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Monday - May 8, 2000

eCommerce Software Spending to will Continue Skyrocketing

Although the US market for packaged eCommerce software will reach $14.5 billion in 2003, user demand will force dramatic changes in how applications are built and purchased. According to a new Report from Forrester Research, Inc., firms will supplement an application-server-based commerce platform with complementary plug-in apps an approach Forrester terms "platform orchestration."

"By 2003, US consumers and businesses will spend $2 trillion over the Net. Online retail sales will hit $144 billion, and business-to-business sales will reach $1.8 trillion," said Eric Schmitt, analyst at Forrester Research. "To thrive in these competitive arenas, firms will need the software tools to promote brands, analyze trends, and capture market share, as well as the support tools to retain buyers -- all of which require a reliable, high-performance software infrastructure."

As firms build out their online businesses, several factors will cause software spending by US companies to grow from $3.1 billion in 1999 to $14.5 billion in 2003. eCommerce budgets will continue to rise as companies spend 1% of total revenues on eCommerce initiatives in 2003. Large companies will dominate the market, driving an average of 50% of all software spending through 2003, while smaller firms will choose to lease software from application service providers. Finally, whether by choice or market pressure, many firms will be forced to channel their eCommerce through third-party intermediaries, offloading investments in software to personalize, measure, and support nonstop eCommerce.

As companies increase their commitment to packaged software, they also increase the burden of integrating and managing multiple products. Forrester believes that decision-makers will seek out platform products instead of feature-rich, but proprietary, packages; platform products allow for deep customization as well as the flexibility to rapidly integrate new best-of-breed apps. Firms will also align corporate IT and business strategies to avoid duplicated efforts and incompatible systems.

Forrester believes that a single, dominant software strategy -- platform orchestration -- will emerge as firms synchronize IT and eBusiness efforts. Based on a core apps platform, an open and extensible standards framework, and plug-in component apps, platform orchestration enables firms to balance the need for constant innovation against the benefits of site longevity.

Tension between platforms and component apps will create friction in the packaged software market for the next four years as core apps subsume today's component apps. Even as consolidation narrows the field, new component categories will appear, resulting in a healthy ecosystem composed of a handful of dominant platform providers and dozens of component app vendors.

For the Report "Commerce Software Takes Off," Forrester examined the SEC filings of 60 software companies. To supplement these figures, Forrester also estimated the revenue of 33 of the largest privately held software companies. Respondents reported spending $24 million on eCommerce efforts in 1999 and expect to increase their spending to an average of $41 million in 2000.

Preparing for an IPO
The New York Law Journal has published a good article on the law when it comes to preparing for an IPO. According to the article:

" Young attorneys for fast-growing e-commerce and Internet companies know that the goal of many such businesses is to conduct an initial public offering and to do so as quickly as possible. An initial public offering is an attractive option for many Internet companies because it provides significant amounts of cash for operating purposes and ready access to the capital markets for future rounds of financing.

In addition, if a strong after-market develops for the company's shares, the founders and other insiders will have a liquid market in which they can eventually sell some or all of their shares. While the benefits of an initial public offering are well known to the founders and officers of e-commerce companies, the obligations and responsibilities that go along with being publicly traded are often overlooked.

Counsel for companies that plan to go public must make their clients aware of the significant responsibilities that are placed on the corporation, as well as on individual officers, directors and shareholders. Significant liability can be imposed for violations of the securities laws, and such considerations must be addressed early on to ensure that an initial public offering is the best alternative for a particular company.

For young lawyers working for new companies or for other attorneys curious about what such work entails this article will address the primary obligations imposed on the corporation after an initial public offering. My next article will address the obligations imposed on individual corporate officers and directors. Counsel should review these obligations with any company that is considering going public so as to ensure that the officers and directors know just what going public entails.

A publicly traded company is subject to various reporting, filing and disclosure requirements. These obligations arise primarily out of the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules and regulations promulgated under these statutes by the U.S. Securities and Exchange Commission. Important obligations also arise out of the contract through which the company lists its shares for trading on a stock exchange, including the Nasdaq system..."

Click here for the full article. [Link no longer active]


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