Ecommerce on the line

There has been something of an ecommerce backlash recently. Market analyst Forrester Research has reported that only five per cent of visits to online stores result in a purchase, that some dotcom businesses have crashed and that scarcely a day goes by without another security breach at an online bank.

Whisper it - but this is splendid news for the channel. There is no surer sign of a market reaching a new stage of maturity than a few teething problems. It's at this stage of the technology life cycle that most opportunities arise for the channel, and ecommerce has a long way to go before resellers will be asked to withdraw their support.

The ecommerce market can be divided into three rough categories: low-end and small to medium sized enterprises (SMEs); corporate; and vertical. One potential option, of course, is hosting, but evidence to date suggests that resellers do not have the resources to compete with internet service providers.

At the lower end of the SME market are the consultants and web designers who use off-the-shelf packages such as Actinic's Catalogue and Multi-active's EC Builder Pro to construct ecommerce systems. Rightly or wrongly, this is regarded by some in the channel as the 'family online store' end of the market, despite claims to the contrary. Chris Barling, managing director at Actinic, argues that Catalogue is scaleable and able to address the corporate market.

But there remain doubts as to whether the range of tools is sophisticated enough for the online buyer, whose needs have become more complex than at first anticipated. In response, Actinic is to launch its Actinic Business products in September. Its penetration in the high end will be the subject of much scrutiny.

The major opportunities lie in the corporate end of the market - essentially the bricks and mortar companies that are struggling to bring their traditional back-office systems and their new web front-ends into one seamlessly integrated system. But this is even harder to accomplish.

The business case for constructing sites for clients is being rapidly eroded by the growth of web hosting companies. Why build your own site, or pay a reseller to construct one for you, when a company such as MRI or Virgin will build and host it for a fraction of the price and in half the time?

No-one at the wheel
Since the ecommerce sector is still in a state of flux, no single vendor is capable of supplying a suite of products that covers everything. It follows that we can expect a period of rationalisation in the next two years. In an ideal world, resellers would be entrusted to pick the best products from each category in the range of tools needed for ecommerce and integrate them all.

Resellers in the networking sector had thought much the same when there were hundreds of communications vendors but no single solution. If ecommerce follows the pattern of the network industry, buyers are likely to want to source products from as few vendors as possible, no matter how crudely those vendors may have assembled their own product portfolios and cobbled them together.

Again, no single vendor can provide all the building blocks for the foundations of ecommerce on which all systems must be built: i.e. application servers, and content and commercial management. Some, like Broadvision, have the pieces in place to cover two areas and rely on partnerships to cover the third. As a result, a lot of technology agreements between vendors will be formed over the coming years. That would be fine, but they tend to last until vendor A decides to acquire vendor B, which subsequently has to drop any association with vendor C and all its technology resellers.

On top of that, there are the usual contradictions of open systems. In theory, any ebusiness tool should be able to run on top of any application server. In practice, of course, there are degrees of compatibility. For example, if you use IBM for an application server, the conventional wisdom is that you will need Vignette to run over it for commercial management.

In other words, integration may be a perilous business in the coming years. Gary Barnett, an analyst at industry researcher Ovum, said: "Every significant software vendor has an ecommerce story that features itself as the central character, but no-one is presenting the true version of events."

In a determined effort to set up as dominant players in a market still in its infancy, vendors are not making things easy for end users or the IT channel. "Every software supplier wants to supply the hub around which the rest of the technology adopters' applications will revolve," said Barnett. "The truth is that very few of them can justify their claim to supply the key component. Customers will have to use many types of products to implement next-generation ecommerce, and vendors will have to work together to meet their requirements."

This sounds a little optimistic. According to Jeremy Sindall, European vice president for content management at vendor Interleaf, which is now a division of Broadvision, some vendors are not prepared to give their products to the channel anyway. "If you think systems integrators can resell ecommerce systems, you're living in dreamland," he said.

The language of ecommerce
On the other hand, there are vendors which are actively seeking to use resellers and systems integrators to bring solutions to market. Roger Lane, marketing director at Software AG, sees a niche that resellers can exploit - for another two years at least. "We actively seek resellers and integrators and will continue to do so until ecommerce solutions become shrink-wrap products, when they will become the domain of distributors. But we are a long way from reaching that situation," he said.

Because Software AG is a provider of content management technology, the niche area on which resellers would have to concentrate would be understanding how the complex data structure of native XML could be used to produce fast, responsive libraries of information.

This demonstrates the challenge facing the channel. Apart from a few high-end systems integrators, most resellers are unable to provide complete ecommerce systems for clients unless they focus on the SME market. Unless they happen to be Cap Gemini or Computacenter, they will have to approach sell-point products - addressing specific issues for corporate clients, rather than attempt to provide a complete infrastructure.

The question of how to exploit ecommerce opportunities is really one of which niche area to target. As highlighted by recent publicity, there are endless loopholes in most ecommerce systems. The fact that Barclays' online customers were able to read each others' personal details shows that the testing of applications is not as rigorous as it should be. This opens up opportunities for resellers that specialise in supplying testing tools and services.

