3/25/00 - Waltham, Mass.-Based Firm's Software Boosts E-Commerce Efforts
markets.forbes.com
Mar. 25 (The Boston Globe/KRTBN)--Clicking through a health insurer's Web site, an agent learns in minutes what it will cost a business client to insure 100 employees.
At a transportation company's Internet site, a consumer products corporation designs a fleet of trucks. With each selection -- silver paint or a more powerful engine -- a new price quote pops up on the screen.
This isn't the technology of the future. It's what FirePond Inc., a hot interactive software seller in Waltham, has been building for companies such as Blue Cross and Blue Shield of Minnesota and French truck maker Renault SA.
FirePond is among numerous companies that have gone public recently, positioning themselves as players in the booming "business-to-business" electronic commerce market. They see huge opportunities in an industry with annual sales projected to surge past the $2 trillion mark by 2004.
Some analysts believe FirePond already has cornered its piece of that market. It has signed on large industrial, insurance, and financial companies that are struggling to figure out how to conduct their complicated businesses on the Internet.
"Traditionally, commerce on the Web has been about simple transactions, like buying books and CDs," said Cameron Steele, an analyst with Dain Rauscher Wessels in Minneapolis. "FirePond and others have been able to open the market to more distribution channels and more complex products like cars and life insurance."
Last summer, FirePond got some attention when Gartner Group, a consulting and research group, named it the leader in such interactive selling systems. But it faces heavy competition.
"There are a lot of people in this space," said Robert DeSisto, a Gartner research director in Boston. "One of the things that has differentiated them ... is they have a unique way of helping companies."
FirePond already has deep roots in the software business. It was founded in 1983 by Jerome Johnson, a Minnesota tractor salesman who traveled from farm to farm hauling a computer in a wooden box.
But Johnson, who has since retired, did not have the management skills needed to take the company to the next level, said Michael Cline, an adviser to General Atlantic Partners, a Connecticut venture capital firm that holds a majority stake in FirePond.
FirePond found new leadership three years ago in Klaus Besier, 48, a German-born executive known for his dry humor and formal bearing. "You have to get him to relax a little bit," Cline joked.
Besier, who now lives in Concord with his wife and four children, had led the German software firm SAP's drive to expand sales in the US market. Under his watch, SAP America's revenue rose from $16 million in 1991 to $723 million in 1996. But as his division grew, he found himself clashing with top managers, often over cultural issues.
When his first salesman made a $1 million commission, executives at SAP's headquarters "freaked out," he said. He also said he encountered more resistance when he suggested that SAP expand into the Internet space.
"I got tired of the arguing," Besier said. "Obviously, I had proven that I knew what I was doing."
Under Besier, FirePond appears to be in favor with investors. Last month, the company made a successful debut on Wall Street, raising $110 million. On its first day of trading, the company's shares more than quadrupled to close at $100.25. FirePond's shares rose $1.25 a share to $54.125 yesterday on the Nasdaq exchange.
Analysts say they expect Firepond to break even in late 2001. The software firm lost $28.9 million in its fiscal year ended Oct. 31, 1999, on revenue of $34.3 million.
Over the last several years, FirePond has become known for its flashy features, including animated scenes of trucks jack-knifing without antilock brakes. Known as "eye candy," these goodies make it easier for corporations to encourage technology-wary employees and business clients to use their Internet sites.
"You want a high adoption rate, so the software has to guide you without you realizing it," Besier said.
More important, he said, FirePonds's software helps piece together deals that otherwise might take weeks of time-consuming negotiations between buyers and sellers. The systems also weave companies' Web sites into their existing businesses. Right now, many companies do not integrate their online and offline sales, irritating consumers and their own sales staffs.
"These e-commerce islands are becoming a problem for these companies," said Marshall Senk, an analyst with Robertson Stephens, referring to corporate e-commerce sites.
FirePond isn't without its own challenges. A young public company with big losses, it cannot afford to make mistakes, analysts said. It also must enlist new customers quickly, forge partnerships, and make acquisitions at a time when everyone in the business-to-business e-commerce arena is doing the same.
That frantic pace was evident at the Industry Standard's business-to-business e-commerce conference this week in Boca Raton, Fla. Attending were hundreds of executives from start-up dot-coms and software firms, including FirePond, all seeking attention, chasing after one another or hunting down venture capitalists.
The push is to "get big fast," said Ronald Spears, chief executive of CMGI Solutions, an operating company owned mostly by Internet holding company CMGI Inc. in Andover. "Being big will help you survive."
FirePond recently announced a partnership with eCredit.com, a Westwood company that offers real-time credit and financing information to e-businesses. If the relationship blossoms, FirePond will get a chance to sell its goods to eCredit's customers, which include big names such as Gateway Inc., Procter & Gamble Co., and Texaco Inc.
With such rivals as Selectica Inc. and Trilogy Software Inc. running after the same potential customers, Besier knows he may have to pick up the pace.
"It is a race," he said.
By Stephanie Stoughton
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