Enlarging the Web

Following the fortunes of such companies and their spin-offs reveals how dense the web of Web-commerce has already become. Recently, for example, ZirMed.com Inc., a Louisville-based company that has been helping healthcare providers file claims data directly on the Internet for all of one year, has formed partnerships with two other Louisville firms: Seven Lands Software, whose unified-process electronic funds transfer technology will complement ZirMed’s strategy, and Genesys Development Corporation, which will provide elecronic data interchange expertise.

Partnership is where it’s at in the e-marketplace, as Lexington’s ecampus.com has demonstrated. The "globe’s largest virtual college bookstore" has recently inked agreements with companies like Inktomi and Texas-based i2 in order to both extend its reach and sustain proper levels of customer service.

Sometimes those partnerships are with your own people. Delta Air Lines will be making home PCs and Internet connections available to its 72,000 employees for $12 a month. Through partnerships with People PC Inc. and Hewlett-Packard, Ford Motor Company will provide home PCs to its 370,000 U.S. employees, and charge them a mere $5 for Net access. At the same time, the auto maker is entering a collaboration with UPS Logistics to speed up vehicle delivery time to customers, including a plan that will enable customers to track their car like a package from the production line to its arrival in their town.

Going further, UPS plans to apply this and other expertise through its new subsidiary, UPS e-Ventures, designed to capitalize on Net opportunities. Its first venture, UPS-e-Logistics, will package some of the same e-services the company offers to its largest clients for use by small- and medium-size companies.

"The fastest way to grow now is with alliance partners," says Keith Hall, president and CEO of Corvus Digital Solutions in Louisville, where the number of employees and the revenue have been doubling every year since the company’s formation in 1996. "If technology allows anything, it’s a high degree of specialization. We’ve had a lot of success with that already, and that will be a major part of our growth for years to come."

The company pledges to help businesses cope with e-commerce (site development, marketing, and security), e-business and e-training by employing a team of designers, programmers, engineers and marketing pros to get customers from the starting line to a constantly evolving Web site. Fashioned from the 1996 merger of White Wolf Computer Graphics and Comsult Management Information Solutions, Corvus continues to profit from its own alliances with AT&T, Data Processing Systems and Fulfillment Concepts, and counts among its customers such firms as KFC, Humana, and the Sam Swope Auto Group.

Gradually, Corvus is leading the shift from software and CD-based training to wholly Web-based modules and programs. The firm has been recognized as an "Up and Comer" by the Metro 100 program in Louisville, and is the region’s largest Web site developer. Hall credits good old human connections as well as the high-tech kind.

"The Kentucky Office of Economic Development has been working with us on alliance building and strategy – it’s a program, in conjunction with Ted Hoffman of Alliance Ventures of San Francisco, that promotes and helps Kentucky businesses develop strong alliances in and out of the state," he explains. "Greater Louisville Inc. has helped us with the alliance building as well as directing us in utilizing the state tax credits program. The Enterprise Corp. has directed us towards many resources for growing a business as well as making me part of a roundtable for CEOs of fast-growth companies."

An Oldham County native and Murray State graduate, Hall has surrounded himself with other home-grown talent and relishes the company’s Louisville location as much for its business atmosphere as for its proximity to 70 percent of the nation’s population and that crucial UPS hub.

Lexington’s eCorporation’s move to a larger facility is just a minor indication of the many-faceted growth the company is experiencing.

"The growth is very hard to manage," says company president Rick Baker. "We’ve doubled in size every few months."

Founded in 1999, eCorporation has its roots in Baker’s experiences with his former companies, MaxWeb and Orb-bit Design Group.

"We had a definitive plan to turn it into an entrepreneurial greenhouse," he says. "I was talking about it in 1997, pitching to local and regional investors – I was a lone wolf then. For two years we had a concerted plan to work with major clients, to gain a good reputation for doing things under fire, to try to convert their problems, applications and challenges, and Web-enable them into solved problems, in the New Age, dot-com world."

The company is backing such efforts as Web Genesys, a publishing engine for colleges; OaSys, a delivery system for digital images; and CarWave, an award-winning online car classifieds operation.

"I don’t like to talk about vaporware – people have concepts on napkins and want to go raise venture capital. I wanted to have some really hard, solid stuff. People want to see real tangible objects, so we wanted to build up our credibility. By the time we reached the VC (venture capital) companies, we had about seven projects. Since then, we have sold one application to a company called Usendit, and assisted them in raising VC in the low millions. That company, now in the beta launch stage, is now valued in the $10 million-plus range.

