Leadership: Dennis Jones Talks Strategy at Commerce One

It’s 10:20 a.m. at Commerce One’s headquarters in Pleasanton, Calif., and Dennis H. Jones is listening to a sales spiel from a CEO who wants to be dealt in to Commerce One’s game. Sipping a bottle of diet iced tea, dressed in a blue-and-white checkered shirt and khaki pants, Jones seems the perfect Southern gentleman. His words and manner are unfailingly polite, but his crossed arms and legs tell a different story. The CEO draws messy flowcharts on an easel in an effort to show how his company’s software would mesh with Commerce One’s products. Ten minutes into the presentation, Jones says casually, “Let’s cut to the core. In your mind, what is the ideal outcome?”

“I think there are lots of possible outcomes,” the CEO hedges.

Jones’s congenial expression stays the same, but unbeknownst to the CEO, the interview is all but over. Jones asks a few more pointed questions, and at 11 a.m. he shakes the man’s hand and shows him to the door. The CEO probably won’t be back again.

As the ex-uber CIO of Federal Express, Jones has always played his cards close to the vest. But he needs a poker face more than ever these days. On July 1, the 48-year-old Jones became president of Commerce One, the beleaguered B2B software vendor that in April named him vice chairman and COO. (The previous president, Robert Kimmitt, left for an executive vice president post at AOL Time Warner.) Despite four busy years of building up its offerings through partnerships and acquisitions, Commerce One is still struggling to sell the world on its vision of e-marketplaces?a futuristic web of catalogs, auctions, inventory and development tools where thousands of companies around the world would come together to conduct business. The company has yet to turn a profit. Worse, its stock price has tumbled, sales have slowed down, employees are skittish after layoffs, and about half of the company’s revenues come from its partnership with the German software vendor SAP. To achieve its goals, Commerce One needs to grow, grow, grow. But skeptics say the company simply cannot survive on its own.

In 25 years at the fast-growing but profitable Federal Express, Jones helped transform the company from a $30 million Memphis, Tenn., startup to a $20 billion giant that changed the meaning of the word overnight. But even someone with his business acumen and IT smarts may not be able to make Commerce One’s lofty vision a reality. Jones, observers say, has taken on the gamble of his career.

Busting Bureaucracy

After barely a month at Commerce One, Jones is having second thoughts about agreeing to let a writer shadow him for a day. “If you mention that I hurt my knee playing tennis, say that I won,” he says. Jones, who is 6 feet tall, wears bifocals and has straight gray hair that he neatly combs back over the top of his head. His fair skin sometimes turns red when he laughs. He spends the day limping between his desk and conference table, meeting with scheduled visitors and talking on the telephone. He checks e-mail constantly?on the road, he uses a wireless BlackBerry instead of a laptop and cell phone?and he’s such an e-mail enthusiast that he got his dog an address. The only decorating he’s done in his office was hooking up a television set tuned to MSNBC.

Outside, the foothills of Mount Diablo are turning brown from the dry heat of May, and Jones is starting to realize what it means to live in the San Francisco Bay area: The rolling blackouts have begun. He asks a public relations person how to find out if his power will be shut off. His standard joke is that he’ll buy a house once he figures out where the best power grids are. “I may end up living next door to a fire station,” he quips.

For now, however, he splits his time between a temporary residence in Pleasanton, 40 miles southeast of the city, and his pillared brick mansion in Memphis. When his daughter goes away to North Carolina State in the fall, both Jones and his wife will spend more time in California. Jones says they’ll keep their Memphis address to make the transition easier for their daughter and also because his parents and in-laws live in Memphis. But the fact is that the Mississippi River town of 650,000 is the only home either of them have known.

Jones was born there in 1952, the second of two sons. His father was a banker who brought home investment reports that inspired the 12-year-old Jones to buy stocks with his lawn-mowing money. By age 14, he was reading The Wall Street Journal every day. During his freshman year at the University of Memphis, where he earned a bachelor’s degree in accountancy, he met his future wife, Debbie, then a sophomore in high school. They married four years later, in 1974, the same year Jones received a master’s degree in accounting and finance from Memphis State University. The next year he started at FedEx, then a 2-year-old company with only 2,000 employees.

Jones, a CPA, held various finance jobs with FedEx before coming to IT in a roundabout way. In 1983, the company started a proprietary network for plain-paper fax machines, and Jones was lead finance person for the project. When it was shut down in 1986, he became vice president of customer automation and invoicing in the sales department, where he got increasingly involved with technology?so much so that five years later, when the CIO left, CEO Fred Smith offered Jones the job.

