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Software firm taps big names for e-commerce

Intershop's 29-year-old CEO aims to help firms break down walls that could stand in the way of doing business on the Web, and his model seems to work.

Stephan Schambach has always wanted to break down walls.

As an East German teenager, Schambach demonstrated in the streets as the Berlin Wall was torn down. Today, the 29-year-old is chief executive of an e-commerce company that aims to help firms destroy symbolic walls that could stand in the way of doing business on the Web.

"In the '80s, I was still very young and I felt like I would never be on the forefront of anything because I had missed the PC revolution," Schambach told CNET "I was wrong. The Internet showed up, and though e-commerce wasn't there yet, it made sense to me."

In a market already clogged with e-commerce software firms, why should anyone care about Intershop? Schambach can tell you. For one, the company's sales are booming. Intershop claims its e-commerce software now helps run more than 20,000 Web sites worldwide, boasting big name clients such as Hewlett-Packard and NatWest Bank. Its stock, which trades in Germany, has skyrocketed since it $15 debut in 1998.

What's more, U.S.-based Forrester Research predicts the e-commerce market will reach nearly $5 billion within two years, up from $259 million in 1998. For nascent companies like Intershop, that's good news.

Intershop made waves last summer by poking fun at IBM in a print advertising campaign that the Wall Street Journal deemed too crass to run on its pages. One ad pictured a farmer shoveling cow manure under the letters "e-b.s.," a thinly-veiled reference to IBM's e-business campaign.

Advertising jabs aside, the firm is intent on becoming a major player in the United States and aims to caputre Fortune 1000 customers. Schambach is on a recruiting blitz. He recently nabbed former Compaq chief executive Eckhard Pfeiffer as the company's new chairman. Last week, Intershop named former Oracle executive Keith Costello president of the firm's American operations.

Costello said he decided to leave Oracle for Intershop because he believes in Schambach's vision.

"Intershop has the opportunity to be an important company," Costello said. "Stephan is truly seen as a visionary in this industry. He is the rock star of e-commerce."

Founded in 1990 in Jena, Germany, Intershop has about 500 employees and U.S. headquarters in San Francisco, where Schambach now lives. The company, which competes mainly against Broadvision, Art Technology Group and OpenMarket, develops software that clients use to sell products over the Internet.

Schambach's early business efforts produced an online order-entry system that university students primarily used to purchase discount items on the Web. Boosted by the success of the service, the company expanded its operations to the general public and increased its product offerings to more than 13,000 items.

Venture capital backing wasn't an option in East Germany, but Schambach said he kept expanding his business with the support of individual investors.

"I don't want to complain about East Germany," said Schambach. "It's difficult to start a company anywhere. There were some delays, but I didn't really see them as obstacles."

Last month, Intershop reported fourth-quarter profits that doubled on soaring sales. Fourth-quarter revenue increased to $19.2 million, 206 percent higher than the same quarter a year-ago and nearly as much as all the firm's revenue from 1999 combined.

Still, Intershop's long-term success is hardly assured. The company is competing in a cutthroat market. Most of Intershop's competitors are also riding the boom for e-commerce software and services, and new firms seem to enter the market every week.

Competitors such as Art Technology Group are also finding well-heeled partners to help spread the word. Art Technology teamed with consulting firm PricewaterhouseCoopers recently to establish a practice dedicated to selling the company's Dynamo software.

One of Schambach's strengths is that he is able "to be non-techy on the outside, but techy on the inside," said Forrester Research analyst David Troug. "To be successful in this business you have to be able to switch from one to the other and Schambach does this very well," he said.

Troug said InterShop's product offerings have improved as the company has expanded beyond helping small companies set up storefronts on the Internet. Customers are using Intershop's Enfinity software, which is built entirely with Java and XML, to handle orders taken on various devices such as cell phones and handheld devices and synchronize those orders with their back-office accounting and billing software.

Schambach said he wants to grow the company to the size of one of the enterprise resource planning (ERP) giants such as PeopleSoft, Oracle and SAP.

"We will be in that top group in five years," he said.