Where’d they go?

As e-commerce goes mainstream, commerce servers are disappearing at least as a product category. Customers can find “good enough” basic e-commerce functions such as catalog management, order processing and personalization in application servers, customer relationship management (CRM) systems or portal software. Commerce server offerings from IBM Corp. and Microsoft Corp. are safe bets because of their strong integration capabilities and their backing from large, stable vendors. Stand-alone commerce server vendors are still worth considering for complex or industry-specific needs, but they are at risk of disappearing through merger or acquisition.

Bye-bye to Specialist Software:Commerce Serving Goes Mainstream

The market has plenty of good, solid commerce servers. Too many, in fact, because vendors such as BroadVision Inc. in Redwood City, Calif., and Blue Martini Software Inc. in San Mateo, Calif., are threatened by “infrastructure vendors” that also offer application servers, middleware, databases and CRM systems.

Commerce server software runs on application or Web servers and provides key e-commerce functions such as managing product catalogs, accepting and processing orders and personalizing pricing and other content based on a customer’s identity or purchase history. As Web commerce has gone mainstream, such functions are increasingly integrated into broader offerings from infrastructure vendors or into other applications.

“Only one or two of the companies that began as commerce server vendors most likely, [Art Technology Group Inc.] or BroadVision will survive after morphing into a CRM or portal vendor,” says Andrew Bartels, an analyst at Giga Information Group Inc. in Cambridge, Mass.

IBM and Microsoft Corp. are the current market leaders, according to a December 2001 report by Forrester Research Inc. in Cambridge, Mass. Their tools offer solid marketing, order processing and catalog management tools, the report says, adding that users look for the following features in e-commerce server software:

Integration. This is key to users like Rockwell Automation Inc., a Milwaukee-based supplier of power, control and industrial systems. Rather than requiring a half-hour sales call to configure products, customers use a BroadVision server to do the configuration online, says Rod Michael, director of customer e-business at the company. And Rockwell’s 550 North American distributors are also linked to the site, so they can query one another for hard-to-find items.

Sophisticated analysis tools. Site performance-analysis tools should support Simple Network Management Protocol so they can work with Hewlett-Packard Co.’s OpenView or other monitoring tools, says Forrester analyst Josh Walker. Tools for analyzing customer behavior should be smoothly integrated into the commerce server so that employees can more easily do business analysis, he says.

Eric Keil, e-business director at Panasonic Management IT Services Co. in Secaucus, N.J., is working with IBM so that future WebSphere releases allow attachment of documents, diagrams or even software to product descriptions. This would not only help cross-sell or upsell related products, he says, but also increase customer satisfaction by ensuring they get the products they want.

Flexibility. Because BroadVision was originally built for business-to-consumer sales, says Michael, “we had to work with them a lot” to let business customers specify that different products in an order be shipped by different carriers or to different places.

Competition and reduced demand have reduced prices. Microsoft dropped its per-CPU price for Commerce Server 2002 Standard Edition to $7,000, compared with $8,499 for Commerce Server 2000, says Bartels. BroadVision dropped its entry-level pricing from about $500,000 to $120,000, he says, and BEA Systems Inc. in San Jose is bundling its commerce server into its portal offering at no extra charge.

As product categories merge, vendor mergers might not be bad either. “It would be great to see someone like [CRM vendor Siebel Systems Inc.] link up with BroadVision,” says Michael. “The worst thing that will happen is [BroadVision] gets acquired by somebody, and we’ll just have more capabilities.”

Scheier is a freelance writer in Boylston, Mass. He can be reached at [email protected].

How’s Your Server Vendor’s Economic Health?

With the consolidation of the commerce server market, the financial viability of the vendor has become a key criterion that you should consider when choosing a commerce server.

“One of the first questions we ask our clients is how risk-averse are they?” says Larry Perlstein, an analyst at Gartner Inc. in Stamford, Conn. “Their answer to that determines how they should go through the vendor selection process,” determining whether the specialized capabilities of a smaller vendor justify the risk that the vendor might go out of business or be acquired, he adds.

Most commerce server vendors are under “incredible financial pressure,” says Perlstein, making it likely “several of them will not survive the next 18 months.” In April, BroadVision Inc. announced that it would cut about one-third of its 970 employees after first-quarter sales fell 35 percent, to US$30.5 million, from the same period a year earlier. Cambridge, Mass.-based Art Technology Group Inc. reported sales falling to $27 million in the quarter, from $43 million in the same period a year earlier.

Stock price isn’t a good indicator of survivability, says Perlstein, “because all of the stock prices have been so depressed.” Customers should instead examine such things as a vendor’s burn rate how quickly it’s using its available cash and the number of customers it has gained in the most recent quarter.

How to Choose

Tips for sorting through the available products.

If you’re doing basic e-commerce and want a safe vendor, IBM’s WebSphere Commerce server or Microsoft Corp.’s Commerce Server may be good enough, analysts say. For more complicated or industry-specific needs, look to smaller, more financially fragile vendors.

For example, “neither IBM nor Microsoft have very strong order-management” capabilities, says Larry Perlstein, an analyst at Gartner Inc. in Stamford, Conn. Comergent Technologies Inc. in Redwood City, Calif., “is probably one of the strongest players” in this area, he says.

The nature of your e-business dictates how fancy you need to get. Few companies just accept an incoming order, check if inventory is available and process the payment, according to a December 2001 report by Forrester Research Inc. in Cambridge, Mass. Most must capture orders from multiple channels, query inventory systems and trigger complex fulfillment processes. The more often a firm fiddles with pricing or product bundling, the more flexible a pricing engine or catalog management system it needs, says the report.

Some commerce servers are also geared toward specific industries. Comergent has a large customer base in high-tech manufacturing, says Perlstein, while Blue Martini Software Inc. in San Mateo, Calif., “has a strong retailing focus and is starting to focus more on manufacturing.” Retailers might want to consider commerce server offerings from vendors such as SAP AG, Siebel Systems Inc. and PeopleSoft Inc. or from retail software vendors such as Retek Inc. and JDA Software Group Inc., says Andrew Bartels, an analyst at Cambridge, Mass.-based Giga Information Group Inc.

Case Study

Business: Power, control and industrial systems; automation software

Revenue: $4.3 billion (fiscal 2001)

Business goal: Provide single point of contact to reduce customers’ purchasing and administrative costs. Cut cost of sales by providing online product configuration.

Commerce server used: BroadVision

Why chosen: Scalable architecture, personalization capabilities, ease of customization

Strengths: Easy to use for employees and customers; high-availability architecture

Problem areas: BroadVision Inc.’s product lacked business-oriented features such as the ability to include unique shipping information for each item ordered. Technical support from BroadVision was weak at first but has improved in the past year.

Business results: The site saves customers an estimated 2 percent of total purchase costs by cutting internal paperwork. The online configuration reduces the need for expensive sales calls and allows Rockwell’s salespeople to focus on boosting revenue.

Deployment lessons learned: Be specific about what you ask your vendor. For example, BroadVision supports double-byte characters required by Asian languages but not multiple double-byte character sets, making it hard for Rockwell to handle multiple Asian currencies on one site. Poor communication about new processes for e-commerce caused confusion among Rockwell’s sales force, distributors and customers.

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