As CIO, he earned a reputation as a visionary?a bureaucracy-buster who could make things happen even if it didn’t make everyone happy. “He’s not a guy who lets water flow naturally; he wants to change the course of the stream,” says Richard Poff, managing director for supply chain developments at FedEx. Jones recognized early on how the Internet would revolutionize the way businesses interact with customers. In 1994, he led a push to introduce package tracking on FedEx’s website, arguably making FedEx the first major corporation to do business over the Web. The company was featured in this magazine’s CIO-100 Best Practices issue. (See “Special Delivery,” Aug. 1, 1995.) In 1996, Jones spearheaded a technology initiative that made FedEx the first company to process shipping transactions over the Internet. By 2000, the IT organization was his empire, with 5,000 employees worldwide and a budget approaching $2 billion. CEO Smith liked to say that Jones was not CIO but the CEO of IT. Jones’s total compensation in 2000 topped $2.5 million, which according to Computerworld made him the third most highly paid CIO in the country.

But he was restless. Two years ago, he and his wife were driving home from a Memphis State football game in Nashville when he mentioned possibly changing jobs. “I almost drove off the road,” Debbie Jones recalls. When Jones became eligible for a pension, after 25 years with the company, he announced his retirement. During his twilight there, in August 2000, FedEx named the centerpiece building of its new 1-million-square-foot IT campus after him.

Jones is careful to say that he was still having fun at FedEx, but the company simply wasn’t moving fast enough for him. “The high growth rates that I had seen in previous years that really drive a lot of change and create a different level of intensity?that creates a whole different pace, and that’s really what I had enjoyed most,” he says. He also felt like he’d spent long enough in the CIO role, which he compares to fitting an SUV into a parking space for a compact car: “You don’t have a lot of flexibility, and you get in some very tight spots,” he says.

A friend indicates that Jones’s entrepreneurial bent was getting stifled. “Different initiatives came up at FedEx, and he decided it was an opportune time to jump out and do the next thing on his list,” says Jeffrey Webber, a consultant who has served on several boards of directors with Jones in the past decade. “There were certain things he wanted to do that would have been easier to do in a small company,” says Webber, a partner at the Palo Alto, Calif.-based R.B. Webber and Co., and also a member of Commerce One’s board of directors.

When Jones retired from Federal Express, “I think people were surprised,” says his successor, Rob Carter, then CTO. “But based on his level of energy and age, there was confidence that he would go do more interesting stuff. You have to understand our culture. We don’t think of [retirement] quite the same way as the world thinks of it?you know, OK, I’m hanging up my cleats.”

Hardly. In September 2000, on the Monday after his last Friday at FedEx, Jones started as CEO of Accel-KKR, a privately held Menlo Park, Calif.-based venture capital firm focused on the integration of online and offline assets. He took the job despite a $48,528 monthly consulting agreement with FedEx through the end of 2002, plus FedEx stock options that he could borrow money against and more stock options from three Internet companies where he is on the board of directors. (He says the FedEx consulting agreement was set up partially because he won’t start receiving his annual pension of $588,000 until he turns 55.)

In a press release, Accel-KKR Director James Breyer raved about Jones’s appointment. But three months later Jones abruptly left, this time with no fanfare. After multiple requests for an interview, Breyer responded with a curt e-mail: “He left on very good terms.”

Jones insists he just needed time off, but friends speculate that he left because of the market downswing in late 2000. When Jones took the job at Accel-KKR, “I think he was probably caught up in some of the dotcom euphoria,” says Ralph Szygenda, CIO of General Motors, who has known Jones for several years and is a Commerce One customer.

Jones and his cocker spaniel, Freckles, spent the next three months poolside or watching TV. They both gained weight, which Jones is still trying to lose. “After about six weeks, I hit the wall. It was like, ’OK, I’ve seen all the Jerry Springer shows I want to see,’” Jones says.

Meanwhile, word that Jones had left Accel-KKR had reached Commerce One, where Chairman and CEO Mark Hoffman had conducted two failed searches for a COO to manage engineering, marketing, financial, legal and administrative operations. Hoffman, 54, had known Jones since the early 1990s, when Hoffman was CEO of Sybase, a relational database company that sold its wares to FedEx. “Dennis is not just a nice guy,” Hoffman says. “He’s a very focused, tough guy, and he can be very demanding but not in an abrasive, disruptive way.”

During his son’s soccer game in Arizona, Hoffman called Jones to gauge his interest. “I said, ’You need a big platform just like you had at FedEx, where you can grow this thing into a big, industry-changing event. I believe at Commerce One you have that opportunity.’ I think he liked that, and I think that’s why he fits in here so well.” Jones heard the soccer crowd cheer in the background. A few weeks later, the deal was done.

A Vision Thing

Commerce One has nothing if not a vision. Reborn out of DistriVision in 1997, the company went public in 1999 and since then has been aggressively hawking a future where employees around the world, at companies of all sizes, would conduct business at ultraefficient e-marketplaces powered by its software. In its private marketplaces, one company connects with its own suppliers and customers; in its public marketplaces, many buyers and sellers in one industry come together to bargain for goods and services. Commerce One envisions a “global trading web,” at which thousands of these marketplaces would link together to become “the world’s largest B2B mall,” as AMR Research analyst Bruce Richardson describes it. “The challenge is separating the vision from what’s currently available,” says Richardson, senior vice president of research strategy at the Boston-based consultancy.

