From article at: bigcharts.com
The New Rat Pack
SATURDAY, MAY 27, 2000 12:40 AM
- CMP Media
May. 26, 2000 (VARBusiness - CMP via COMTEX) -- Some cool players are taking over e-business software. Can you dig?
Allaire. Ariba. BroadVision. Vignette. Together, they constitute a fab-four tour de force. They're the organizations partners want to engage. They've got momentum and ambition. Their leaders are positioning them as providers of platforms, not just single-point solutions. Should Microsoft Corp. worry? Maybe. Allaire Corp. CEO David Orfao says he'll take on Microsoft-and anyone else. Brash? Sure. But what else would you expect from the new Rat Pack? Vignette Corp. is the fastest-growing software company of all time, says CEO Greg Peters. BroadVision Inc. CEO Pehong Chen says he's watching his employees become millionaires. And Ariba Inc. CEO Keith Krach says he'll be leading the e-business revolution. Things haven't been this much fun since the pack ruled The Sands.
A One-To-One Vision -- Pehong Chen
Pehong Chen, 42, chairman and CEO, BroadVision Inc. HQ: Redwood City, Calif. Employees: 770 1999 sales and growth: $115.5M, up 127 percent 1999 earnings: $18.8M, or 22 cents a share, up 370 percent Market capitalization: $9.64B (May 22) Stock price: $38.81 (May 22) Key product: One-to-One family
Pehong Chen has had the golden touch with just about all of his endeavors, save one. The man who has helped shape the face of e-business software by building BroadVision into a powerhouse of personalization valued at $12 billion still hasn't mastered the one thing he would like to-the violin. Finding the time to practice is difficult given the demands of running a company growing in excess of 100 percent a year.
Chen is no overnight dot-com success story. An immigrant from Taiwan, in 1989 he founded Gain Technology, a multimedia software company, and bet its future on interactive applications for businesses.
In 1992, Sybase bought 3-year-old Gain for a whopping $100 million. A year later, Chen started BroadVision, one of the few e-commerce software makers to escape red ink.
VARBusiness: What's the most enjoyable part of your job?
Chen: Watching a lot of our employees become millionaires.
VB: What are some of the most common mistakes businesses make when it comes to e-business?
Chen: A lot of people seem to think anything "e" should automatically be a runaway success that's worth billions of dollars of new market capital. It would be nice if such activity could create so much new shareholder value. However, if such financial engineering were the only motivation, then we'd be missing the true core value of e-business, which is to create a long-term, strategic competitive advantage to the business.
VB: Your company is focused on e-commerce software. From a solutions standpoint, that looks like it will fuel the next wave of e-business for customers and your partners.
Chen: People are finally realizing that e-business is not just about browsing static pages of news and stock quotes. It's about allowing someone to do something meaningful with the company on a self-service basis. To be able to succeed in self-service, one must remember who the user is and make the interaction straightforward and relevant.
VB: Are companies that jumped onto the Web with boilerplate sites rethinking and revamping their e-commerce strategy?
Chen: Absolutely. The key issue that everybody has realized is that the whole value chain-from supply to demand to feedback-must be integrated, and the relationships among all the constituencies up and down this value chain need to be empowered through self service. Brochureware, or simple catalog ordering as the e-commerce solution, will no longer suffice. They need personalized e-business solutions.
VB: Where do solution providers fit into your market strategy?
Chen: Each dollar of our product license probably generates around $5 of systems integration businesses. SIs (systems integrators) do about 90 percent of our implementations and play a key role in our strategy.
VB: Tell us about some of your more interesting solution-provider engagements and why they are working.
Chen: They are the Big Five-Andersen Consulting, PricewaterhouseCoopers, Deloitte and Touche, KPMG and Ernst & Young. We also have great things going with big SI firms like Sema and Cap Gemini in Europe. We also work closely with a large number of e-consultancies, including the bigger ones like [MarchFirst], Xpedior, iXL, Proxicom, Razorfish and Organic, as well as newer players like Context, GroundSwell, Zefer, e-Force and Brience. They are all exciting because they drive a lot of business for us; more important, they're delivering great solutions.
VB: What are the biggest challenges e-integrators face with B2B
solutions?
Chen: The balance between the speed of implementation and learning how to deliver a truly optimal personalized site. Also, the training of their staffs from the old waterfall methodology to today's e-business methodology could be tough.
