Bells Are Bulking Up On E-commerce Services

FRAMINGHAM (02/25/2000) - When it comes to e-business, local phone companies are rushing to set up online marketplaces for corporate customers who don't have the time, resources or inclination to learn the technology and set them up for themselves.

And none seems more committed to that e-commerce concept than SBC Communications Inc., which offered $3.9 billion last week to buy e-business software maker Sterling Commerce Inc. The deal will go a long way toward letting SBC tap the estimated $200 billion business-to-business e-commerce market.

SBC sees the Sterling purchase as a way to get a jump on competitors by acquiring products, services and the personnel to deliver new services all at once. The deal also brings in a customer base that Sterling says includes 487 Fortune 500 companies.

"This plants a stake in the ground. It will definitely raise the level of competition and marks a maturation of the e-commerce market," says Jilani Zeribi, an analyst with Current Analysis, a network market consultancy in Sterling, Va.

Other regional Bell operating companies are interested in providing similar services, at perhaps a lower level. Bell Atlantic, BellSouth and US West have made partnerships to cobble together e-commerce services, but they have done nothing as bold as the SBC-Sterling venture.

For example, BellSouth and Commerce One last fall announced they would develop an electronic marketplace where businesses could band together to buy equipment. For example, several businesses could come together to seek bids on desktop PCs expecting to get a better price because they are buying larger volumes.

That service is scheduled to be up and running the spring, and by year-end, BellSouth will let customers sell their own goods and services, the company says.

The Commerce One alliance lets BellSouth expand the services it offers without a huge investment and without losing focus on its main business - selling communications lines. "Unlike what SBC did, we will stick with what our core competencies are," says Pat Shannon, president of BellSouth Exchange Services.

Company focus may be an issue with the SBC/Sterling deal because when pressed at a teleconference announcing the deal, SBC officials could not say exactly how they would integrate the two companies' offerings.

Zeribi says that process could take a while to sort out because Sterling's blue-chip customers will expect the quality of the service they buy to stay high. SBC will have to be careful not to overload Sterling's staff with too many new customers at first.

Even so, Sterling will bring in $561 million this year if it equals last year's sales. "SBC can afford to hold that market share until they figure out what to do with it," Zeribi says.

Beyond selling e-commerce services, RBOCs will have the chance to use those services to their own advantage under a program being pushed by BellSouth.

Last week BellSouth and Commerce One proposed setting up an electronic marketplace where other major carriers and their equipment suppliers could buy, sell, bid and auction equipment. As of press time, no one else had signed on.

BellSouth apparently believes that such a marketplace can save money: It has budgeted $1 billion in savings from such a venture.