To survive, Commerce One has to get enough companies to sign on so that the software is worth everyone’s while. Commerce One’s star account?Covisint, a public marketplace for the automotive industry founded by DaimlerChrysler, Ford and GM?has been famously slow in taking off, causing some to speculate that the model simply won’t work because of competing interests. The technology isn’t perfect, either. GM CIO Szygenda says that before Jones came on board, Covisint’s auctioning software wasn’t working properly. Jones got the problem fixed. “He will be a valuable asset for [Commerce One] because he understands what it takes to run a big operation,” Szygenda says.

Jones comments, “It’s very easy for me to understand [a CIO’s] perspective and cut through the issues in a very quick fashion.”

Even so, Commerce One’s pattern of rapid growth has complicated matters. It grew from a full-time staff of 25 in 1996, to 157 in 1998, to 3,766 at the end of 2000, before quietly laying off 10 percent of its workforce in the first quarter of 2001. In the past two years, Commerce One acquired four companies and formed partnerships with dozens more. While arch-rival B2B vendor Ariba has narrowed its focus, Commerce One shows no such inclinations. The more pieces of technology it picks up, though, the more the company struggles to describe its offerings in a simple way.

“[B2B commerce is] going down the hype cycle pretty rapidly,” says Barbara Reilly, vice president of e-business management strategies at Gartner, a research company headquartered in Stamford, Conn. “There’s disillusionment about how quickly companies can get people trained and get [B2B offerings] rolled out.”

Wall Street agrees. As with many of its Nasdaq brethren, stock for Commerce One?which reported a first-quarter loss of $25.5 million on revenues of $170.3 million?is trading at a fraction of its 52-week high.

Reilly says that the future of B2B companies hangs on whether they have enough cash in the bank to get them through the economic slowdown. “It’s a tough, tough market,” she says. “[B2B customers] are quickly losing their desire to reinvest. It’s really sad to see that happen because I think that [B2B vendors] have the right vision. They need time, but I’m not convinced they’re going to get that time.”

Jones seems confident that Commerce One will survive. During lunch, when asked how he envisions the future of e-commerce, he sets aside the grilled chicken and fresh fruit that his assistant brings him every day from the cafeteria. He heads to the easel, where he sketches three phases of Internet business: the initial build-out from 1994 to 1996, when companies used the Internet as a billboard; the B2C period from 1995 to 1998, when companies used it to provide self-service; and the B2B period starting in 1998, as businesses reengineer how they work with suppliers and customers. Defending his opinion that this build-out period will take 10 to 20 years, Jones drops his unflappable facade for a moment. “It’s always been my belief that the benefits businesses could have from B2B commerce would take longer to receive but would be greater in the end,” he says emphatically.

There was no question that it was a strategic move for Commerce One to hire a CIO who is used to fast growth and well regarded by his peers. More mystifying is why Jones, who had about 10 job offers last spring, decided to put his reputation on the line for a company like Commerce One. He didn’t sign on for the paycheck: Jones declined to disclose his compensation, but in 2000, according to Securities and Exchange Commission reports, even the CEO of Commerce One took home a comparably small $412,586 in salary and bonuses. If Commerce One fails, not only will Jones’s stock options be worthless, but he could hurt his chance of someday running his own show. If Jones is troubled about his future, though, he’s not letting on. “I’m not worried about me,” he insists a few days after his promotion to president was announced. “I’m worried about serving the customers we have and the customers we don’t have.”

The reason for his move must be something less tangible: a high-stakes challenge that Jones simply couldn’t refuse. It’s also the fulfillment of a prediction made by his mentor, former FedEx President Peter Willmott, when Jones was just 23 years old. “He told me after I’d been there two or three months that I was going to be the president of a company someday. It was hard to absorb at the time. I hadn’t begun to think that far ahead,” Jones says.

Twenty-five years later, Jones is exactly where he wants to be. And his mind is entirely in the here and now. At a recent trade show, his first public appearance as an ambassador for Commerce One, Jones worked the room like a B2B old-timer. It was 81 degrees, and a muggy night was descending on the French Quarter in New Orleans. Out in the music-filled streets, tourists carried plastic cups of beer, but in the muted courtyard of the Ritz-Carlton, resolutely upbeat Commerce One employees ate hors d’oeuvres on little white napkins. Financial analysts in dark suits crowded around Commerce One’s CFO. Finally, dressed in a blazer and slacks, Jones emerged and started making his way around the courtyard, pausing long enough to shake hands, exchange small talk and win converts. Dennis Jones was back in the game.