VB: What kind of projects are these solution providers doing with BroadVision's One-to-One platform?
Chen: All kinds-B2C, B2B, B2E (business-to-employee), financial services, travel, retail, distribution, high-tech, manufacturing, telco-you name it.
VB: Will you continue to acquire intellectual property by acquisition?
Chen: We acquired Interleaf, which complements BroadVision's technology in a significant way. We'll continue to make acquisitions. The main reason is to gain time-to-market advantages and the talent from the acquired company.
VB: What role does the stock market play in your go-to-market
strategy?
Chen: None. We've been doing the same thing-delivering high-quality e-business applications to our customers-since day one.
Buyers Be Aware -- Keith Krach
Keith Krach, 42, chairman and CEO, Ariba Inc. HQ: Mountain View, Calif. Employees: 425 1999 sales and growth: $45.4M, up 443 percent 1999 loss: $14.7M, or 84 cents a share (excludes stock-based compensation) Market capitalization: $11.69B (May 22) Stock price: $60.81 (May 22) Key products: Ariba ORMS and ORMX buyer-enabling applications; Ariba Network platform for B2B Internet commerce; Ariba Internet Business Exchange service, Ariba Commerce Center, and Ariba Market Suite development platform for Net markets
Although Ariba was one of the dot coms hit by the recent stock market correction, there's no risk involved for customers that bet their e-businesses on its products, says CEO Keith Krach, who believes Ariba is shakeout-proof. Krach, himself, has shown a knack for taking risks that pay off handsomely. He started his career as a fast-track executive with General Motors Corp. Lured by the excitement of the Internet, Krach left his secure life at GM and gambled his future on Silicon Valley. His first venture-as COO of engineering company Rasna-led to a $10 million sale. Next, Krach bet on Ariba. His 10 percent share of Ariba's stock has made him a billionaire.
VARBusiness: How fast is the market moving today vs. a year ago?
Krach: The adoption curve for today's commerce solutions is moving much faster than it ever did in the ERP world. Essentially, the B2B technology adoption curve has been even further compressed since the rise of B2C. Whether your competition comes from established brick-and-mortar players or new dot coms, you must stake out your place in the digital marketplace. Being the first mover is more important than ever.
VB: An executive at HP said he had a rug with Sun Microsystems' logo to show his staff who HP wants to walk all over. If you had such a rug, what would be on it?
Krach: I would rather have the picture of my customer on the wall than the logo of my competitor on the floor. You have to stay focused on your customers, not on what other companies may be doing.
VB: What role do alliances play in your company's strategy?
Krach: We deliver real value, not just promises, to our customers. The quality and breadth of our alliances are key to delivering this value. We have significant relationships with companies like IBM, Microsoft, American Express, EDS and Hewlett-Packard.
VB: How are alliances with solution providers enhancing Ariba's market penetration?
Krach: We look to our partners to bring vertical-market domain expertise. We can best serve our customers by complementing our value-added partners with a robust network with an open platform for value-added services. What Ariba does better than anyone else is to build partnerships with our customers to get them to market quickly. Additionally, we provide our customers the best technology with the fastest deployment schedule. In our competitive environment, time to market is an incredibly important competitive advantage. At Ariba, we believe that it's not the big that eat the small; it's the fast that eat the slow.
VB: Could you tell us about some of those vertical-market
opportunities?
Krach: There are opportunities for integrators to work with us across everything from dot coms to large corporate exchanges. We are seeing certain industries moving faster than others, but there's activity in every vertical.
This is a great time for integrators. There are huge integration and consulting opportunities for organizations helping to implement buy-side solutions that digitize spending within the four walls of a company.
There are similar opportunities in the areas of supplier enablement and commerce services, which range from payment services to logistics support. Those services are going to be provided through B2B marketplaces powered by Ariba-and that will require a new level of integration.
VB: What new technology is Ariba excited about?
Krach: We are excited about continuing to extend the breadth and scope of our application platform. We are adding additional functions and features to its core application platform, including dynamic trade mechanisms such as multiparty negotiations, and collaboration tools that let buyers and suppliers collaborate more effectively. We're also excited about the inroads we're making into interoperability technologies and solutions that allow marketplaces to interact with buyers, sellers and other marketplaces. We are also working to give our customers the ability to run our products in a global environment.
