E-Business Service Provider (EBSP)

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E-BUSINESS SERVICE PROVIDER (EBSP)

E-business service providers (eBSPs) are companies that help other companies use e-business technology to improve operations. This might involve tasks like the design, construction, and operation of a company's Web site or the streamlining of procurement processes for a business. The original e-business service upstarts, including Scient Corp., emerged in the late 1990s, believing that companies, particularly smaller businesses unable or unwilling to hire their own technology specialists, would find e-business technology crucial to long-term survival. Many established technology giants, such as IBM Corp., also turned their focus to e-business services.

Initially, e-business service providers mainly were seen as firms that helped small businesses erect online storefronts. According to a September 2000 article in Money, "Not only do eBSPs host your site and provide templates and tools to help do-it-yourselfers build engaging electronic storefronts, but many also offer merchant accounts to facilitate secure credit-card transactions." However, as more firms began to offer e-business services, the definition of an e-business service provider grew to include a wider range of e-business services than simply those related to storefront design, construction, and operation. The notion of what type of customer might seek e-business services also expanded to include more traditional, larger firms.

Scient Corp. was founded in late 1997 as a traditional e-business service provider. The firm's early marketing tactics centered around the slogan, "It takes courage to be legendary." Advertising campaigns aimed at potential clients stressed the advantages of being the first to utilize new e-business technology, as well as the disadvantages of being left behind. These efforts paid off as the firm landed several contracts not long after its creation. In addition to securing business from fledgling Internet ventures like Wineshopper.com, furniture e-tailer Living.com, PlanetRx Inc., and ePhysician, the firm also helped to launch sites such as Chase Online for Chase Manhattan Corp. By the end of 1999, Scient had built a total of 15 e-businesses from the ground up and provided e-business integration services to another 85 companies. Speed-to-market was the firm's major selling point.

Sales continued to climb in early 2000, and Scient achieved profitability for the first time. However, within a few months, as investors began to shy away from dot-com startups, e-business service providers like Scient watched their client base shrink. In August, rivals iXL Enterprises Inc., Viant, and Marchfirst Inc. announced layoffs. Scient's stock price plummeted to roughly $10 per share, where it had started trading at the firm's mid-1999 initial public offering. Several Web sites Scient had built, including environmental news hub Verde Media and jewelry etailer Miadora.com, closed down. Roughly half of Scient's revenues, the percentage for which dot-com startups had accounted, simply disappeared.

The dot-com meltdown allowed larger companies to regard smaller, more technologically savvy firms like Scient less fearfully. As a result, issues such as quality and added value replaced speed-to-market as a key focus. This opened the door to industry giants like IBM, which believed e-business services would prove a highly lucrative market. According to a July 2001 article in The Financial Times, "the small-scale Internet consultancies, which shot to prominence by building web sites during the dot-com bubble, are fighting for survival in the wake of the technology slowdown and resurgence of larger, more established consultancies, who have made up for lost time in the e-business market." Recognizing that it needed to strengthen its ability to secure larger accounts, particularly when faced with increased competition from such formidable rivals, Scient agreed to merge with rival iXL in July. The deal was scheduled for completion in early 2002.

IBM Corp., the largest maker of computer hardware in the world, also is the top computer services provider. The firm spent the latter half of the 1990s retooling itself as an e-business services provider. These efforts began in earnest in June of 1995, when IBM acquired Lotus Development Corp. Management saw the purchase as an opportunity to bolster IBM's position in the computer software industry. IBM also planned to use the Lotus Notes messaging software to offer integrated e-mail, data processing, and Internet services to clients.

Within two years, services had become the most rapidly growing portion of IBM's operations. To increase its visibility as an e-business products and services provider, IBM upped its advertising budget by 21 percent in 1998. Highlighting its e-business servers, software, hardware, technology, and services, the firm targeted business managers expected to use the Internet to streamline processes, improve bottom lines, and increase visibility. In 1999, IBM upgraded its own Internet-based e-commerce operations. Early the following year, the firm established an e-Business Innovation Center in Santa Monica, California. The new operation had 16 employees.

At the core of IBM's e-business services was its WebSphere server software, which helped to power the e-commerce enterprises, including online stores, of IBM customers. The WebSphere Commerce Suite 4.1 package launched in 2000 included Web development tools, as well as technology that allowed businesses to classify customers in a variety of ways. This functionality allowed e-business to improve the results of future marketing campaigns. By December, employees at the first e-Business Innovation Center had increased to 135, and e-business accounted for $5.2 billion of IBM's revenues. Thanks to the previous year's upgrades, sales from IBM's Web site grew 65 percent to a record $9 billion.

Unlike many competing e-business service providers, IBM marketed its services to traditional businesses rather than targeting dot-com upstarts. Consequently, when the dot-com crash in 2000 left many e-business service providers contending with a sharp drop in orders, IBM saw demand for its e-business services continue to grow. Twenty-five e-Business Innovation Centers were either operating or being constructed by the start of 2001. As stated in the January 2001 issue of the Los Angeles Business Journal, IBM's goal was to "establish itself as the one-stop shopping source for customers seeking Web-related creative design, consulting and tech support." By then, services, both e-business and otherwise, accounted for more than one-third of IBM's annual revenues.