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Theme: Outsourcing E-Commerce is Becoming Popular

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September 1, 1999 *2,200 subscribers* Volume 1, Issue 08
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ECnow.com 1999 trend #03: "Movement of e-commerce to a service industry" and "outsourcing of e-commerce functions will become very popular."


Trend Prediction: Outsourcing E-Commerce is Becoming Popular
Mitchell Levy
Publisher, ECMgt.com

As of the third-quarter of the year, ECnow.com's number three top trend prediction for 1999 is mostly on target, namely that there will be a "movement of e-commerce to a service industry" and that "outsourcing of e-commerce functions will become very popular."

In this context, outsourcing of e-commerce means that a company can "rent" the use of an e-commerce application and access it via the Internet and Web either directly from the software vendor or through a new intermediary, the Application Service Provider (ASP). Small, medium and "dot.com" startup companies see the benefit of outsourcing e-commerce components that are not their core competencies. The large "click-and-mortar" companies, with legacy integration issues and large IT departments, appear to be lagging behind in this trend.

Outsourcing and leverage are two management trends that have been heavily discussed over the last couple of decades. It's important for companies to focus on what they do best and to outsource activities that are not their core competence. By outsourcing, companies can leverage the work, effort and experience of outside partners whose sole responsibility is to satisfy a particular business activity. One of our readers indicates that his company gains competitive advantage by outsourcing. "My company can take on the industrial giants through the outsourcing functions available today," writes reader A.F. of San Francisco, CA, USA. Although the industry is just at the beginning of this trend for e-commerce, there are already a tremendous number of e-commerce activities that are being provided online on a "rental" basis.

The ASP concept is growing dramatically as seen through the recent formation in May of an ASP Industry Consortium (ASPIC) <http://www.aspindustry.org>. According to the ASPIC, an ASP "manages and delivers application capabilities to multiple entities from a data center across a wide area network. ASPs offer a simple and cost-effective alternative to managing technology in-house and help customers precisely control the total cost of ownership." "What we are seeing in businesses today is that the reliance on computer technology within companies is exceeding their capabilities" according to Jaime Schwartzman, V.P. Marketing, at @ccelerate <http://www.accelerateNOW.com>, a start-up company which delivers Web-based communication and collaboration solutions for distributed and mobile workgroups.

The shortage of talented IT professionals and their ability to create integrated e-commerce enabled applications will continue to feed this trend. At this stage in the ASP evolution, there are two classifications of ASPs being bantered around in some circles: the eASP and the iASP.

  • The eASP -- e for enterprise -- are enterprise type applications, typically massive packages, such as SAP, Peoplesoft, BAAN, Documentum and Interwoven, which are highly configurable and customized for specific vertical markets.
  • The iASP – i for Internet – are Internet-based pre-packed applications that are moderately customizable for a particular application and can cut across most, if not all, markets. These are typically point solutions that address a particular business need, but are not necessarily integrated into a company's core enterprise systems.

In the eASP category, a number of the larger enterprise software companies have started initiatives targeted at providing their software via the Internet on a rental basis. Pandesic <http://www.pandesic.com> is a partnership between Intel <http://www.intel.com> and SAP <http://www.sap.com> whose charter is to deliver this type of solution to medium-sized companies. But success in the eASP market will not come quickly or easily due to legacy hardware, software and people infrastructure hurdles that must be overcome by prospective customers.

As to the prospects for the iASPs, the sky is the limit. Most of the traditional services and a host of new Internet-based services are currently available. Here are some examples:

E-Commerce Internet-based Services for Rent
Storefrontshttp://store.yahoo.com, http://www.btsw.com, http://www.econgo.com, http://www.affinia.com
Electronic Software Distributionhttp://www.cybersource.com, http://www.buydirect.com
E-Marketing Automationhttp://www.rubricsoft.com, http://www.marketfirst.com
Affiliate Marketinghttp://www.linkshare.com, http://www.befree.com
Newsletter Distributionhttp://www.egroups.com, http://www.onelist.com
Customer Interaction: live communicationhttp://www.liveperson.com, http://www.hearme.com
Customer Interaction: automated e-mail responsehttp://www.brightware.com, http://www.egain.com
E-mail Marketinghttp://www.markethome.com, http://www.lifeminders.com
Online Auctionshttp://www.ebay.com, http://www.amazon.com, http://www.moai.com, http://www.opensite.com
Create Your Own Search Enginehttp://www.jayde.com, http://www.searchbuilders.com
Running a Bulletin Boardhttp://www.befree.com
Location Mappinghttp://www.mapquest.com, http://www.mapblast.com
Online Calendar Applicationshttp://www.ecal.com, http://www.when.com
Actively monitor the online communityhttp://www.ewatch.com, http://www.cycheck.com, http://www.cyveillance.com

For more examples, please check out either of these two Web pages:

As you can see, there are a number of companies providing e-commerce services and we are just at the beginning.

Let me leave you with a few of my favorite quotes from readers who responded to this month's survey:

  • "Outsourcing of this function is also a natural, particularly for small to medium businesses who haven't the resources or desire to develop and implement solutions. They just want a solution to their business requirement." F.R. - Toronto, Ontario, CANADA
  • "The internet and e-commerce present a new solution where the small to medium company can buy it (an application solution) and have the full solution supplied by the vendor at the vendors site. And the training is minimal as well. All any company will need in-house are small PC's with browsers." R.C., Silicon Valley, California, USA
  • "What we call traditional 'click and mortar' companies will continue to need their own IT staff to perform all of the critical activities associated with their legacy systems. They will hope that those staff members are talented enough to pick up the 'web stuff'. What we call Internet pure play DOT.coms will tend to outsource due to the cost of maintaining staff that may or may not always have the right skills." L.M., Sunnyvale, California USA

A Special Note to our readers: Don't miss the upcoming ASP events in the US and Europe, sponsored by ASPIC http://www.aspindustry.org/events.html.

I hope you enjoy this newsletter.

See you in cyberspace,

Mitchell Levy

President, ECnow.com <http://ecnow.com>
Publisher, ECMgt.com <http://ECMgt.com>
Coordinator, SJSU-PD ECM Certificate Program <http://ecmtraining.com/sjsu>

  • ECnow.com is an e-commerce strategy, e-marketing and training firm. ECnow.com is engaged in strategic e-commerce consulting and Internet marketing activities for US-based and international corporations.
  • ECMgt.com is a monthly e-commerce eZine focusing on strategy, trends and related news.
  • San Jose State University, Professional Development, Electronic Commerce Management (ECM) is a Certificate Program for e-commerce professionals <http://ecmtraining.com/sjsu>.


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