VB: What do you think is driving the consolidation among e-software and e-service providers?
Krach: Companies are realizing they will need to work together to deliver a comprehensive suite of open network-based commerce services, along with an integrated enterprise-commerce solution to help businesses effectively B2B-enable their buying, selling and supply-chain processes from order to fulfillment. An integrated offering, including both Internet services and software solutions, will provide customers with rapid time to value, robust marketplace functionality and the best comprehensive solution available.
Dot-Com Fusion -- David Orfao
David Orfao, 41, president and CEO, Allaire Corp. HQ: Cambridge, Mass. Employees: 300 1999 sales and growth: $55.2M, up 158 percent 1999 loss: $5.5M, or 48 cents per share (diluted) Market capitalization: $1.16B (May 22) Stock price: $42.94 (May 22) Key products: ColdFusion, JRun, Spectra, HomeSite, Forums
Allaire is the fifth company that CEO David Orfao has helped to take public. Prior to joining the company four years ago, he served as senior vice president of worldwide sales, marketing and services at SQA. Before that, he did the same thing for Claris Corp. Orfao joined Claris after stints at Frame Technology Corp., Ashton-Tate Corp. and Lotus Development Corp. Although each of his former employers has gone through tremendous upheaval and change since his departure, Orfao has demonstrated a knack for getting onboard a company when it hits its zenith. Allaire, he believes, probably won't reach that point for a few more years. He plans to stick around until then. That's good news for allies. With his channel-friendly background, solution companies can't help but benefit from looking closely at Allaire.
VARBusiness: I understand that you just returned from an extended road show. Your stock didn't fare so well in April, but you've bounced back somewhat and are around $40 per share. Take me back to the road and set the scene.
Orfao: In 10 days we met with 55 institutions. We were doing it right as Nasdaq was melting, so a lot of people we were presenting to were under their desks with their helmets on.
VB: They must have had ashen faces.
Orfao: You should have seen the guy from Janus Fund. He was up 45 percent in January and down 25 percent when we met with him. These kinds of swings prompt these guys to put on their armor suits and go looking for companies that are going to survive. We had a strong story to tell, thankfully. We had strong sequential quarter growth of 45 percent, 200 percent year-over-year growth and profits. They definitely listened to us.
VB: Were people otherwise panicking?
Orfao: I don't think anyone was panicking. A lot of the discussions we had opened up with, "What do you think of the market?" Interestingly, some said the crash of '87 was better because it was fast. It happened within two days, and then the market pulled its pants back on and moved on. This adjustment keeps lagging. It's like the Chinese torture test. Drip, drip, drip. That's trying for some of these analysts who are young and have never seen some of this market volatility before.
VB: What sets you guys apart?
Orfao: What's different about Allaire's platform is that we solve more intranet problems than actual dot-com problems. What's interesting to systems integrators from the standpoint of Allaire is that not only can they go after the dot-com side of a business, but they can also build and deploy the enterprise portal, too. That's where the majority of our revenue is coming from, by the way.
VB: Do you get the sense that integrators are starting to winnow down the number of vendor partners they are playing with?
Orfao: There's a couple of things driving that. Two or three years ago, people were looking for best-of-breed point solutions. Now they are looking for a platform that combines all the elements, whether it be content management, e-commerce, collaboration or the key infrastructure that it takes to build and deploy these applications. What will happen is that the best-of-breed applications will still have a market, but they have to move up in terms of functionality.
VB: How many solutions partners do you work with today?
Orfao: We work with about 1,010 interactive agencies and systems integrators. That's everything from small Web shops all the way up to Ernst & Young, Andersen and Computer Sciences Corp.
VB: I came across a press release about your company and FAO Schwarz. What was interesting was how MarchFirst, your e-business consultant there, helped the customer select the software. How are these organizations helping to brand you to end-user customers?
Orfao: I've had the pleasure of being part of Allaire for four years now. When I got here, the premise and overall strategy for partnering was to build what we call an Allaire industry or Allaire economy. When the company started, we were pretty much selling products over the Web. What we wanted to do was move from that focused strategy to a strategy where we had worldwide partners. Why we wanted partners in our strategy mix was to build barriers to entry for new players coming in, but more important, allow our customers to have more focused direct support in any geographic area.
