Merchant Server: Are You Being Served?

Electronic commerce has evolved to the point where it demands pre-packaged solutions and Microsoft?s single-platform Merchant Server promises to be a complete ?shop in a box?. For resellers, it could well be the fast track into retail, says Tim Phillips.

The internet, in case you hadn?t noticed, is changing. It used to be a geek?s paradise where everyone who could get on to the Net had a go at making their own content. Now, there?s an increasing divide between the content providers and the content consumers.

Increasingly, those providers are professional organisations rather than an enthusiast in his or her bedroom. Today, retail organisations from Virgin to British Airways offer services to UK Web users. Even if hardly anyone is making money from the internet yet, the players aren?t putting up sites just for the good of their health. We have reached the dawn of the era of electronic commerce.

If electronic commerce is going to take off ? and research from the Henley Centre suggests that it may already be speeding along the runway, as one in five internet users has already bought something from the Web ? then the demand will rise for pre-packaged solutions.

This has not escaped the notice of the major Net players: Netscape, Sun and IBM are already offering e-commerce solutions. IBM?s vice president of network computer solutions for EMEA, Sankaya Addanki, estimates that in 1996, electronic commerce increased by 400 per cent. ?Look at 1995, and in the world there was about $200 million of e-commerce. Look at the market to the end of 1996 and the rate is close to $1 billion,? he explains.

That?s why electronic commerce needs packaged solutions. Lotus announced its entry-level solution two weeks ago as an add-on for Domino and will deliver it in another few weeks. It?s available to download in beta today. But perhaps most important of all, Microsoft has its offering and has had for the last six months ? Merchant Server.

Merchant Server is an enhancement to NT Server 4 and Internet Information Server, continuing Microsoft?s single-platform internet strategy. There?s no attempt to extend it to a cross-platform environment like Domino and there?s no encouragement if you want to implement it under Unix. What you get instead is a massive commitment to making IIS and Merchant Server internet standards. If some other manufacturers are dipping a toe into the electronic commerce pool, Microsoft has the resources to plunge right in. David Bridger, Microsoft internet server product manager, defends Microsoft?s single-platform strategy for its Net products. ?Merchant Server scales up and down easily. A lot of the electronic commerce sites you see at the moment are being built from scratch using CGI scripts,? he says. ?We wanted to package that and bring the cost of an online shop down. Using our product, you can literally build a shop out of the box.?

Bridger concedes that users are not going to build a shop that easily, but he points out that the important parts of the electronic commerce shopping experience, like the electronic shopping basket, are already developed in Merchant Server.

But, he agrees, retailing involves more than shopping baskets. All that Microsoft?s product can do is try to remove the complexity from one part of the process. ?You can?t do this if you don?t have the physical logistic ability. There?s more involved, including getting a fleet of people in vans to provide the product. In the short term, business might be less important than marketing value. For retail, being able to provide electronic commerce is good marketing.?

But who can afford to splash out this type of money on marketing to a select group of consumers? ?Realistically, we?re still talking about early adopters here,? Bridger says. ?Those sort of organisations that have Web sites in place already, and also systems like SAP which we can we integrate with.?

While Merchant Server is intended to be the complete development environment, it doesn?t attempt to do the entire commerce job. For example, it integrates with transaction systems to provide secure electronic credit card payments and work is being done to provide back-end integration with systems like SAP for stocking, pricing and order processing. This will surely be the biggest test of Merchant?s ?shop in a box? claim.

Previously, UK retailers have relied on custom-developed applications, eschewing packaged products for stock-keeping andsupply-chain management ? if they automated the process at all. Unlike the US, where EDI took hold quickly at the beginning of the 1990s ? two decades after the first EDI transactions ? only one per cent of the UK?s trade was done in this way.

Bridger says the environment has now changed enough for this not to be a problem. Windows has a hold in the Epos world and there isn?t a lot of NT skill in the retail channel. ?Developers do need NT expertise but quite a lot of developers are up to speed already. It?s an opportunity for the rest. If they have skills in SQL Server and NT Server they are quite some way down the line. My advice to them: start developing the expertise,? says Bridger.

That?s jolly convenient advice for Microsoft but the early signs are that the channel may be taking it. In January, the Online Delivery conference was oversubscribed: 400 developers and retailers went along to get a head start in developing those NT skills.

Microsoft channel sales and marketing manager, David Smith, is helping to establish Microsoft?s effort to recruit channel retail skills. It hasn?t escaped Microsoft?s notice that the Windows NT skills needed are rare in the retail sector and that the large retailers it wants to attract are wary of small Web-oriented resellers. Microsoft?s response is to recruit a cadre of 15 resellers to work more closely with the company. Those resellers get the good leads, Microsoft gets credibility.

?The business development group has extended an invitation to the channel but we are talking about 25 partners at most. They have to be prepared to see no return on their investment for at least 18 months. It?s a certain type of reseller that gets involved,? says Smith.

Smith doesn?t agree that the type must be ?more money than sense? although he does concede that few are going to have the commitment and the cash. ?There are some retail specialists, who already have strategic relationships. There are also specialist solutions developers who are developing products around Merchant Server. We give them access to our technology in its early development stage,? he says.

For those in the retail sector, electronic commerce is part opportunity, part threat, Smith adds. This is partly because of its effect on retailing and partly because the incumbent e-commerce reseller will form a strategic relationship with management and marketing teams ? instead of through the traditional route of the retailer?s IT department.

?Every business transacts money in some way. Successful resellers will be able to build on those skills and extend electronic commerce eventually to a broader market,? he says.

There are other uses for electronic commerce that don?t need credit card transactions, new customers or retailers. Just as the internet in business is the intranet, electronic commerce has an intranet application.

Merchant Server is being customised for internal use, says Bridger. ?Within organisations, the supply of goods is important too and it applies equally to Merchant Server. Infobank is developing a Merchant Server application like this for one of the major utilities.?

It is possibly, he says, an opportunity for resellers outside the retail sector to use Merchant Server without the complexities involved in a full retail solution. This type of ?electronic stationery cupboard? may seem like overkill for a small organisation but the supply of goods internally is becoming a headache for many HR departments.

Smith doesn?t claim that anyone will make revenues from electronic commerce in the short term ? not for a year and a half is his guess ? but in five years, he says, ?it will be a huge opportunity. We?re entering a new form of competition here and electronic payment will be the next Visa card. The credit card went from being something that many people were not certain about using to an everyday part of our lives. In 10 years, electronic commerce will be something we all take for granted.?

Roger Collins, one of Smith?s select band at BIT, admits the market is ?really small? at the moment ?but it?s going to be really big?. He sees a knock-on effect from defensive moves by the big players in retailing. Tesco was first to market with its BIT-designed electronic supermarket. Arch-rival Sainsbury?s has recently copied the concept.

?If you?re going to bet on anyone being a success in this area, you bet on Microsoft,? Collins says. ?It would be a mistake to think Merchant Server is restricted to Active X. Open is a dirty word but I like the way it doesn?t tie you to Microsoft technology. We need tools like this to make a market.?

With more high-profile sites under construction, BIT has been given a leg up by electronic commerce. ?In an ordinary week I?d never have got to talk to Tesco. Now we?re getting interest from a lot of similar organisations,? Collins says.

Tesco and Great Universal, two of the four largest e-commerce sites in the UK, are driven by Merchant Server. You might have trouble getting into Microsoft?s fast track programme for electronic commerce (unless you have the resources you might have trouble finding a reason why you?d want to at the moment) but there?s no doubt that the proprietary, database-driven world of retail technology needs new resellers to give it a radical overhaul. Electronic commerce will be their way into that sector.