When it is possible for hackers to acquire customers' credit card details, this must create a need for ecommerce security specialists. Forrester's report on the dismal success levels of so-called e-tail outlets in turning enquiries into sales only illustrates how desperately companies need to improve their responsiveness to customers.

One of the easiest areas in which to gain a foothold will be the integration of legacy applications, and for many resellers this is a question of extending the service they already offer to corporate clients.

Vendor WRQ is a good example of this strategy. The company has a 19-year history of selling solutions into blue chip clients and is known mainly for its ability to link PCs to IBM host systems. Obviously, this is no longer a product set to create the turnover to keep shareholders happy, and the company was forced to find new markets. It has achieved this by developing its expertise in integrating systems to the point that data held in legacy systems, such as IBM mainframes or Unix servers, can be wrapped in object technology coding and made available to web applications.

According to industry analyst Gartner, 20 per cent of corporate IT spending is used to integrate existing systems. The millennium bug issue highlighted this, said Chris Bradley, director of strategy and planning at WRQ. "Having spent all that money on the millennium problem, companies will not throw out those old systems, even if they do not fit the ecommerce way of doing things. They will get the people who have always dealt with the CICs and the DB2 systems, and ask them to migrate them to a new model," he said.

With a great deal of experience in corporate environments, and a user base of six million seats, WRQ and its resellers have more than a foot in the door. Despite this, it cannot recruit enough resellers and Bradley is trying to lure more systems integrators into the market with a package of training, co-op marketing, mentoring and pre- and post-sales support.

The shortage of resellers in this sector of ecommerce could be explained by the fact that enterprise application integration is perceived as a tough market, said Bradley. Even so, Gartner predicts worldwide sales of $1bn (£665m) a year, with a 100 per cent growth rate year on year for the next four years.

Theory of Relativity
An alternative to WRQ's technology comes from Relativity Technologies, a newcomer to the marketplace. This US-based startup tackles legacy code rather than legacy data formats. Again, resellers and systems integrators that have forged close links with corporates during the millennium scare will be able to use these relationships to create more business.

Relativity rejects the idea that middleware can be used to bring disparate systems together. It's not that simple, and the solution needs a much deeper investigation of the problems at the heart of the incompatibility between Cobol and the new web applications. Vivek Wadhwa, the founder of Relativity, said: "Middleware was like putting lipstick on a pig - telling people the standard line that legacy systems could be web-enabled."

Wadhwa has now come clean about the issue and decided to develop tools to convert Cobol into something that can be used on the web. Again, the answer lies in the use of object technology - converting the application into objects which are convertible to Java, C++ or Visual Basic.

"This will be a much bigger opportunity than the year 2000 issue. That was about the date - this is about the entire transformation of systems," said Wadhwa.

Ultimately, companies such as Relativity and WRQ are providing technology that will increase the response times for ecommerce. The revelation by Zona Research that buyers will not wait longer than eight seconds for purchase information before they take their business elsewhere, has been so frequently quoted it has become an ebusiness mantra. But tighter systems integration and load balancing aren't the only ways to improve response times.

Research last year by Hewson Consulting showed that the customer relationship management practices of the UK's top 150 electronic traders is woeful. Only 14 per cent were able to respond to a sales enquiry within a day. Most companies think it is enough simply to have a website, said the report.

This is another area in which resellers can provide solutions. Bob Apollo, UK managing director at E-Gain, argues that he has the tools to combat this menace. E-Gain uses artificial intelligence applications to route sales enquiries to the appropriate person and, where necessary, generate an automated response to a request for information. "Configuring these systems will be a rich source of revenue for resellers," said Apollo.

The spectrum of ecommerce tools is enormous and new vendors are constantly entering the market and looking for resellers. The latest company to launch into the UK is Catalog International, a Danish vendor looking to recruit enterprise resource planning (ERP) specialists who will be able to install and integrate its business-to-business procurement software. Catalog's product set may show the way ecommerce software is heading.

Prem Athwal, UK country manager at the company, said: "We decided not to offer people tools but a complete package. This is an application that any systems integrator will be able to pick up in days. What will be really valuable is the experience they have of ERP systems."

This is welcome news for resellers of solutions from SAP, Baan and JD Edwards. SAP sales had flattened completely for resellers such as Diagonal, there are few new installations of ERP systems and the web version of products such as MySAP.com have yet to win the confidence of users. Catalog could prove to be the salvation of ERP system resellers.

Simon Pollard, vice president and service director at AMR Research, said that to simplify the elements of an ebusiness suite into three levels - application servers, content and commercial management - is to underestimate the complicated tectonics of the software systems needed. "There is all the choice you would expect with inward facing business systems which have evolved to face outwards."

The only real challenge is in choosing the right sector and picking the best vendors. This aspect of it all is as perilous as ever.

Conclusions

• Research from Forrester suggests that only five per cent of visits to online stores result in a sale.
• Many dotcom startups have crashed, leading to widespread fears that the ecommerce era is over before it has really begun.
• Many analysts see the teething problems of ecommerce as signs of a mature market, and the time when resellers and the rest of the channel have plenty of opportunities to cash in.
• The ecommerce market can be divided into three sectors: low-end and SME; corporate; and vertical. One other potential option is web hosting, but the evidence so far suggests that resellers do not have the resources to compete.