"Today we closed on a $5 million round for Travelago, which grew out of working with Travelocity to do video streaming, and coming up with an online video destination guide. Now Travelago is one of the largest online video resources and we’re making a play to dominate the travel content arena with a couple mergers and acquisitions."

Both Hall and Baker have grown their companies and ideas from the fertile soil of a design background, though these days what they design are strategies instead of visuals.

"eCorporation is not in the business of selling Web design services," says Baker. "We’re interested in building Internet businesses. We want to partner, we want to have a trailing interest, an ownership stake. Really we have too many opportunities, so we’re selective. If we believe in the upside of the application, and it fits our skill set, we’ll try to move heaven and earth to be involved."

eCorporation’s momentum has been fueled by a bolstered financial aspect of the firm, from the backing of two VC firms with broad-based clout to the internal strengthening of their business development capability. Such developments only add to the company’s mission to incubate young dotcoms (the current count is 14), then turn them loose on their own paths.

"We’ve added to the design company a financial component," says Baker. "We can’t quite do everything, but we can cover most of the bases for an evolving company and go from idea to reality."

Baker is just as glad to see the symbiotic successes of other Kentucky dotcoms, as they raise the general technology level and awareness. He’ll call attention to it in June when eCorporation, in collaboration with UK’s Gatton College of Business, will host the first annual Mid-South E-Conference in an effort to rally local entrepreneurs, emerging dotcoms, and nationally recognized venture and private equity firms.

"We expect 250 to 300 people will be there, including some very significant people in the Internet space and VC community," adds Baker. "We’re more or less trying to assist [and] to instigate and I think it will take on a life of its own."

Working out the kinks

New niches create new problems too. Losses from the "denial of service" attacks on major e-commerce sites like Yahoo and CNN in February could total over $1.2 billion. The resulting mayhem has temporarily stolen attention away from privacy issues like that faced by DoubleClick, accused of using cookies to compile and send tracking reports on individual consumers to potential advertisers. Not only do a host of privacy issues arise, but so do issues of fair competition. For instance, the Justice Department recently announced that it’s looking into eBay’s practice of blocking rival auction sites from accessing its content.

As Baker suggests when he notes that his company had just discovered some valuable state incentive programs, "We’re running at 110 miles-an-hour, so we don’t notice much that’s not going that fast."

Keith Hall notes a similar interface benefit from the membership of Corvus on the Kentucky Quality Council, drawing lessons from manufacturing operations like Dana Corporation.

"We were able to apply their principles of quality management and control to us directly," he reports with satisfaction.

Like the companies that eCorporation likes to incubate, headliner Amazon.com may finally be reaching critical mass, enough to not only benefit from economies of scale and increased warehouse efficiency, but maybe even turn a profit. And as the company looks to serve its customer base of 16.9 million, its warehouses in Campbellsville and Lexington will be part of the equation.

The Campbellsville facility presently employs 500 and is forecast to hire 500 more in the next two years. While the Lexington warehouse is not yet open, it will debut with 250 workers, and will double that number in its first two years as well. Though the company recently laid off 150 people, that still leaves 7,350 nationwide, and Amazon’s extended reach into categories beyond books only figures to extend its physical facility network.

Moving real stuff in real space and time is indeed the next critical juncture for the e-commerce juggernaut. UPS spent over $700 million for technology to support e-commerce, while the U.S. Postal Service topped the $1 billon mark. But they’re not just working with three-dimensional packages. Two years ago, UPS introduced UPS Document Exchange, which allows customers to send digital documents, software and images securely and with some of the flexibility and compatibility problems of e-mail attachments resolved.
One recent attempt to bridge the virtual-physical gap is the offering of GolfNEARu, an affiliate of National Golf Suppliers of Louisville. Designed by Corvus Digital, the site is designed to allow golfers to research and shop for equipment – even help to design custom clubs – and then be directed to the nearest dealer to test-drive those clubs in real time and real space.

But there’s another, more pressing side to this conundrum – the proper role of states in imposing and collecting sales tax on virtual transactions. Until 2001, a federal moratorium exists on Internet sales taxes. Of course, we’re already supposed to be paying tax on such out-of-state transactions, as provided for in the use tax provision of the state tax code, but a miniscule percentage of those transactions are policed. One-fourth of the Kentucky state budget comes from the $2 billion collected annually through sales tax.

The dilemma is:Where is the actual transaction taking place, and how many interested parties are entitled to gain money from it? To avoid confusion and complexity, some favor a universal Internet tax rate. Others say the Net should stay tax-free.

To be B2B or not to be

A February report released by Forrester Research said that by 2004, online exchanges will account for 53 percent of an expected $2.7 trillion in business-to-business (B2B) e-commerce.

