Dot-coms causing bottom-line bombs?

The dot-com crash has affected everyone from real-estate brokers to advertising firms. What about Microsoft, IBM, and others who sell to these online businesses?

It's bad to be pegged as a dot-com these days. But is it worse to be a vendor that's trying to sell to them?

During the past couple of years, software vendors, including Microsoft Corp. (msft), IBM Corp. (ibm), Oracle Corp. (orcl), and the Sun Microsystems Inc./Netscape Corp. iPlanet alliance all have launched major campaigns to sell to dot-com customers. Now that so many dot-coms are falling on hard times, are these vendors rethinking the wisdom of their strategies?

After all, dot-com layoffs, stock devaluations, and funding problems have had devastating impacts on a number of other companies that have bet their businesses on dot-coms, ranging from real-estate brokers to advertising firms. A dot-com that's teetering on the brink of closing its doors can hardly be expected to shell out for new servers, transaction-processing middleware, or wireless-infrastructure products, one would think.

But software vendors are holding fast to claims that bombing dot-coms aren't hurting their bottom lines.

IBM -- the company that made "e-business" a household (and trademarked) name -- is going so far to claim that its focus on helping dot-coms become sustainable and profitable more quickly has been good for the bottom line of its Global Net Gen sales unit.

IBM formed the dot-com-targeted Global Net Gen unit 20 months ago. The unit is part of the company's sales and distribution organization.

In January, Global Net Gen announced it had set aside $500 million in funding to help finance dot-coms. This week, the Global Net Gen business began conducting "Going Global" seminars aimed specifically at dot-coms struggling with time-zone, currency, and other issues confronted when attempting to take their Web-only businesses global. "We're not seeing a slowdown (from dot-com customers) at all," claimed an IBM Global Net Gen spokeswoman. "Our business unit is more focused than ever on helping this community succeed."

Microsoft is singing a similar tune, but citing slightly different reasons as to why the dot-com bombs haven't blown away its e-business software sales.

"Our different philosophy for scaling out the data center will help us the most over time," said Bill Dunlap, Microsoft group product manager for e-business products. "We're saying you don't need to spend millions up front just to get your business online."

Microsoft's pitch to dot-coms remains the same: Buy a few, smaller Windows 2000 servers and related back-end software now, and add to your capacity, a server at a time. Microsoft has used this strategy in selling to companies ranging from Buy.com (buyx) to Barnes & Noble.com (bnbn), Dunlap said. At the same time, Microsoft has launched initiatives like the August Dot.Ramp program it announced with KPMG Consulting to help bring B2B marketplaces online more quickly and efficiently.

At the same time, Microsoft isn't putting all its e-business software eggs in one basket, Dunlap emphasized. "E-businesses span a wide range, from pure-play dot-coms to traditional companies coming online who are interested in B2B and B2C."

Some non-traditional software vendors are relying on similar price/performance gains achieved by Web-based subscription models as the best way to attract dot-coms lacking deep pockets.

Salesforce.com, for example, is touting its ability to provide software as a service today, not some time in the future, as one way to attract small- and mid-sized online businesses.

"Users have found enterprise software too expensive to use. Vendors don't call them back when they need help because they have insufficient numbers of users," noted Salesforce.com chairman Marc Benioff. "We train users for free and hold their hands through the process. We can get entire companies up and running in a matter of weeks."

Benioff's only caveat: Salesforce.com is not a dot-com, he insists. Nor are its wares "hosted services," even though, in fact, Salesforce's applications and customers data reside in an outsourced datacenter. Just as "dot-com" has come to have a negative connotation, so, too, has "hosting," Benioff claimed.

"To be hosted implies you can be unhosted. My service cannot be put on a CD-ROM. We look more like Amazon.com (amzn) or E*Trade, in terms of our infrastructure," than a hosted version of an enterprise application, he added.