Competitors swarm Pandesic's carcass

One month after Pandesic announced its plans to close up shop, scores of ASPs and e-commerce vendors are clamoring for the company's 100 customers.
Written by Ben Elgin, Contributor
One month after Pandesic announced its plans to close up shop, scores of ASPs and e-commerce vendors are clamoring for the company's 100 customers.

Pandesic, the 400-person outsourced e-commerce provider spawned by computing giants Intel and SAP in 1997, said in late July it will throw in the towel because it could not carve a timely path to profitability.

Pandesic officials say 200 e-commerce providers--be it app outsourcers or traditional software makers--have approached the company about taking on its customers. "The response to Pandesic's winding down has been, frankly, overwhelming," says a spokesperson for the company, which will continue its hosted e-commerce service through at least the end of the year.

Many competitors have leapfrogged Pandesic's skeleton management team to court the customers themselves. Express.com, one of Pandesic's biggest merchants, which sells DVDs, music and other electronics, has received calls from 50 tech firms seeking to migrate its business over to a new e-commerce platform. Express.com CIO Victoria Piper says these suitors range from ASPs to hosting facilities to application providers.

"This is a real opportunity for us. ... We can offer a cost-effective change of direction for these customers," crows Michael Hentschel, president of Internolix Corp. America, an e-commerce software maker that is actively courting Pandesic's clients.

But reeling in Pandesic's customers won't be easy. So far, none of the ASPs and e-commerce vendors contacted by Sm@rt Partner can claim a single Pandesic customer win.

For starters, the technical migration certainly will cause headaches. And with the holiday shopping season rapidly approaching, few may dare a complex migration before the end of the year. Second, while the ASP's customers realize the benefits of tech outsourcing, these customers also understand the risks following Pandesic's demise. This has left many competing providers struggling to prove they have healthier business models than the ill-fated Pandesic.

"I'm concerned that [Pandesic's] news ... may give rise to yet another influx of nay-saying about the viability of this sector," says Keng Lim, CEO of Escalate, a Redwood City, Calif., e-commerce provider that claims to be in "active discussions" with a few of Pandesic's largest customers.

Poking holes in the ASP pioneer's blueprints isn't difficult. For starters, the company offered e-commerce solutions based on SAP's R/3 technology, which wasn't a terrific fit for e-commerce start-ups. Second, the company charged a modest setup fee up front, and then took between 2 percent and 6 percent of each merchant's revenues. Not only did that sit poorly with some prospective customers, but a soft B-to-C e-commerce sector also translated into weak revenue cuts for Pandesic. Getting out of that hole proved impossible.

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