Can Pandesic Prosper?

Intel and SAP are discovering that not everything they touch instantly turns to gold. Just take a look at their joint e-business venture, Pandesic.

Intel and SAP are discovering that not everything they touch instantly turns to gold. Just take a look at their joint e-business venture, Pandesic.

While Pandesic hardly can be deemed a failure, the company is increasingly at odds with the e-commerce visions of Intel and SAP. On one front, Intel is heralding its recent iCat purchase as the cornerstone of its hosted e-commerce solutions. That's the very same market Pandesic targets. On the other front, SAP is trying to add e-business functionality to its enterprise resource planning (ERP) software via its portal.

Both visions could overlap with Pandesic, which uses SAP technology to target a broad market that stretches from high-end enterprises to small e-tailers. The potential for competition coupled with Pandesic's losses (estimated by one analyst at $20 million per year), spurs some debate as to how long Intel and SAP will bankroll their baby.

"One wonders why the two leading names in the industry have done such a poor job executing a consistent strategy," asserts International Data Corp. e-commerce research manager Albert Pang.

Other analysts confirm Pandesic's problems, but doubt SAP or Intel will throw in the towel. "E-commerce companies that are still around two years from now could do very, very well," says industry analyst Vernon Keenan. "It would be a poor decision to back out [of Pandesic] now."

Intel, for one, says it has no plans to bail. "We're very happy with Pandesic's progress and our investment in the business," says an Intel spokesman.

SAP could not be reached for comment. Although Pandesic boasts only one top exec from the ERP vendor (compared with four from Intel, including President Pete Wolcott), Pandesic officials say they are equally backed by both founders.

Granted, Pandesic is building closer ties to Intel. On Tuesday, Intel announced as part of its Intel Online Services initiative that it will host Pandesic's commerce solution. The impact this will have on Pandesic's existing hosting relationship with Digex, which currently hosts Pandesic's 40-plus customers, remains to be seen.

Pandesic's channel partners, meanwhile, remain very upbeat. "Our partnership with them is great ... we're working on four or five different Pandesic projects right now," says Tom Wilson, VP at integrator Osprey Systems Inc.

Many of Pandesic's integrators praise the company for its strong channel support and its maverick pricing model. Essentially, Pandesic's goal is to get e-commerce sites deployed within three to four months, with a start-up cost of under $100,000. Pandesic then generates recurring revenues via a flat monthly fee and a percentage of the customer's online transactions.

"Our business model is about long-term, recurring revenues, not some one-hit flash in the pan," notes Bruce Zuelsdorf, a Pandesic sales manager.

But how long will Intel and SAP maintain their patience?