market, “we are big, so we are safe”, as well as casting aspersions on another more innovative and far more reliable EDI network (ECGrid), GXS words can actually be taken in their inverse meaning:

As to the made up term of art, “Daisy-Chaining” being bad? The inverse is true, , “As All real and reliable networks Hop-Well, allow n-path routing at every protocol level above the link control layer (HDLC).

Is GXS stating that BGP, the core protocol that allows a datagram and its constituent packets to traverse multiple ‘hops’ and fail bad links gracefully, along with TCP / IP)-  is GXS saying that an appropriate implementation of n-path routing and replicable pathways (at layer seven) would not be a splendid , even a wonderful aspiration of what EDI communications sector should aspire to? I say YES! Hop, Daisy Chain, and set the bar oh so high for better messaging protocols and supporting services (directory services, status API’s, Exchange Point controls); let’s start a new era! 

The Daisy-Chaining Inverse Corollary: “Any network or proponent thereof supporting or proposing to support 1:1 terminus routes (a non-hierarchical routing) is not a well-designed network.

The facts: GXS TGMS VAN downtime far outstrips any other VAN in the EDI industry – and my soon to be released research portfolio on the sector and on GXS in particular….will authoritatively bear this out.

Any questions can be directed to this author via his contact channels at http://about.me/awilensky

All opinions and the composition of this entire article are under the responsibility and imprint of the Author, Alan Wilensky, Analyst, bizQuirk Sector Advocates.

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