To understand Orville Bailey and his epiphany, it's probably easiest to recall the "plastics" moment from "The Graduate." In Mr. Bailey's case, the setting was Cambridge, Mass., 1992, not poolside, California, 1968, and Mr. Bailey already knew more about plastics than he cared to admit. But, much like the Dustin Hoffman character in "The Graduate," he was presented a cryptic, two-word vision of the future: "the Internet."

In Mr. Bailey's case, those two words changed his life. He set off on a course that helped to save his employer tens of millions of dollars and that could potentially save it hundreds of millions of dollars a year. Mr. Bailey landed at the forefront of an explosive industry that is rewriting the rules for how businesses interact with their suppliers and that is changing the very nature of pricing. As often happens, though, when blazingly new ideas are introduced, Mr. Bailey and his entrepreneurial spirit wound up on a collision course with Corporate America.

A mechanical-engineering alumnus of Worcester Polytechnic Institute, Mr. Bailey had seven years under his belt at GE Plastics when he decided to drop out of his career and into life as a full-time student at the Harvard Business School. GE thought so highly of his potential that it helped pick up the tab, with no strings attached. For his part, Mr. Bailey still saw in GE the entire universe of his ambitions—until John Sculley showed up on campus for a recruiting visit in 1992.

Mr. Sculley, a proselytizer who wears charisma like an aftershave, had traded in a bright career selling carbonated water at Pepsi to become Apple Computer's chief executive. At Harvard, he preached that others should join him on the cutting edge of the computer revolution. "He talked about how technology would change the way you lived your life," Mr. Bailey recalls. "That got me."

When Mr. Sculley mentioned the Internet as an engine that would change every facet of business, Mr. Bailey began to see the future: electronic commerce. "It was so inspirational that I set out to get a job within the PIE [personal interactive electronics] group at Apple. So I burned some frequent-flier miles and went out there," Mr. Bailey remembers. "And there I was with my blue suit, while everyone had shorts on at Apple."

When, despite the faux pas, he lined up a summer internship, Mr. Bailey arrived with more detachment than most. At age 29, he was divorced and the father of a 12-year-old daughter, so he had some perspective on the Harvard paper chase and his fellow students' hunt for The Big Job.

"You go to business school, and they try to put pressure on you about a class. They tell you, 'You could fail it!'" he says. "So what happens if I do fail? Nothing. The pressure was not real to me."

Instead, Mr. Bailey was casting a wide net for interesting ideas to pursue. While at Apple, he found one: a gaping hole in the relationship between manufacturer and buyer. When he returned to Harvard for his second year, he proposed a field study focusing on the problem. Apple provided a $10,000 grant.

In studying all the steps that customers went through in buying computers at Apple retail locations, Mr. Bailey found that Apple, its customers, and retailers all felt they had inadequate information. The lack of it produced miscues. Sometimes, a retailer wouldn't figure out a customer's needs. Other times, a customer wouldn't realize that a retailer was pushing a model simply because it had plenty in inventory. No huge surprises, perhaps, but the results drove Mr. Bailey to the deep conviction that improved information on competitors could turn even high-priced products and services into commodities. Buyers—whether corporate or individual—could win big.

When he finished at Harvard, Mr. Bailey knew he wanted to help build an electronic marketplace that would give buyers all the information they wanted. The question was where to do it. The more he looked at opportunities at start-ups, the more obvious it seemed that he could construct a powerful electronic marketplace much more quickly at a Fortune 100 firm. He could not escape the realization that his future lay squarely in his past.

So, Mr. Bailey went back to GE, with the understanding that he'd be able to work on his dream. His timing was perfect. While he was doing his Apple research at Harvard, GE was grappling with the same problem: how to use an electronic marketplace to cut costs out of the $30 billion it spent annually on raw materials. By 1994, it had made strides by establishing the GE Marketplace. The system worked by having GE send out Requests for Proposals to suppliers and then, two weeks later, hold a four-hour live auction on-line. Because everyone knew what the low bid was and could react, Mr. Bailey says, "in the last two minutes, the prices would just dive." GE figured its savings—on paper, at least—at a whopping 20% on each contract put up for auction.

The system had some problems, however. "If there was any complexity with regard to the part specifications, the auction blew up," says Gary Hare, who helped to develop the GE Marketplace. "And it did not take into account 'total cost' attributes such as tax, freight, tooling, etc. When we figured out which commodities the auction worked for, it turned out to be a small part of GE's broad buying."

