chapter 4 types of e-commerce providers and vendors

Chapter 4: Types of E-Commerce Providers and Vendors
“When nations grow old, the arts grow cold and commerce settles on every tree.”
—William Blake (1757–1827)
Overview
The Internet has proven to be a disappointment for many retailers and manufacturers, as sales channels are
hyped to be both efficient and virtual. First generation e-commerce adopters now find themselves mired in
technology bearing little in common with their core businesses, because they invested in an infrastructure often
costing hundreds of millions of dollars. Today, industry analysts estimate that one-time e-commerce setup costs,
including technology and labor, range from $22 million to $42 million, depending on transaction volume (5,000 to
25,000 transactions/day) for companies building from scratch. Very few companies make money, and even fewer
return an attractive ROI at those levels.
For many companies demanding online profitability and reliability, the traditional buy/build approach is no longer
the best option. Without ever buying a piece of software or hardware, new business architectures enabled by e-
commerce Internet service providers (ECISPs) allow companies to establish fully customized online sales
channels. Under guarantees of world-class service delivery, the ownership, integration, and ongoing
management of this infrastructure can be outsourced. By freeing retailers and manufacturers to focus on their
brand, merchandise, and customers—not the technology, ECISPs radically improve the attractiveness of e-
commerce.
This chapter examines types of ECISPs and vendors. It addresses three topics: how the next generation ECISP
architecture delivers complete, one-stop online sales channels, which major advantages companies gain by
outsourcing their e-commerce infrastructure, and why many early adopters have struggled with the first
generation buy/build approach. You will also learn how an ECISP architecture enables manufacturers and
retailers to achieve profitability at $50 million to $290 million in online sales, avoid managing numerous
integration and third-party service relationships, ensure reliability and scalability in your Web site and order
processing, focus your organization on real profit drivers—not technology, and upgrade functionality continuously
and seamlessly over time.
Traditional Buy/Build Approach
Over 93 percent of first generation e-commerce adopters utilized a “buy/build architecture” in establishing their
technology platform. This architecture generally begins with a commerce software package from leading vendors
such as BroadVision, Blue Martini, ATG, and Microsoft (see Table 4.1)
[1]

. Bolted upon this are dozens of individual
applications to manage the online channel: planning, merchandising, marketing, fulfillment, customer service,
business intelligence, and so on. Hardware connects this infrastructure to the Internet, including database, Web,
and application servers; routers and firewalls; load balancers; and the secure facility that hosts it all. To customize
and integrate the platform, most companies rely on a systems integrator for 3 to 12 months of hard work that is
rarely completed on time or within budget.
Table 4.1: Sample of e-commerce software vendors
Vendor Description Sample Customers
Ariba Ariba provides an open commerce platform to build B2B
marketplaces, manage corporate purchasing, and electronically
enable suppliers and commerce service providers on the Internet.
CheMatch, Chevron,
Covalex, Dow, Merck
Commerce One Commerce One enables buyers and sellers to trade and creates
new business opportunities for all trading partners. Commerce One
offers solutions for companies who want to establish a portal on the
Global Trading Web, those who want to host portals for others, and
those looking for a comprehensive e-procurement solution and
robust return on investment. The company’s products include the
Commerce One BuySite e-procurement application and the
Commerce One MarketSite Solution, the technology that allows
Internet market makers to build open marketplaces and link them to
the Global Trading Web.
Duke Energy,
Eastman, Praxair,
Shell, Schlumberger
Crossworlds Software CrossWorlds Software is a leading provider of e-business
infrastructure software to enable the integration and automation of
business processes within enterprises and among trading partners
using the Internet (acquired by IBM).

Dow Chemical,
DuPont, Royal
Philips
e-Credit eCredit.com, Inc. is a leader in the market for real-time credit,
financing, and related services for e-business through the
eCredit.com Global Financing Network™. With the Global Financing
Network, the company intelligently connects businesses to financing
partners and global information sources so credit and financing
decisions can be processed in real time at the point of sale.
Beckman, BP Amoco,
Cargill, Chevron,
Commerx, Inc.
(PlasticsNet.Com),
Conoco, Procter &
Gamble, Texaco
HAHT Commerce HAHT Commerce, Inc. is the leading global provider of business-to-
business sell-side e-commerce solutions. HAHT Commerce e-
Celanese, Dow
Corning, OxyChem,
Table 4.1: Sample of e-commerce software vendors
Vendor Description Sample Customers
Scenarios™ are the first suite of packaged Internet applications that
integrate and automate marketing, selling, fulfillment, and service
functions across the entire business customer life cycle, allowing
companies to increase revenue, improve service levels, and lower
costs to their distribution channels and customers.
Montell Polyplefins,
Sigma-Aldrich
i2 Technologies i2 Technologies is the leading provider of supply chain optimization
solutions. The RHYTHM family of software provides comprehensive

