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SAP, Intel team on e-commerce

The behemoths announce a new company, Pandesic, which will sell SAP software and Intel-powered hardware aimed at the Internet e-commerce market.

    Intel (INTC) and the U.S. arm of German enterprise software giant SAP today teamed up to form a new company that will offer a turnkey Internet commerce service.

    As previously reported by CNET's NEWS.COM on August 1, the deal signifies SAP's first venture outside of its traditional packaged application business.

    The two companies will form Pandesic, which will deliver a service, not a product, with start-up fees "in the low double-digit thousands" and a percentage of revenue as a transaction fee.

    The firm initially will focus on U.S. companies selling hard goods to consumers, with rollouts to international markets and Web sites selling to other businesses planned within a year.

    The 50-50 joint venture, based in Sunnyvale, California, has about 50 employees, drawn equally from both parent companies, which also invested an undisclosed sum of cash. Harold Hughes, Intel vice president of planning and logistics and a former CFO, will become Pandesic chairman, while Bryan Plug, an SAP America vice president who has run SAP's Canadian business, will be chief executive.

    "We think most of the e-commerce stuff on the Internet today is fairly simplistic and won't scale," said Plug. "We believe e-business includes the richness of the shopping experience, order fulfillment, managing inventory, warehousing, and accounting."

    "Competing offerings don't give small to medium-size businesses the total integration of Pandesic," said Craig Barrett, Intel's president.

    Although Pandesic marks SAP's first venture for the smaller companies Pandesic is targeting, Intel's widely known brand will help the joint venture.

    "This explodes the market," said Sheldon Laube, chief technology officer of USWeb, which will sell and install Pandesic systems. "This reduces the risk and the cost of entry for Internet commerce." He cited the turnkey nature of the offering plus Pandesic's promise to upgrade hardware and software over time.

    Pandesic's offering includes marketing, order processing, fulfillment, inventory pricing, materials management, tax calculations, payment processing, shipping, logistics, financial reporting, and vendor payments that stem from Web transactions.

    That complexity plays to SAP's core competence in software to manage back-end operations for large organizations. The Pandesic service includes elements of its R/3 product line and can function either as a standalone system for a Web storefront or integrate to existing back-end software from SAP or another vendor.

    Although Intel is clearly pushing new uses for its microprocessors, the joint venture grew out of Intel's experience using SAP software to run global operations and worldwide manufacturing.

    Hughes said Pandesic is first targeting consumer-oriented marketers because managing those transactions and collecting payments via credit cards is simpler than in the business-to-business space.

    Pandesic also unveiled other partners, including Compaq and Hewlett-Packard for PC servers, CyberCash for payments, Citibank for banking services, and UPS for shipping.

    Tim Koogle, chief executive of Yahoo, said his search engine will work with Opandesic customers to integrate their e-commerce sites into Yahoo's various Web sites. Yahoo also may offer ad-serving services to Pandesic sites that want to advertise elsewhere on the Internet.

    Pandesic systems will be available by the end of September through Inacom and Internet systems integrator USWeb. Hughes said Pandesic will have a direct sales force too, in addition to signing other channel partners.

    In addition to start-up fees between $10,000 and $100,000, Pandesic will collect 1 to 6 percent of merchant revenues, depending on a variety of factors. Pandesic says its system can be up and running in as few as two weeks.

    SAP AG, parent company of SAP America, announced in March that its workflow software was being modified to allow it to work over the Web. That followed December's announcement that the company had added Internet elements for its R/3 3.1 offering.

    The software offers 25 Java-based components for Internet use, plus ten employee self-service human resources applications for intranets. The intranet applications let employees fill expense reports, verify employment and salary information, and perform other functions.

    The SAP Internet software is designed to work with network computers (NCs) and NetPCs.

    Intel is an investor in CNET: The Computer Network.