The auctions didn't disrupt just suppliers but also created administrative makework for GE's numerous purchasing operations. They had to make sure first-time suppliers were qualified before any bids could be accepted. Old suppliers had to be taught how to deal with the new types of negotiations. The whole process lacked the sophistication that was needed to make it an effective tool for use across GE.

Just as Mr. Bailey was getting the lay of the land, the auction group almost exploded. Glen Meakem, who had brought the GE auction concept into being in 1994, tried to convince GE management to make the auction group a separate business unit. He argued that the business could handle electronic auctions for buyers of a wide range of suppliers in numerous industries. GE declined. Mr. Meakem quit. In March 1995, he founded his own auction-driven business, FreeMarkets OnLine, and he took several colleagues with him.

Those who stayed behind were stunned. They had lost their leader, plus a lot of other talent.

Still, Mr. Bailey and some of the others saw opportunity amid the turmoil. Without Mr. Meakem, who wanted to focus on his initial auction idea, Messrs. Bailey, Hare, and others realized they could expand the initiative. (Mr. Meakem didn't return calls for comment.) Mr. Hare pushed ahead with development of software that would automate the process for requesting proposals from suppliers. Under Mr. Bailey's direction, the Marketplace team started developing a program that would let GE divisions do all their purchasing through auctions—at the time, GE was using auctions only for commodities, and only, in fact, for 15% of them. Together, Messrs. Bailey and Hare tried to sell GE on the idea that electronic purchasing should be expanded beyond auctions to cover other types of negotiations. The two believed strongly that an electronic purchasing program needed to be a business process, not a series of one-time events.

It was an ambitious plan, and Bailey & Co. knew they would have to convince Gary Reiner, GE's chief information officer. Mr. Reiner provided crucial backing for Mr. Meakem's initial auction program, but Messrs. Bailey and Hare could have been venturing into a touchy area. Over the years, GE Information Services had spent hundreds of millions of dollars building a powerful internal computer network, which had served nicely as the backbone of the initial auction program. Now, Messrs. Bailey and Hare wanted to switch and use a public network, the Internet, to link buyers with potential suppliers. They surmised—correctly, in retrospect—that the Internet would give them access to more potential suppliers at lower cost than even the huge GE network could. But the plan could easily have been killed by internal politics, without powerful backing. Remember, back in 1995, an awful lot of people still didn't see the Internet as a slam dunk.

In the summer of 1995, just a few months after cobbling together a new team in the wake of Mr. Meakem's departure, Mr. Bailey presented his team's vision of the future to Mr. Reiner. Mr. Hare demonstrated the tools and programs that his group had developed to implement a new type of electronic sourcing. Under this new initiative, there would be price savings, but there would be something more: The entire purchasing cycle could be collapsed in some cases from 21 days to two because so much of it would be automated. Mr. Reiner liked what he saw. He agreed to support a prototype for what was being called the Trading Process Network.

Not surprisingly, GE's suppliers became concerned. They not only faced pressure on prices, but they were going to have to learn a new way of doing business. So Mr. Bailey went on the road, visiting more than 100 major suppliers in 13 cities. He came back with an interesting, consistent message that went well beyond fear of competition. Suppliers guessed that GE's auctions could spawn dozens of similar initiatives at other companies. Every time GE fine-tuned the way it conducted its auction business, the changes were sure to be replicated—almost—at other electronic marketplaces. Because no two buyers operated with the same rules, the suppliers would face a wild array of different ways of doing business. So, they greeted the electronic revolution with all the enthusiasm that critics save for an Oliver Stone conspiracy movie.

Mr. Hare picked up the same angst in a less genteel setting when he and a senior GE buyer retreated to a bar near GE's Fanuc plant in Charlottesville, Va. The senior buyer was no stranger to the saloon; indeed, one of the drinks on the menu was named for him. So, it was with the kind of convivial ease that you can't create at a workshop that a gang of some 10 salesmen from suppliers spent an evening talking shop with Mr. Hare. "One guy gets an inch from my face, and he's breathing Scotch on me, and he says, 'You're killing me!'" Mr. Hare recalls. "'You have to find a way to standardize this.'"

It was in the vehemence of the complaints that Messrs. Hare and Bailey realized the potential of this program to reach beyond GE. "The sellers told us that they'd love a shared service, to use one interface to reach multiple buyers," Mr. Bailey says. He, like Mr. Meakem before him, decided that GE's internal purchasing system needed to become a stand-alone business within GE. He didn't want to just provide a service within GE—he wanted to sell the service to other big corporate buyers. Secretly, he dreamed of spinning TPN off as a completely separate, publicly traded company.