Four years ago, Allaire was a direct- over-the-Web business. Now it is a business with more than a $100 million run rate per our last quarters, where 62 percent of our revenue goes through partners. That's not by accident; it was very specific in our thinking. This has allowed us to be one of the first new economy companies or infrastructure or platform companies that has actually shown a profit. We've done that in the past two quarters and we'll continue moving forward.
Building a Village -- Greg Peters
Greg Peters, 40, president and CEO, Vignette Corp. HQ: Austin, Texas Employees: 750 1999 sales and growth: $89.2M, up 450 percent 1999 loss: $42.5M, or 84 cents per share (diluted) Market capitalization: $6.66B (May 22) Stock price: $34.88 (May 22) Key product: The V/5 e-business platform
Greg Peters likes to boast that Vignette is the fastest-growing software company of all time. Critics like to point out that it's nearly as adept at racking up losses. Last year, for example, it lost $42.5 million, vs. a $26.2 million loss in 1998. Red ink aside, the company's revenue growth is astonishing. Last year's sales of $89.2 million were 450 percent greater than in 1998 when the company generated $16.2 million in revenue. Furthermore, sales growth isn't slowing. For example, sales for the first quarter ended March 31 soared 505 percent over last year to $55.2 million. That growth nearly matched the level achieved in the fourth quarter of 1999, when sales increased 512 percent to $40.9 million. Phenomenal. Like Allaire, Vignette is building its empire on the backs of willing-and-able partners. Its pitch: Grow fast with us. Many, indeed, are.
VARBusiness: Your stock has suffered a significant hit. Same with everybody else in your space. What do you make of the shakeup?
Peters: Really, it's simple. A lot of investors simply aren't doing their homework. Some have run scared. They lumped everybody together and sold. Everyone got taken down. It was across the board. The key is who comes back.
VB: And one of the winners will be a company that doesn't recognize sales until they are done and installed?
Peters: That's right. We don't count sales until the customer is getting benefits, not when a deal is booked. Our way gives us a predictable, consistent revenue stream. When you look for winners, that's another thing to keep an eye on.
VB: What is the most fun thing about your job?
Peters: We're changing the world. We're not just a part of this new economy that's being built. Vignette is really driving it. That's exciting, not just for myself, but for everyone in this organization.
VB: What does Vignette offer in corporate philosophy and products that has really struck a chord in the e-marketplace at this time?
Peters: We are a customer-obsessed organization in terms of how we go about creating our products, addressing the marketplace and building a business model. The company was initially created out of more than 300 phone calls to organizations to see what their pain points were and what their needs were strategically going forward. Everything revolves around the customer. Companies are realizing that failure lies ahead for organizations creating e-business applications based on a hodgepodge of disparate technologies that already exist in the marketplace. We're providing the broadest and deepest platform for enabling companies to build very distinctive and deep applications that serve their target audience.
VB: Everyone is talking platforms these days. What's that all about?
Peters: We definitely want to be an e-business platform company. That includes both platforms and applications. We've been in platforms in the past. Now we're beginning to release our first application modules. What customers are telling us is that they've written much of their business logic in app servers that they currently have. They're looking for ways to extend that in an online environment. Our job is to bring the ability to do such things as personalize, target multiple channels, syndicate content online and build online marketing campaigns to the technology that customers have already deployed. Customers do not want to deploy another proprietary application server as part of their online strategy.
VB: You've made several large acquisitions, including the $555 million acquisition of e-ISV DataSage. Is your primary goal to add to your customer and product portfolio?
Peters: Our core mission is to make sure we continue our position as a leading platform for e-business applications. So, at the platform level, we have to evolve and mature the technology. We're at a stage in the market where the platform is not complete. It's still evolving. The acquisitions have been about expanding the capabilities that exist inside the platform. Customers don't want to choose different technologies that they have to make work together in their environment. If you have the capabilities living within the platform, you can personalize specific things. There's no one in the marketplace today that has married content management, customer profile management, content delivery and personalization in a platform. That's why we're seeing alliances and acquisitions in the marketplace.
VB: I would assume that acquisitions bring you that needed technology faster and at a lower cost.
Peters: Cost is way down the list. It's speed to market and domain expertise. We're a very bright organization, but continuing to attract and acquire smart people to nurture and target this market opportunity is a reason to acquire.
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