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Tech Industry

The human bottleneck in B2B

A funny thing happened on the way to the business-to-business "revolution": There were plenty of weapons built, but not enough people to fire them.

    A funny thing happened on the way to the business-to-business "revolution": There were plenty of weapons built, but not enough people to fire them.

    Over the past few years, hundreds of companies around the globe have devoted themselves to writing code and building enterprise-class e-commerce technology. Referred to by many as arms dealers, these companies--which include such well-known publicly held franchises as Ariba, Commerce One, BroadVision, i2 Technologies, Art Technology Group, BEA Systems, Interwoven, Vignette, Epiphany, WebMethods, PurchasePro, VerticalNet, Oracle and FreeMarkets--are responsible for building the underlying software applications that make B2B e-commerce possible.

    Judging by the truly astonishing year-over-year and sequential revenue growth rates posted by many of the aforementioned companies in recent quarters, it seems clear that demand has been extremely robust for the "weapons," or technologies, they are developing--from buy-side procurement applications, trading platforms and content-management solutions to supply chain management resources, personalization tools and application servers.

    What technology providers and enterprises are quickly discovering, though, is that the "arms" sales themselves are simply the beginning--not the end--of a long, sometimes excruciatingly painful process. For with most new B2B-related technology purchases comes a massive deployment, customization and integration cycle. Often requiring large teams of engineers, thousands of man hours, and millions of dollars to complete, this implementation effort is often as critical to an enterprise's overall long-term health as is the actual technology being purchased.

    We prefer to think of the issue in these terms (with a little help from MasterCard):

    New procurement application: $2 million
    New content management layer: $1 million
    New application server: $1 million
    Seamless integration with existing business infrastructure: Priceless

    And so, in an ironic twist, people--or a lack thereof--have actually become a major stumbling block in the release and adoption of B2B technologies.

    As a remedy to this human bottleneck, "arms dealers" have aggressively allied themselves with leading professional services companies. Leveraging the intellectual capital and client relations of these consultants and systems integrators, B2B technology providers hope to drive more technology sales, faster technology launches, superior technology implementations and, ultimately, greater customer satisfaction.

    Commerce One's recent acquisition of AppNet, a leading provider of Internet professional services, is perhaps the clearest example to date of this phenomenon. Consummated Sept. 14, 2000, this was a $2 billion stock-for-stock transaction done for apparently one reason and one reason only: to better manage the implementation cycles of Commerce One's marketplace and procurement technologies.

    But Commerce One is by no means alone. As the chart below indicates, every flavor of B2B technology provider now boasts a healthy and growing roster of consulting and systems integrator partners.

    Clearing the bottleneck through partnerships
    Ariba i2 Technologies WebMethods Epiphany
    PricewaterhouseCoopers
    KPMG Consulting
    IBM
    Deloitte Consulting
    Arthur Andersen
    Andersen Consulting
    Computer Sciences
    Cap Gemini E&Y
    Unisys
    Proxicom
    Andersen Consulting
    Cap Gemini E&Y
    Deloitte Consulting
    PricewaterhouseCoopers
    IBM
    Arthur Andersen
    Computer Sciences
    Cambridge Technology Partners
    Braun Consulting
    Andersen Consulting
    EDS
    Cap Gemini E&Y
    Deloitte Consulting
    KPMG Consulting
    Lante
    BEA Systems
    EDS
    Computer Sciences
    IBM
    Infosys
    Unisys
    Braun Consulting
     
    PricewaterhouseCoopers
    KPMG Consulting
    Cambridge Technology Partners
    Deloitte Consulting
    Cap Gemini E&Y
    Hewlett-Packard
    iXL Enterprises
    Commerce One BroadVision FreeMarkets Manugistics
    AppNet (acquired)
    PricewaterhouseCoopers
    Andersen Consulting
    Cap Gemini E&Y
    PeopleSoft
    Cambridge Technology Partners
    Compaq Computer
    Andersen Consulting
    BEA Systems
    Computer Sciences
    Cap Gemini E&Y
    Deloitte Consulting
    Hewlett-Packard
    Sapient
    iXL Enterprises
    Deloitte Consulting
    Deloitte & Touche

    PricewaterhouseCoopers
    KPMG Consulting
    IBM
    Deloitte Consulting
    Arthur Andersen
    Andersen Consulting
    Computer Sciences
    Cap Gemini E&Y
    Technology Solutions
    Source: Company reports
    We suspect the bottleneck is only likely to get worse over time. While it seems clear that B2B e-commerce technologies will improve dramatically in the next three to five years, we are only at the beginning of wide-scale global adoption of the Internet as an enterprise-class transaction medium. Layer on top of this the sheer volume of product introductions expected over the same time period, and it stands to reason that professional services firms will likely become an increasingly important facet of the B2B industry.

    As of Dec. 8, 2000, WR Hambrecht + Co makes a market in the securities of BroadVision (BVSN), Cambridge Technology Partners (CATP), Infosys Technologies (INFY), Sapient (SAPE) and VerticalNet (VERT).

    The information contained herein is based on sources believed to be reliable but is neither all-inclusive nor guaranteed by WR Hambrecht + Co, LLC ("WRH+Co"). Opinions, if any, reflect our judgment at this time and are subject to change. WRH+Co does not undertake to advise you of changes in its opinion or information. In the course of our firm's regular business, we may be long or short in the securities mentioned and may make purchases and/or sales of them or options to purchase or sell them from time to time in the open market, as a market maker or otherwise, including purchases from or sales to customers on a principal basis. In addition, WRH+Co may perform or seek to perform investment banking services for the issuers of these securities. Most of the companies WRH+Co follows are emerging growth companies whose securities typically involve a higher degree of risk and more volatility than the securities of more established companies. The securities discussed in the reports included in WRH+Co Research may be unsuitable for investors depending on their specific investment objectives and financial situation and needs. No report included in WRH+Co Research is a recommendation that any particular investor should purchase or sell any particular security in any amount or at all, and is not a solicitation of any offer to purchase or sell from or to any particular investor. For additional information that may be available on the securities mentioned, please contact WRH+Co.