Mr. Bailey recalls judgment day: Dec. 18, 1995. As he lobbied for the stand-alone idea, he knew that he needed a show of support and required more financing. Messrs. Bailey and Reiner set up a conference call with purchasing managers at 11 GE divisions. The plan was to ask each division to kick in $80,000 over the next year—not a huge sum, but enough to make Mr. Bailey nervous. Nine of the 11 agreed. The stand-alone idea was a go, at least for a while.

TPN got another boost in early 1996. The group was moved over to GE Information Services, an internal powerhouse, where TPN picked up much broader financial support and got a dedicated sales force of 200 ready to push its product. Less than a year after being stranded by its leader, the auction experiment had become a full-fledged operation.

"There was some celebration," Mr. Bailey says, "but we were not there yet."

TPN grew quickly in 1996. It was involved in $350 million of contract negotiations for GE and produced impressive savings. TPN also moved beyond internal operations such as GE Lighting and GE Capital to include outside accounts such as Hewlett-Packard and the automotive division of Textron. TPN expanded its repertoire, too, going well beyond the purchasing of machine tools and parts and being used to acquire office supplies such as pencils and paper.

As the months rolled by, TPN was starting to deal with so many suppliers of so many things that it was headed toward becoming a sort of universal catalog for business—and there was already such a catalog. Rather than compete with Thomas Publishing's Register of American Manufacturers, the TPN group decided to cooperate. In February 1997, GE and Thomas entered into a 50-50 joint venture called TPN Register. Mr. Bailey was named vice president of marketing and sales. Mr. Hare became vice president of product development.

The thinking was that the purchasing expertise of GE could combine with the Thomas Register's massive classification of thousands of suppliers and their products, producing an operation that would sprawl across most of the business-to-business commerce in the U.S. Mr. Bailey's initial vision would now be supported by all the resources it would ever need. When the venture was unveiled at a GE meeting in Orlando, Fla., Mr. Bailey was in a mood to kick up his heels, for the first time since returning to GE. He and his colleagues—the ones who had gutted it out over the previous two years—took over the hotel bar and partied late into the night.

At this point, the entrepreneurial game really began. Mr. Bailey and his colleagues gave up their GE pensions and other comforts of corporate life in return for a share in any success at TPN Register. It was a risk—in its first year, TPN Register experienced plenty of growing pains. But it also kept signing up big corporate buyers—such as Avon and Cooper Industries—as clients. "We had hit the magic formula," Mr. Bailey says.

Senior managers such as Mr. Bailey wanted to now broaden their sales efforts and line up more companies, beyond GE and Thomas, to sell the TPN Register service. In the spring of 1998, the service landed Oracle as a strategic partner. The huge seller of database and application software would now recommend that customers use TPN Register if they were interested in improving their purchasing processes.

That's when the light bulb went on at the parent companies. Former TPN Register employees say the parents realized the full potential of the venture—and decided they needed more day-to-day control. By the time the Oracle partnership was announced, the press release said GE Information Services would bring the TPN Register portion of the arrangement to market, would control pricing, and so on. The TPN Register board—with representatives from the two parents—expressed a strong preference for having the parent companies be the exclusive distributors of the TPN Register service.

Mr. Bailey disagreed strenuously. He argued that the company could thrive on its own and should be given the chance to see just how successful it could be. Other former TPN Register employees say they felt that the parents were taking away the upside potential, now that the start-up had succeeded.

Despite the disagreement, Mr. Bailey was promoted to president of TPN Register in April 1998. But the bigger title only made him more frustrated at his inability to move the group in the direction he wanted. He pressed his arguments. "Rather than take the lumps gradually, I forced the discussion to get a feel for where we were" on the question of independence, he says. "I decided, 'This is not what I signed up for.'"

So, like Mr. Meakem three years earlier, a frustrated Mr. Bailey quit in early July.

At 35, Mr. Bailey is in a hurry, eager to control his destiny. So, he set up his own business, Electronic Procurement Group, a consulting firm specializing in electronic commerce. "When there were 10 seconds left in the game," he says, thinking back to his days on the basketball court at Worcester Polytech, "I always wanted to take the big shot. It's the same feeling now. I don't know where the next check is coming from, but it's more fun" being an entrepreneur.

Mr. Farrell is a free-lance writer based in New York. He can be reached at ggfarrell@erols.com.