decision support across both interenterprise and intraenter-prise
supply chains: from suppliers’ suppliers to customers’ customers.
OxyChem
IBM IBM e-business technology and solutions help chemical and
petroleum companies compete for market leadership in the following
key areas: building efficient and flexible supply value chains,
delivering more than price and quality in customer relationships,
providing e-market solutions that transform your business
architecture, and building business value through ERP extensions.
BOC, Degussa-Hüls,
Eastman Chemical,
e-Chemicals,
Moai Moai is a leading provider of negotiated e-commerce solutions for
online auctions, online procurement, and e-marketplaces. Although
Moai’s primary focus is on customers in the business-to-business
market, the company also has customers in the business-to-
consumer and consumer-to-consumer markets.
Eastman
mySAP.com The mySAP.com marketplace is an open electronic hub that creates
seamless intercompany relationships for buying, selling, and
collaborating within and across industries. It provides the
infrastructure, security, and applications to transform previously
disconnected business transactions into a single collaborative
process.
Various
Oracle Oracle Corp. is the world’s leading supplier of software for
information management. The company offers database, tools, and
application products, along with related consulting, education, and
support services, in more than 145 countries around the world.
Oracle provides an Internet-ready platform for building and deploying

Web-based applications, a comprehensive suite of Internet-enabled
business applications, professional services for help in formulating e-
business strategy, as well as in designing, customizing, and
implementing e-business solutions.
Hoechst Marion
Roussel, ICI Chloro
Chemicals, IMC
Global Inc, Reichhold
Chemicals
Table 4.1: Sample of e-commerce software vendors
Vendor Description Sample Customers
Sapient Sapient provides Internet strategy consulting, sophisticated end-to-
end solutions, and launch support to Global 1000 and start-up
companies. As Architects for the New Economy(r), Sapient helps
clients define their Internet strategies and design, architect, develop,
and implement solutions to execute those strategies.
Amoco,
ChemConnect,
Praxair
webMethods webMethods is the leading provider of open solutions for business-
to-business (B2B) integration. The webMethods B2B(tm) solution
provides companies with integrated, direct links to buyers and
suppliers, connecting them to major B2B marketplaces and enabling
real-time, interactive communication through the Internet, regardless
of existing technology infrastructure. Powered by XML, webMethods
B2B can automate critical business processes, such as customer
relations, procurement and financial services, supply chain
management, logistics, and sell-side/buy-side e-commerce.
Ashland Chemicals,
ChemConnect,

Eastman Chemical,
FMC Corp., The
Geon Company,
Optimum Logistics,
OxyChem, Ventro
Corp.
With this approach, each retailer and manufacturer reluctantly enters the technology management business and
replicates an infrastructure that exists at every other company. Bits and pieces might be outsourced to gain scale
and expertise, but the core technology platform gets re-created countless times. Drawing a real estate analogy,
this would be similar to all mall-based retailers building, owning, and operating the facilities in which their stores
reside, rather than renting floor space from specialized mall developers. In an industry that has never invested
heavily in IT (under 5% of revenues on average), this technology ownership approach has proven challenging,
especially for midsized retailers and manufacturers.
Real Profit Drivers Distraction
The key elements of retail differentiation have long been branding, merchandising, and customer service. By
building e-commerce in-house, organizational focus shifts to technology management, systems integration, and
drop ship order fulfillment. Most offline companies have limited experience in these areas and struggle to recruit
talent in competitive IT positions. With an average e-commerce staff of 767, multichannel retailers have seen
their organizations balloon beyond expectation to support ongoing problems in technology and operations.
Scalability and Reliability Struggle
Front-page headlines in 2002 showcased site failures at such leading online retailers as Toys R Us, eBbay,
Yahoo!, Amazon, and Wal-Mart. Smaller companies wage less-publicized, daily struggles to meet consumer
expectations for site uptime, response time, and product shipment. Confirming how difficult most businesses
have found owning and operating a reliable e-commerce infrastructure, industry analysts have found that a
whopping 85% of companies planned to change their commerce software package within seven months of being
surveyed. Even with replacement, the reliability problem persists because 93% of sites are technically
understaffed. In other words, because of escalating salary demands, equity inflexibility, and less desirable work
environments, offline companies face daunting odds in recruiting against start-ups and professional services
firms. The end result: over 37% of orders are failing to get to consumers on time.
Third-Party Service Relationships and Integration Management

