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E-business: Empowering the customer

There is a revolution going on in enterprise software that's creating significant new opportunities for investors.

There is a revolution going on in enterprise software that's creating significant new opportunities for investors.

The Internet has enabled the development of highly scalable applications that can be accessed using universally available client software, namely the Web browser. Customers and employees throughout an organization can access systems without having to call a customer service representative. The development of the Internet is an evolutionary step in the history of software development, but the effect is revolutionary.

Why not call it "e-everything"? The phrase e-business has emerged to describe the extension of business capability to the Internet, and it is quickly replacing the more narrowly defined but widely used "e-commerce."

There is an important distinction between e-business and e-commerce. E-business is inclusive of e-commerce capability--the ability to take payment over the Internet--but extends beyond commerce to customer self-service, back-office integration and targeted marketing capabilities.

Web sites, including e-business sites, must continue to evolve and add functionality to stay competitive and to attract customers. Features must include much more than the product catalog and the ability to take a customer's credit card.

Innovations include complex content management capable of delivering customer-specific content on the fly. Customer service capability can enable customers to quickly service themselves, whether they're looking up an account balance or the status of an order, changing services, or merely inquiring for additional product information. Recently, sites have added product campaign management software and targeted marketing capabilities to maximize sales to customers.

Computer systems started out automating the back office with large mainframes that could store and crunch data. With the advent of distributed client-server applications, organizations began automating the front office and developing sales force automation and human resource applications, for example. With the Internet, businesses are automating the customer, empowering the customer to interact with businesses on their own terms.

But e-business is growing increasingly complex and requires software to get traditional businesses online. The early pioneers built their own systems, but as the complexity continues to grow and the functionality and quality of new e-business software applications continues to improve, IT organizations will purchase solutions rather than attempt to build the software themselves.

We are seeing tremendous growth in the companies addressing this market--both the e-business-focused software vendors and the professional services organizations that plan and implement solutions.

How fast is this growth? In the third quarter, revenue for e-business software vendors increased 26 percent, and professional services grew 36 percent. The companies in these sectors are hiring as fast as they can.

A recent survey by InformationWeek indicated that the No. 2 priority of IT managers is e-business. Predictably, the top priority went to Y2K readiness. With the end of Y2K issues in sight, IT will be left to focus on developing e-business.

We believe that adoption of e-business software will continue to accelerate. After all, the market is still nascent. The two leading companies in the market, BroadVision and Vignette, had a combined total of only 843 customers at the close of the third quarter. We have only begun to scratch the surface.

We believe that successful e-business software vendors will focus on the customer by offering personalized marketing, content management and customer service capabilities. Increasingly, the business unit, the sales and marketing organization, not just IT, is getting involved in the purchasing decisions for these software solutions. They want more than a robust, scalable solution. The sales and marketing folk want to improve customer interaction, create repeat buyers through satisfaction, and in turn, maximize revenue.

Some of the leading companies in the market for e-business solutions include BroadVision, with its one-to-one marketing capability; Vignette, with its leading content management solution; and Silknet, with its broad focus on customer service solutions.

As the market continues to mature, we believe that the leaders will have to extend their capabilities beyond their current offerings, and competition between vendors will increase. But for now, customers will continue to mix and match the best of the breed to create complete e-business solutions.

(The preceding comments are not a complete analysis of every material fact respecting any company, industry or security. The opinions here expressed reflect the judgment of the author at this date and are subject to change. Facts have been obtained from sources considered reliable but are not guaranteed. Banc of America Securities (or its affiliates), its partners and/or employees may have an interest in the securities and options on securities of the issuer described herein and may make purchases or sales as principal or agent in securities mentioned while this article is in circulation. Neither the information nor any opinion expressed herein constitutes a solicitation by us of the purchase or sales of any securities or options thereon. Banc of America Securities may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in this article. The securities discussed herein are not FDIC insured, are not bank guaranteed, and may lose value.)