At GE’s Aircraft Engines unit in Cincinnati, a 40-person team has overseen a complete integration of its 300 customers’ systems with the company’s online customer Web center, thereby streamlining purchasing, order fulfillment and repairs at the $10 billion division. Especially in the aircraft industry, the ability to make parts available at the same time you’re transmitting all-important service bulletins to your customers makes for a mechanic’s – and a manager’s – dream: a seamless and efficient, one-time transaction that takes minutes instead of days.

Lexington’s ecampus.com, which purports to deliver all the amenities of a campus bookstore to online customers, is primarily involved in the business-to-consumer realm, but the firm is also designed to provide distribution and fulfillment services to a wide range of educational providers, from colleges and secondary schools to corporate training programs and general business.

Lexington-based Link-Belt Construction Equipment Company recently launched a venture called "Link-NetPro," allowing its distributors exclusive access to vital and timely technical and sales information.

The Kentucky pioneer in this realm is the rising star PurchasePro, based in Las Vegas, but begun by Lexington native Charles "Junior" Johnson. The company specializes in enabling businesses to sell and buy from one another via a password-protected marketplace on the Net, thereby skipping the inefficiency of having to link their own Web sites. Johnson started the firm through his ties with the purchasing departments of the Las Vegas casino and hospitality industry.

"They buy across a wide breadth of products," says Brad Redmon, the company’s Lexington office manager and a member of the board of directors. "It’s perfect because it cuts across so many areas. Although the majority of companies on our network are hospitality-related, our core focus is on small- and medium-sized businesses. We were lucky enough to begin in that vertical market, but we recognized early on that our product was universal and could work for any business." Other prominent customers include The Nevada Power Company, Sea World of San Diego and the Phoenix, Arizona Chamber of Commerce.
The Kentucky office has been a proving ground for PurchasePro, devising its first billboard marketing campaign for PP, hosting the first buyer seminars, forging the company’s first strategic alliance (with Cincinnati Bell) and being the first to offer its product outside the hospitality market to entities like homebuilders and hospitals. Meanwhile, with a presence in over 20 metro areas and at top resorts nationwide, PurchasePro has been making plenty of noise on the stock market, despite the "quiet period" prohibiting forward-looking disclosures from company officials during the IPO process. On the company’s first day of trading, September 13, 1999, the price was $12 per share. In mid-February, that price stood at over $133 per share.

The company is only three years old, but is already serving as a veteran on the e-commerce field of battle. And Johnson’s prior experience as founder of Johnson Security has given the company the necessary background in online security to meet recent attacks head-on.

"Private marketplaces are what we can create," explains Redmon. "For example, one recent customer is a group purchasing organization for the hospice industry. They use our platform to offer nursing homes and other facilities the opportunity to buy from a select group of buyers."

AEC Connect is the company’s construction industry product, modified to suit the needs and the project work flow patterns of commercial contractors. Negotiations are ongoing with other "verticals": lawyers, doctors, trade organizations, even chambers of commerce.

Redmon attests to the competitive spirit of many company stalwarts.

"All of us were athletes, and we’re all very competitive," he says. "That drive, that desire to succeed and will to win carries over and it lends itself to success."

As enthusiastic as the company is though, they’re equally circumspect about the apparent wealth of opportunities out there.

"There are so many companies being created. There will be a lot of synergy out there with PurchasePro and we’re looking for those relationships," observes Redmon. "But you have to be very judicious, lift up the hood, do a lot of due diligence."

That same diligence has been applied to recent strategic marketing partnerships with the likes of Primavera Systems, Sprint and Office Depot. But Johnson is always there to point out that the hardware store proprietor is as likely to benefit from their product as any big name.

"Small businesses get exactly the same software from PurchasePro as does a Fortune 500 company," he said last year. "We’ve knocked down the barriers to commerce and have leveled the playing field. All anyone asks in business is to get a foot in the door. We’re getting them in the door."

PurchasePro and others have wedged their feet in doors by virtue of their strategic partnering and innovation. After all, speed is just as needed in decision-making as it is over the data lines. Just ask Keith Hall, whose latest venture at Corvus is an e-marketing applications called E-MKT2.

"Our ties with Data Processing and AT&T allow us to go to the senior marketing person for a company. They can make the decision quickly, and it gets them in the game quickly. Those relationships help get us to the key decision makers right away.

"With one online application, a marketing executive can do everything from manage their e-commerce data to direct and control literature and product fulfillment. It’s fun to show people this type of application because it affects their day-to-day business so much."