Industry analysts have found that 68% of companies have to rely on nine or more partners to develop and run
their Web commerce sites. Systems integration often constitutes the most important outsourced function because
(in a buy/build architecture) literally dozens of complex linkages must be created across applications, commerce
packages, databases, legacy systems, and third-party services. Unfortunately, most companies receive less than
desired results from their integration partner.
For example, in a comprehensive evaluation of the leading e-commerce integrators, industry analysts have found
that even top performers among a sample of 65 integrators earned unimpressive scores, and those on the low
end showed surprisingly few strengths. Additionally, not one vendor demonstrated excellence across all service
offerings.
Integrators face intense pressure to deliver committed projects, but little pressure to improve quality. That’s
because demand for integration services will exceed supply, thus driving the major 3,900 global Web sites to hire
whatever service providers they can get.
Vendor clients are confused, too. Stunned by skyrocketing price tags and un-even quality, clients cut corners,
switch vendors, or bring work in-house. Unfortunately, few integrator customers have enough depth of experience
to know what to cut, whom they should turn to, or how to build complex e-commerce sites themselves.
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“e-business vendors,” © Copyright 2003 eChemPeople, eChemPeople, 131 Shady Lane, Bolingbrook, Illinois
60440
Online Sales Channels: Internet Selling Environment
The Internet selling environment includes a hosted online store featuring customer management, advanced
selling, shopping cart, and order processing functionality. Although the ECISP builds and hosts the store, clients
retain complete control over design elements and merchandising. Consumers see only the client’s brand,
content, and merchandise. The ECISP handles everything technical, including site uptime, response time, and
the management of customer shopping sessions. The ECISP also handles tax calculation, payment processing,
data encryption, order routing, and customer e-mail notification.
The Integration of Business Services and Applications
Integrated business applications and services includes a full suite of tools and services to manage the online
channel, including merchandise planning, storefront management, marketing, fulfillment, and customer service.
These applications allow clients considerable flexibility. Companies can choose to fulfill orders in one or a
combination of ways: in-house warehousing and fulfillment, third-party logistics services using a preintegrated

provider, and/or drop shipping using preintegrated vendors. Similarly, clients can perform customer service in-
house, or they can outsource this service to a preintegrated call center. In either case, account management and
advanced CRM applications support the service representatives. Marketing applications and services include e-
mail campaigns and affiliate programs. Storefront management applications include catalog management, pricing
and promotions, and content management. And finally, merchandise planning includes optional applications for
seasonal planning, demand forecasting, replenishment, and purchase order management.
Business Intelligence Service
Business intelligence service (BIS) includes real-time reports, advanced ad hoc reporting, and financial data
feeds to analyze client business performance. In an ECISP environment, clients retain ownership of their data
and flexibility as to its usage. Clients receive a combination of direct data feeds (in a format of their choosing) and
access to standard reports delivered through an online portal. With an online analytical processing (OLAP)
package, reporting capabilities become extremely powerful and flexible in terms of ad hoc design using multiple
data sources.
Advisory Service
Advisory services include e-commerce expertise and assistance in merchandising, demand forecasting,
marketing, customer service, and logistics. Given their advantaged position in serving dozens of companies
simultaneously, ECISPs can leverage a single team of business experts across many clients. Clients benefit from
performance benchmarking and best practices gleaned from the entire network. For example, clients can
benchmark their performance in customer acquisition, shopping conversion, fulfillment time and accuracy, and
staffing levels, all while their ECISP partner recommends changes to move closer to best practice. Rather than
reinventing the e-commerce wheel, businesses implement well the first time and receive ongoing help from a
partner financially committed to their success.
Infrastructure of Hosted Technology
Hosted technology infrastructure includes world-class e-commerce infrastructure with guaranteed reliability.
ECISPs specialize in designing technology platforms built to scale with the highest degree of operational
excellence. ECISPs achieve economies of scale by managing a single, multitenant architecture. Rather than
operating a separate technology cluster for each client (thereby losing all of the advantages of scale), ECISPs
focus on a single platform built with best-of-breed components throughout. Some even issue industry-leading
service level agreements covering site uptime, response time, and customer service responsiveness. Clients
sleep at night knowing that their sites run on the best hardware and software, all backed by failover redundancy,

