Dot Coms Need You

Like many surviving dot coms, Drugstore.com prefers to manage as much of its infrastructure as possible on its own. While it's having BCG upgrade its Oracle database from a four-processor to an eight-processor server platform to support business expansion, Drugstore.com seldom uses solution providers and often buys refurbished network cards and other peripherals. Even when it does sign on an outside partner, such as Cable and Wireless' Exodus Internet, to host its data center and Web site, Drugstore.com uses its own staff and equipment at its facilities.

"All they provide us is floor space, bandwidth and power,ping, power and pipe," says Scott Green, Drugstore.com's senior director of technology.

While solution providers may not welcome such hit-and-run sentiment, it provides a candid, but important, assessment of where some of the largest virtual businesses are spending their technology dollars these days,and where they are most likely to bring in outside help. Those solution providers that understand how IT managers at dot coms implement and deploy technology,and their biases against third-party assistance,are the ones more likely to find opportunities to serve their needs.

The good news for consultants, systems integrators and VARs is many of those dot coms that have survived are not just in a holding pattern,they are building next-generation capabilities for their businesses,all with an emphasis on increasing revenue and maintaining profitability. While many dot coms overbuilt on the hardware side,adding more servers and routers than they needed before the economy went south,they still need hosting and bandwidth providers. Online companies are also looking to improve the capabilities and usability of their Web sites, allowing them to offer more products, faster response times to complex searches and overall better customer service and support.

The bad news is, the freewheeling days of throwing solutions at every grand idea that pops into a 22-year-old CEO's head are over. "A year ago, time was a precious commodity," says Scott Sleeper, CTO of Tanning Technology, a Denver-based integration and IT architectural assessment firm. "If you could do it faster, that was worth something. Today, time is not the critical element. People are making much more rational decisions."

In addition, dot coms,tech-savvy themselves,are largely biased against using outside help. "I don't think [VARs understand the businesses they're dealing with before they come in the door," Drugstore.com's Green says. "I'll bet you I get 40 to 50 calls a week from VARs that have never even seen my site."

And those VARs that can pass the basics have to overcome a bigger hurdle,many dot coms simply like to purchase big-ticket items directly. They have large development and integration capabilities in-house, which they say are more cost-effective than paying an outside integrator. "I would say with the small [integrators, you're paying 100 percent premium over what you would pay if you had them on your own staff," says Etienne Handman, CTO at E-Loan, an online provider of consumer financing. "With the Accentures of the world, it's closer to three times,that's a pretty big premium."

Going Once...

Even eBay, arguably the most successful dot com, avoids using outside help. But Chuck Geiger, eBay's vice president of product development and architecture of the online auction site, concedes integrators can, at times, fill a strategic niche.

Given its meteoric growth in recent years,the company expects to break the $1 billion mark this year, a figure it hopes to see triple by 2005,eBay has stretched the outer limits of its infrastructure. Its subscriber base, just 12 million in 2000, is now 46 million. In a nutshell, eBay's systems were not designed for the amount of traffic and transaction volume it now has and aspires to grow to.

As a result, it is in the midst of rearchitecting its Web site and back-office operations with a platform it calls V3. The first phase involved partitioning its databases so each auction would have its own cluster rather than running all the auction categories on a common database. By doing so, outages that once routinely made headlines have ceased for the most part.

Now, eBay is working directly with IBM on rearchitecting its application code from standard C++ to Java 2 Enterprise Edition in an effort to improve developer productivity by building reusable components. More than 100 internal eBay developers are rewriting 3 million lines of code. The effort is so ambitious that eBay only agreed to do it if the programmers who designed and built IBM's WebSphere suite were on hand to help out.

"I knew I was going to break it because of my capacity and my unique need, and that's proven correct, actually, so having the biggest and best from IBM and having direct access made it impossible for me to use a middleman," Geiger says.

But eBay did use middlemen to validate its plans for V3; Accenture and Tanning were brought in to assess the new architecture and its methodology. "Tanning helped discern the type of architecture to build, and then Accenture helped me put together the program to build it," Geiger says.

Assessing the architecture was a significant engagement for Tanning,

Sleeper notes. For one, there isn't another dot com with comparable transaction volume. "EBay conceived a new business model, but pushed the technology beyond where it was ever designed to go," Sleeper says. "They're the 800-pound gorilla."

In addition, eBay plans to launch a B2B site that will let retailers unload excess inventory. EBay brought in Accenture to build a listing engine, which eBay will own and Accenture will license back to develop links for retail clients. In return, Accenture will receive per-transaction fees from retailers for their use of the listing engine, says Accenture partner Kevin Reedy. Although such revenue-sharing schemes are less common than they were during the boom, Reedy says Accenture is doing more of them these days on a strategic basis.

Maintaining Internal Control

Other dot coms face the same in-house and outsource issues, albeit on a smaller scale, acknowledging there are places VARs and integrators can provide value.

For example, E-Loan's Handman has not ruled out bringing in outside help for the upgrade of its mortgage loan-origination system,Eastern Software's Empower,to a pure Web-based, three-tier application platform. The upgrade will let different applications communicate with each other rather than through a shared database, giving customers real-time views of the loan-processing procedure. Handman is also considering replacing E-Loan's homegrown document-management system with a turnkey document- and image-management solution, and is open to bringing in outside help. "My core business is making loans, not making image-management systems," Handman says.

Like E-Loan, online broker Ameritrade is considering bringing in a solution provider to build out a new call center and to implement an event-driven job-automation system from Tidal Software, Mountain View, Calif. Coming off its acquisition of rival Datek Online Financial Services, speed and lack of resources may warrant bringing in an outside partner, says Gary Greenwald, vice president of enterprise development.

Travelocity.com also has its own strategic effort under way, where it is maintaining internal control over development but using EDS for administration. As part of its plan to roll out a revamped Web site set for later this year, the online travel-reservation service is deploying Oracle 9i Real Application Cluster. The system will replace some mainframe applications and a recently deployed standard Oracle 9i database with a platform that will help "improve the shopping experience we offer," says Richard Pendergast, vice president of systems at Travelocity.

EDS also runs Travelocity's data center and hosts its Web site. And while Travelocity negotiates its deals directly with its key vendors, which include Oracle and Sun, it uses EDS' volume-purchasing clout to negotiate the best price. "The reason we involve EDS is we can get an even better deal," Pendergast says.

Travelocity works with other solution providers, as well. For example, when Travelocity acquired Site59.com, a company that sells excess inventory of air, hotel and car-rental services in March, it turned to NCR and InterVoice-Brite to link its telephone systems and customer databases and to roll out new call centers. It also used NCR's consulting services to deploy that company's Teradata CRM tools.

"While CRM is a skill Travelocity considers part of its core competency, we recognized NCR had additional skills, so working together we were able to jumpstart our CRM efforts," Pendergast says. "We're always looking for in-source vs. outsource opportunities."