Releasing Your Inner Infrastructure Play

June 2000

If you see three well-known Internet companies make the same strategic shift, it's a trend, and four makes it a stampede. Four major consumer ecommerce companies are moving into the infrastructure business:

• Beyond.com is the furthest along with its eStore service, launched in September 1999, providing online storefront services for companies wanting to sell online.

• CompuBank, a leading Internet-based banking service, announced in April a deal with General Electric (GE) to provide the banking technology infrastructure for GE's consumer finance Web site, GE Financial Network.

• BigStar Entertainment announced on April 20 the creation of its Advaya Direct Marketing System division, which will use BigStar's technology to provide online direct marketing services to other online merchants.

• MP3.com announced on June 20 their plans to become an online music infrastructure company. The company has recast itself as a or music service provider (MSP), providing content, security, marketing, data, and payment schemes to Web sites that want to offer music.

With the vultures (or are they lemmings?) circling the putative corpse of business to consumer (B2C) and waiting for the death of business to business (B2B), the "next big thing" has become infrastructure. And we're hearing again the trite refrain that the tools suppliers are the only people who make money in a gold rush. The model, of course, is Cisco; it always has been. Everyone wants to be Cisco. Who wouldn't?

Many ecommerce companies have no doubt developed strong systems for commerce, marketing, and other services. We expect that over time, the ecommerce community will standardize on a small number of platforms, and some of these proprietary systems may indeed be the wave of the future. After all, Vignette, a respected content management infrastructure company, evolved from CNET's early efforts to develop its own content management system.

Whether these new infrastructure divisions are the equivalent of Peapod's deathbed conversion to B2B ecommerce or will unlock hidden value in these companies is not clear yet. There are good reasons to be skeptical:

• Service businesses require different skills. CNET had the wisdom to stick to its core business and settle for partial ownership of the company that marketed its technology.

• Internally developed systems require a very different mindset than commercial products, even if the developer does the integration.

• Many of these services are me-too offerings in crowded fields. How is eShops different from Amazon's zShops or Yahoo! Stores? Probably too many online direct marketing firms exist already.

• If these pioneers cannot succeed, how can their customers expect to do so? In the words of Woody Allen, "Those who can't do, teach. And those who can't teach, teach gym."

However, we're certainly going to be hearing more about infrastructure and services from some well-known consumer ecommerce companies.