The big "E" is education

eCorporation’s Rick Baker succinctly sums up the human resources challenge of e-commerce:

"With the pay being offered to young programmers, it’s almost tough for them to stay in school the full four years," he half-laments. "They get a couple years and they’re recruited."

At the same time, there’s a push to educate the under-educated – namely, the business owners and managers who want to know this stuff themselves. This winter, Jefferson Community College began offering an e-commerce certification program, intended to offer managers the skills and knowledge to integrate Web-enterprise into every aspect of their businesses, instead of merely staging an electronic dog-and-pony show.

Meanwhile, where do these cutting-edge firms find their talent? And what kind of training programs would be most beneficial to fortifying e-commerce efforts in Kentucky?

"The practical work-related tech training is being addressed by private firms with short certification courses," replies Baker. "Some is being done at the university level, but the course structure could be enhanced and modernized. However, by the time you set a course in motion, it’s changed, so it’s not the university’s fault for not keeping up … it’s a very fluid environment."

"Many of our people come from large companies where they felt stifled and out of touch with the action of the Internet," says Keith Hall. "Others come from small start-ups – sometimes their own – looking to work for a company with the muscle to tackle bigger, more innovative projects. We can offer something to both groups. I would definitely like to see the universities offer more fundamental development skills education – ASP, SQL and even HTML. I understand the problems they face with aiming at a moving target, but we could use more skilled people and we will only need more and more in the future. We also need non-development people to have at least some fundamental computer and Internet skills."

Thus, many such companies find themselves filling conduit role with universities, both enabling their technical systems and drawing from their pool of future workers. Meanwhile, the Kentucky Science and Technology Corp. has launched an initiative called Gorilla Group, designed to award $1,000 seed grants to Kentucky college students with business plans. As one might expect, much of the Gorilla’s attention will be focused on juicy Internet start-ups.

In Frankfort, a package of legislation called the "Kentucky Innovation Act" is under consideration. Among its forward-thinking proposals are an R&D voucher fund, a Kentucky commercialization program, and a new department in the Economic Development Cabinet to target the recruitment of technology-driven companies.

New spaces, enduring principles

According to an Ernst & Young survey of 150 Net company founders, it’s that drive to innovate as much as the money that’s motivating these "Netpreneurs." Sixty-seven percent said they were drawn to Netpreneurship because it "represents a new frontier."

The visionary types at Kentucky’s Net observe that this frontier spans a lot more than the width of a computer monitor.

"It’s all about creativity in this business," says Keith Hall. "I’ll come to an idea differently than a technical person might. The combination of our ideas will be more profound than if either one of us had come to it alone. There is a creative component to this that’s always overlooked. It’s still primarily a visual medium and you’re trying to reach a broad base of viewers or consumers."

Rick Baker’s approach is as personal as it is professional and gets to the core of what it takes to innovate in such an info-glutted, hypermarketed environment.

"For 18 years in a row, I’ve picked a mentor in seven different disciplines," he explains. "I pick mentors in science and mathematics, art, human relations. I try to balance it between different disciplines that would give me a broad spectrum of understanding. In the venture capital world, I’m studying David Wetherall, CMGI Idea Lab and Internet Capital Group. I read their press, I download their 10Ks off the SEC site.

"I’m also reading about cold fusion. My architect this year is Frank Geary – last year it was Frank Lloyd Wright – and I’ll try to visit at least five or six of his buildings. I have a goal to go fairly deep in each of these disciplines. The artist I’m focused on right now is Marc Chagall, last year it was Picasso. Next year I’ll review that and see where it’s gotten me. I call it God’s equation. I have an equation for the business we’re working on and my personal philosophy is tied up in that:If you seek that kind of balance, you’ll be able to harmonize different forces.

"At eCorporation, we’re trying to work with technicians, artists, business people, having some human intelligence to motivate people. Each of those disciplines is taxed to the utmost and none of them are wasted. In evaluating how things look, feel, branding, all that I’m trying to do, you can always do and learn more. It’s a 360-degree equation, and it takes a lot of diversity of focus to be of service to the company."

E-commerce entrepreneurs apparently look for seamlessness in their missions as much as in their products.

In 1990, the late French novelist Georges Perec penned a book called La Disparition. What was initially astounding about the book and its subsequent translation into English was that it was entirely composed without using the letter "e." Like any poetic convention or form-based rule, such a choice was a gimmick on the surface, but further reading revealed a deeply creative story, one both bound and freed by an odd convention.

E-commerce practitioners may find a similar dynamic at work in the very busy electronic hive. Once we get over the gimmick of the "e", and perhaps follow Perec’s example and drop it altogether, we may find that it’s simply commerce taken to a higher power.

Adam Bruns is a staff writer for The Lane Report.