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Technology is king for Web merchants

A handful of pioneering merchants on the Web are finding that their core businesses may not be retailing but the technology they have developed to run their own electronic storefronts.

Cybersource, which runs a well-known software store on the Web called Software.net, has signed up a dozen or so software companies to use its technology to sell software off their own Web sites. Virtual Vineyard, a wine boutique and one of the Web?s earliest merchants, soon will launch a similar service to enable other merchants to sell hard goods via the Net.

"Right now the merchant server market is anybody's market," said Torrey Byles, electronic commerce analyst at Giga Information Group. "The usual blue chip IT (information technology) vendors, and I'm thinking of Netscape Communications, Microsoft, and maybe IBM, don't necessarily have the battle-tested products. It's really the early adopters in the electronic merchant community that have, through persistent efforts to get a Web storefront up and running, learned what the requirements are."

Software publishers lured CyberSource into marketing its back-end technology.

"We've had a lot of companies asking us to help them with the back-office processing that goes along with conducting business from their Web site," said CyberSource CEO and president Bill McKiernan. "We hadn't planned it that way. But when we had half a dozen very significant software companies come in saying, 'Can you help us?'" we ain't that dumb that we miss a business opportunity."

NetContents, the parent company of Virtual Vineyards, actually set up the wine-vending site to sell its back-end software for electronic stores.

"We talked to retailers and they said, 'What do you know about selling things?'" said Robert Olson, a former Silicon Graphics engineer who is co-founder and technology guru for VV's parent. "That's legitimate, so we decided to do a demonstration site."

Virtual Vineyard's unexpected success distracted NetContents from its original business plan, but Olson expects to get its first commercial customer up on the Web this month. He'll launch the commerce service in about two months, when it has several sites using its technology.

"Our core competency is the technology," Olson said. "We had to get into the retail business in order to understand the mapping of the technology to the reality of selling things."

CyberSource's commerce services division now has nearly a dozen clients that use its back-end systems Just this week Qualcomm began selling its popular Eudora Pro email software from its Web site, using CyberSource technology. Tracy Crowe, marketing manager for the Eudora line, termed first-day sales "very, very good" but would not disclose figures.

"We made the classic make vs. buy, or in this case lease, decision," Crowe said. "Our goal was time to market."

Adobe Systems this week began using CyberSource's back-end technology after running a pilot selling its PageMill authoring software using Adobe technology.

"The biggest thing they are providing is a cost-effective way to deliver full products to customers over the Internet," said Adobe's Brian Heuckroth, senior product marketing manager. Because downloading multi-megabyte pieces of software chews up bandwidth, Adobe opted to offload that process to CyberSource.

Today the buy button on Adobe's home page sends the user to CyberSource's Web site, where credit card authorization, fraud screens and downloading happens. Next month CyberSource will introduce a new version of its service that handles those functions without a buyer knowing CyberSource is doing the work--a branding advantage for software publishers.

Other Web sites that have invested significantly in technology are taking different tacks.

Nets Incorporated, the new company that resulted when Jim Manzi'sIndustry.Net merged with AT&T's new media unit, plans to use Industry.Net's substantial technology to enter other vertical markets itself, although it has named none.

InsWeb, which has spent more than $1 million on security alone for its insurance marketplace Web site, is giving away some of its technology.

"To the extent that we are helping to foster electronic commerce on the Internet by sharing this technology, we hope to accelerate the expansion of commerce," said Darrell Ticehurst, InsWeb president. The company has discussed working with Web sites in other vertical markets, "but keeping up with our own site has kept us from looking in external directions."

CNET: The Computer Network used its technology to get a 50 percent share in a new entertainment service online, E Online, that is due to launch later this year.

"It's really anybody's ballgame now," said Giga analyst Byles, noting that even mighty Microsoft essentially outsourced development of its merchant server software last month by buying eShop. "To develop a real production quality merchant server, the real solutions come from the trenches; the electronic merchants who were out there first."

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