technology operations experts, and quality of service guarantees. And, they never have to own, build, or manage
any technology themselves.
The Advantages of Outsourcing an Infrastructure to an ECISP
Thanks to the new ECISP architecture, many companies can for the first time sustainably conduct e-commerce
while selling less than $594 million annually online. With dramatically lower up-front costs, predictable ongoing
fees, and guaranteed operational reliability, the ECISP architecture equips offline companies with the confidence
that their online business will succeed.
Better Return on Investment
The ECISP architecture enables profitable e-commerce at one tenth the revenues of those required by traditional
buy/build approaches. Based on industry averages for transaction values and operating costs, branded apparel
manufacturers and multicategory retailers could achieve profitability at between $22 million and $24 million in
online sales, if operating on an Escalate e-commerce platform. Even multicategory pure-plays could hit
profitability at $32 million in sales. These compare to the $84 million to $2.3 billion breakeven estimates for the
traditional architecture discussed earlier. Best of all, companies earn a far higher return on investment when
using an ECISP due to the low setup costs.
Focus and Decision-Making Improvement
With the ability to focus on profit drivers, the ECISP architecture enables companies to outsource less important
“context” technology functions (customization, integration, maintenance) while owning “core” business functions
(branding, merchandising, service). Companies typically require at most one IT employee to interface with their
ECISP provider. In fact, most companies require just 8 to 12 employees to run their entire online business, as
compared to staffing averages for those who build/own (76 for store-based retailers and 90 for pure-plays). With
an ECISP, employees focus on core business functions, including marketing, merchandising, and content
management—not the technology.
Third-Party Service Relationships and Management of Integration Reduction
When using an ECISP, companies may require as few as one additional e-commerce relationship, that with a
Web design firm. The ECISP translates the design work into a functioning Web storefront, thereby simplifying
even that relationship. Some companies will also choose to hire a third-party consulting firm to perform
implementation on the ECISP architecture.
Having preintegrated all other third-party applications and services, the ECISP ensures ongoing quality of
performance, freeing the client to focus on running the business. For example, should a client desire to outsource

customer service, the ECISP recommends one or more providers based on the client’s specific requirements,
from the service providers that have already been integrated. The ECISP handles ongoing service provider
integration, data transmission, billing, and quality monitoring. The client focuses on the real business drivers:
service policies and representative training.
Solution Dynamics
Finally, the dynamic solution here is the continuous upgrading and addition of new functionality. By managing a
single, multitenant architecture, ECISPs can continuously enhance applications, features, and functionality for all
clients simultaneously. An analogy can be drawn to telephone companies (telcos). When a telco adds a new
feature like call waiting, the telco can immediately make it available to any customer on their network. Similarly,
as the ECISP adds a new feature like digital gift certificates, every client can receive it on their site. And, because
ECISPs must continuously innovate on behalf of their broad network of clients, each individual company can
expect frequent platform improvements that keep them ahead of their competition.
Summary
Selling online has become an imperative for retailers and an increasing number of manufacturers. Recognizing
that a 24 percent loss in customers can completely eliminate the profitability of their offline stores, retailers have
raced to drive e-commerce growth to $77 billion in 2004 (6.8% of U.S. retail). By mid-2005, over 95 percent of the
largest U.S. retailers (over $60 billion in annual sales) will be e-commerce enabled. And, for midsized retailers
($900 million to $60 billion in sales), over 85 percent will be selling online. Yet these adopters face a fundamental
challenge: using the first generation buy/build architecture, many cannot make money at e-commerce, but none
can afford to avoid trying. For most of them, owning and operating an e-commerce infrastructure does not make
economic or operational sense.
Finally, next generation ECISPs make that ownership unnecessary. They leverage the Internet itself to deliver a
complete online channel solution with guaranteed levels of performance quality. Companies contract for a fully
branded online store, all of the applications and services required to manage it, and a partner committed to their
ongoing performance improvement. Implementations of 4 to 13 months get accelerated to 4 to 14 weeks, and up-
front costs are cut by 64 to 89 percent. From a profitability and reliability standpoint, businesses can now justify e-
commerce to their shareholders and customers. By enabling companies to focus on their core business, ECISPs
unlock the full potential of online sales channels. ECISPs provide the sustainable e-commerce solution that
manufacturers and retailers have been seeking.