John and ALL: Article...Intel bites E commerce bait...
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Call me contrarian, but Pandesic, the new Internet commerce service Pandesic doesn't look like a sure-fire success> from Intel and SAP America, doesn't look like the surefire success e-commerce experts are predicting.
Yes, it's interesting, even unique in the market so far, but Wall Street analysts would be premature in raising their earnings estimates.
Seem strange? The service does seem promising on the surface.
Two great companies, with beautiful brand names and deep, deep pockets, offer a safe, turnkey way for companies to start selling on the Net. This is e-business, not e-commerce, handling not just Internet transactions but everything from billing to inventory to delivery to restocking.
It doesn't cost that much to get started, and it's a service, not a toolkit, for merchants to build their own Web storefronts. No worries about finding scarce e-commerce and security programming talent. Merchants get to keep the servers for their stores on their own premises--no need to put their proprietary data on a machine at some Web hoster's server farm.
And it takes only weeks to deploy--six or eight weeks from contract to grand opening.
What's wrong with this picture? Plenty, but let's acknowledge what's right about the strategy, first. Here are a few things the Pandesic promoters failed to dwell on publicly:
First, Pandesic will use partners--resellers, consultants, systems Most e-commerce software vendors cater to Unix snobbery> integrators, and Internet marketing agencies--to sell its service. Those folks lust after "e-commerce solutions" to deliver to customers, and there are virtually no other offerings. But Pandesic chairman Harold Hughes, an ex-Intel employee, says his first job is to sell directly to customers, and SAP will too. Channel conflict as usual.
Second, Intel gets to prove that servers based on its chips are indeed robust enough to run an Internet store. This matters in the Intel vs. Unix religious war, because most e-commerce software vendors cater to Unix snobbery.
Third, Pandesic offers a way for SAP--which sells fiendishly complex software for giant companies to integrate diverse business functions--to try out "SAP Lite," a dumbed-down version for e-commerce in the middle market. Wouldn't those Fortune 2000 firms that spent tens of millions of dollars to buy SAP software (then tens of millions more to install it over several years) like that option?
Fourth, Pandesic gets 1 to 6 percent of every transaction. That's no-effort revenue if Pandesic does it right.
Fifth, scratch an e-commerce software vendor with a nickel--including Open Market, BroadVision, Connect, Microsoft--and you find a big consulting practice tailoring their basic software for a particular merchant. Pandesic, perhaps alone, offers a turnkey solution.
Unfortunately, the list of areas where Pandesic doesn't make sense is far longer, and perhaps, more damaging.
For one, who, outside of the Fortune 5000, ever heard of SAP? Yes, Intel has. Pandesic may be too early--or just plain wrong> a great brand that could carry Pandesic into small companies and midsized accounts--if the customers get over confusion about whether the vendor is Pandesic or Intel.
Can Intel, a chip company, sell itself as an e-business vendor? Granted, it's a worldwide manufacturing, logistic, and commercial presence, but it's not obvious that those qualities make it a trusted source for e-commerce.
If SAP makes such great e-commerce software, how many Web storefronts are running it today? SAP points to computer reseller Prisma and still-unnamed others, but that isn't likely to persuade many.
And is this concept really so new? IBM started this talk of "e-business, not e-commerce" back in April. It's a legitimate (and widely acknowledged) point, but not a revelation, that running a Web store requires far more than posting a catalog.
And if setting up turnkey Web storefronts is such a great business, why haven't AT&T (not a bad brand itself) and other would-be "commerce service providers" reported huge account wins?
Pandesic's target market is also a strange choice. Why merchants selling hard goods? Virtually all the analysts say the immediate e-commerce opportunity is selling to businesses, not consumers. Pandesic says: Paying by credit card is a real option today, but interbusiness payments remain unsettled. That may not be true for long.
Finally, can two multibillion-dollar, global companies act like a fast-moving start-up? Creating a separate company as a joint venture makes sense, but can execs and employees from very different big-company environments move together, let alone at Net speed?
In the near term, Pandesic will appeal to merchants with $50,000 to $100,000 to bet that Intel and SAP can get an outsourced Web storefront up and running. But in the next six months, Pandesic must deliver some thriving success stories, or else its service model will be revealed as either having come too early or being just plain wrong.
In the long term, Pandesic better write its contracts well, because anyone who succeeds using Pandesic will soon want to run its own store, and stop paying that percentage off the top to a service provider.
But in the big picture, if that Pandesic grad sticks to Intel hardware or buys industrial-strength SAP software, then Pandesic will be just another SAP and Intel marketing expense for their core business.
Tim Clark writes about electronic commerce issues on Mondays in Perspectives.
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Regards, Michael |
