Tech Industry

HP leads e-commerce initiative

The company accelerates its move into the Internet commerce field by launching a global consortium backed by major financial institutions.

Seeking to boost their positions with financial institutions, Hewlett-Packard (HWP), Electronic Data Systems (EDS), and HP's VeriFone unit are forming a global consortium to boost electronic commerce.

Called the First Global Commerce initiative, the alliance initially includes the sponsoring technology companies plus eight major financial institutions, most of which also are VeriFone customers.

Although HP and VeriFone officials say First Global is designed to promote e-commerce and "open platforms" for e-commerce, the move appears to be directed against their chief competitor, IBM (IBM).

IBM has not only a full suite of Internet commerce software, but also banking software venture Integrion, which includes Visa International and 17 major North American banks. Visa, Royal Bank of Canada, and Citibank belong to both Integrion and HP's First Global Commerce initiative.

"It looks in some ways as though VeriFone, HP, and EDS are forming a camp in some ways to compete with IBM's efforts in the same area," said e-commerce analyst Scott Smith of Current Analysis. "But in some ways it makes me think more of [e-commerce trade group] CommerceNet than Integrion."

That in part is because First Global Commerce intends to open its membership to other technology firms, additional financial institutions, merchants, buyers, industry analysts, and card companies such as Visa, Mondex, and MasterCard. Mondex is already part of First Commerce.

Today's announcement follows word earlier this month from the same three technology firms that systems integrator EDS will launch a service next month to process Internet card transactions for financial institutions. (See related story)

Analysts said the consortium would help HP leverage its ownership of VeriFone, its largest-ever acquisition at a valuation of $1.29 billion, and counter IBM.

"IBM is the person to beat in this space," said Cliff Condon, electronic commerce analyst at Forrester Research.

Condon said the deal with EDS would help bring e-commerce to smaller banks and merchants, which were the thrust of last month's announcement.

"To date it's just been the big guys" that can play in e-commerce, Condon said.

He said EDS's experience as a service integrator "will really give the second tier of financial institutions the ability to play in this game."

Hewlett-Packard is the No. 2 computer systems supplier after IBM but does not intend to play second to Big Blue in e-commerce. First Global Commerce will concentrate on three areas: payments, Internet commerce, and smart cards.

Research firm International Data Corporation projects that commerce over the Internet will soar to more than $220 billion by 2001, more than 20 times its forecast for 1997.

Other members of First Global Commerce are Wells Fargo (WFC), Japan's Sumitomo Credit (SUMI), Spain's Sistema 4B, and First USA Paymentech (PTI), one of the largest U.S. electronic credit card and merchant payment processors, and a unit of Banc One.

HP's Bob Taylor said other technology vendors will be invited to join First Commerce, although the alliance is not likely to approach IBM any time soon. But Taylor did not rule out having IBM or CyberCash, another VeriFone competitor, as members. Big retailers also will be invited, Taylor said.

"The initiative with First Global will open electronic commerce's doors for more traditional merchants like stores and retailers," said Rodney Bell, a senior director at Paymentech's headquarters in Dallas.

Analysts noted that merchants were missing from the initial list of participants, but they expect VeriFone's position as the leading supplier to payment devices to enable it to attract a substantial merchant following.

The group will promote electronic payment solutions based on an open architecture, beginning with VeriFone's Integrated Payment System, which supports Internet commerce, smart card, and merchant point-of-sale uses.

Glenn Osaka, vice president and general manager of HP's extended enterprise business unit, said new HP technology was already enabling some customers to cut their cost per transaction dramatically.

The First Global Commerce initiative was more focused on consumer behavior than IBM's efforts, Osaka said, but he does not underestimate Big Blue's strength, especially in large institutions with mainframe computers installed.

"I'm not after the mainframe yet. IBM can have their share of the business, for a while at least," he said. "Our focus is simplicity, flexibility, access to information and services."

Lloyd Mahaffey, senior vice president at VeriFone, said the initiative was aimed at pooling technology from several leading companies to make electronic commerce more convenient, whether in a store or on the Internet.

"We believe there's an opportunity unfolding to completely redesign the payment systems and financial service systems that allow banks and consumer services to interface with each other," he said.

"We think the systems we have now just won't take us where we want to go," said Mahaffey, whose company has reached an agreement with IBM to ensure its systems can work together with VeriFone's standards.

Reuters contributed to this report.