In yet another sign that its relationship with


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is getting increasingly close,

Commerce One


will end development of its flagship software, opting instead to focus on new applications with SAP.

The company will roll


, the software that helped make it famous in the B2B world, into


, the software it has developed with SAP. It won't spend more time developing BuySite as a stand-alone product.

"BuySite doesn't live on," says Chuck Donchess, Commerce One's chief strategic officer. "There will be only one solution."

"There were clearly some strong feelings and a lot of debate

within Commerce One about BuySite," Donchess adds. "But the joint solution is the product customers want."

BuySite lets companies buy supplies over the Internet. But it's mostly used for indirect goods, the supplies (like paper and PCs) that companies need to run their businesses. Increasingly, however, Commerce One is focusing on building software to buy direct goods -- the raw materials and components used in actual manufacturing processes. It says SAP's software will help it do that.

Since partnering in June, Commerce One and SAP have become increasingly friendly, developing software together and

landing at least four customers together. That closeness has led to

chatter among analysts and investors that the two companies will merge, though both say that's not going to happen.

Donchess says that both Commerce One and SAP realized they would have to make sacrifices individually to make their partnership work. "We're going to have to give up things, and they're going to have to give up things to make this work," he says. "But we've also both got individual strengths that we can leverage for each other as well."

As an example, Donchess says SAP is nixing independent development of its B2B-Procurement software so it can roll that into EnterpriseBuyer. B2B-Procurement "doesn't live on," he says.

Joint software isn't the only thing cooking with the companies. Mayur Shah, president of SAP unit


, says the duo could have four to five more customers by the end of October.

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"This thing is gaining momentum," Shah says. "It's like a freight train going forward."

Analysts say the close working relationship between SAP and Commerce One is surprising, especially because SAP has a reputation for going it alone. It comes at a time when the competing alliance among




i2 Technologies




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been showing signs of weakness.

"The commitment by SAP to make this partnership work is as strong as I've ever seen," says Eric Upin, a

Robertson Stephens

analyst who doesn't officially follow SAP. "It sure seems that with SAP, which has been very hesitant to make acquisitions, that there has been some kind of change, at least with the implementation of the Commerce One partnership." (Upin rates Commerce One a buy, and his firm hasn't done underwriting for the company.)

For Commerce One, the jointly developed software could become a short-term catalyst. Until recently, Commerce One has focused on setting up big industrial exchanges on the Internet, such as


, through which major automakers will buy and sell supplies. But few of those exchanges are up to speed at this point, which means they're doing little for Commerce One's revenue. Selling software, however, does provide immediate revenue, something competitor Ariba has shown. (


wrote a recent

story about Commerce One's prospects.)

"If they start focusing more on the SAP software extensions, then that could help impact their near-term revenue," Upin says. "Because even though they've made many, many big deals, we won't know if the Commerce One model is really going to be a powerful growth model until the middle of next year at the earliest."

John Biestman, Commerce One's director of investor relations, says the company is conscious of revenue issues, especially when talking about direct goods, the company's new focus.

"I'm not saying that we want to get out of the indirect goods area," Biestman said. "You've got to have it. But if you hang your hat on just that, you have some revenue-sustainability issues."

For direct goods, Commerce One is hanging its hat right next to SAP's.