November 4, 2013, 2:31 PM

Full service

That’s what top brands expect from their e-commerce software. Learn how four vendors vie to satisfy multinational clients with an array of integrated capabilities.

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When Benefit Cosmetics LLC planned to expand its online sales internationally three years ago, it went shopping for e-commerce software. It deemed IBM Corp.'s Websphere and ATG Inc.'s software too expensive and complex, and narrowed its choices to hybris AG and Demandware Inc. Language capability helped cinch the deal for hybris, a German e-commerce technology provider acquired this year by another German software company, SAP AG.

At the time, hybris could handle Chinese character sets and Demandware could not, says Valerie Hoecke, senior vice president of digital for Benefit Cosmetics, which now sells online in 32 markets.

Demandware subsequently added Chinese capability to its software. And, in the last two years, such global brands as athletic shoe maker Puma SE and cosmetics brand Groupe Clarins have launched e-commerce sites in China, as well as in other countries, on the Demandware platform.

That's just one example of how multinational brands are demanding more from e-commerce software, and how the providers of that software are responding. Today's e-commerce platform must handle more than just orders, inventory, customer files and payments. It must also let a retailer or brand sell globally, reach consumers on social networks and through mobile devices, feed product data to online marketplaces like Amazon and eBay, and adapt what an e-commerce site displays to take into account shifts in customer buying patterns, an individual consumer's history, profit margins and product availability.

In fact, selling across all channels today requires roughly 25 distinct technologies, according to Tom Johnson and Joe Lamano, retail consultants at PricewaterhouseCoopers LLP. For an e-retailer that relies on 25 vendors to fill those needs, that's potentially 25 upgrade cycles, programming languages, user interfaces and databases to keep in sync. Having one vendor provide most of those technologies can help simplify all that.

When multinational brands look for that one provider of comprehensive e-commerce software they primarily look at IBM; Oracle Corp., which acquired ATG in 2010; SAP, since its recent acquisition of hybris; and Demandware. All four are moving aggressively to provide a fuller range of services—the first three mainly through acquisitions and Demandware through building interfaces to technology providers dedicated to specific tasks, such as making product recommendations or international shipping.

None are cheap—an e-commerce platform from IBM, SAP or Oracle, with implementation costs factored in, can cost a retailer tens of thousands to millions of dollars, experts say. Demandware, meanwhile, typically costs less than $500,000 to implement for its largest clients, a spokeswoman for the company says. Retailers also have to consider the ways the vendors charge. IBM, SAP and Oracle charge licensing fees, which can be a hefty sum for a retailer just getting started online, but easily manageable for a large e-retailer; Demandware charges a percentage of client revenue, which makes it more affordable for smaller retailers, but means fees increase along with sales.

On top of that there are significant personnel and resources costs to maintain these sophisticated software suites. Retailers on average spend $212,000 annually on such overhead and $92,000 per year on platform upgrades, with the largest retailers spending much more, according to a November 2012 Forrester Research Inc. report commissioned by Demandware.

The four companies have different origins and strengths. IBM is among the world's leading providers of software and information technology consulting and booked 2012 revenue of $104.5 billion. Oracle is a dominant provider of database software and competes directly with SAP for the business of multinational companies in the area of enterprise resource planning, or ERP, the accounting and software suites used by businesses with global manufacturing and marketing operations. Oracle generated $37.1 billion in 2012 revenue and SAP $22.0 billion.

Demandware is much smaller, with only $79.5 million in 2012 sales. But it raised $88 million in an initial stock offering in 2012 and has built its business largely on helping consumer brand manufacturers sell directly to consumers via the Internet. Its clients include such brands as L'Oréal S.A. and Crocs Inc.

IBM and Oracle are the leading choices for the biggest North American e-retailers. The two companies provide e-commerce software to 33 of the Top 100 retailers in the Internet Retailer 2013 Top 500 Guide, with most of the rest building their technology internally or outsourcing online sales to eBay Enterprise, the eBay Inc. unit that includes GSI Commerce Inc., which eBay acquired in 2011. IBM boasts 17 Top 100 clients, including Staples Inc. and Target Corp.; Oracle's 16 clients include Apple Inc. and Wal-Mart Stores Inc.

Demandware serves 20 Top 500 clients. SAP can claim only two Top 500 clients, but, reflecting hybris' European roots, it has 16 clients in the Internet Retailer 2013 Europe 500 rankings.

The four companies seek to build on their strengths as they compete for the e-commerce business of the world's leading brands and retailers.

In the case of SAP and hybris, they not only share German roots, they also shared 300 clients before SAP's acquisition of hybris this summer. They've since begun building tighter integrations between their software so new clients can launch them together.

Even before the SAP acquisition, the comprehensive hybris offering made it attractive to North American companies like Airgas Inc., a supplier of specialty gases and equipment for welding and other purposes to business customers. "We wanted a single provider so we wouldn't have to deal with the challenge of making two companies' systems talk to each other," says Steve Max, eBusiness director at Airgas. Airgas began migrating to hybris shortly before SAP acquired it. While Airgas doesn't use other SAP technologies so far, Max says the company will consider it down the line, one reason being that his small e-commerce team wouldn't have to master several tool sets to do its job.

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