New Masters Of The Enterprise?

Earlier this year, Salesforce.com's Marc Benioff offered his theory that there are three business models that will come to dominate the Internet. One of the three, naturally enough, was the one pursued by his own company. The other two approaches, perhaps more surprisingly, were those of eBay and PayPal.

Now that eBay is set to swallow PayPal, I wonder if Benioff is beginning to feel at all overwhelmed by the fusion of these two rivals into a single dominant force? Knowing Benioff's character, I think it's unlikely. Salesforce.com is busy frying other fish, in any case — most notably the enterprise software suites that Benioff believes his company's online software services model will soon render obsolete.

Its alliance with Web services tools vendor Cape Clear Sofware adds an important new plank to that strategy (see Cape Clear Integrates Salesforce.com). The Cape Clear platform signficantly simplifies the task of passing data and processes from one application to another, thanks to the standardized application-to-application messaging of Web services.

Today's leading enterprise software suites, from the likes of Siebel, SAP and Oracle, owe their dominance to the perception that tight functional integration is the only way to achieve efficient business automation. Web services are removing that justification, by making it easy to link functions wherever they exist within the network, achieving integrated business process automation without tying customers into a single vendor's monolithic application suite. Componentization is enabling other novel approaches, too, like BizAutomation, the salesforce automation add-on for Microsoft Outlook that launched recently (see There's a New CRM Kid in Town).

This is an environment in which applications that deliver their functions as online services, like Salesforce.com, can thrive all the more. By teaming up with Cape Clear, salesforce is aligning itself with a platform that makes the most of its Web-native architecture. Benioff can afford to smile while eBay and PayPal get on with their merger.

Keep an Eye on eBay
The rest of us would do well to start paying a bit more attention to what these two Internet consumer behemoths are up to (see eBay Shells Out $1.5 Billion for PayPal). It's easy to dismiss them as catering to a consumer niche of Internet enthusiasts, but their combined annual revenues are running in excess of $1 billion; they jointly enable transactions to the value of some $15 billion to $20 billion each year; and, even though every cent of their earnings is derived from Internet-based activities, both of them actually make a clear net profit — an extremely robust one, in the case of eBay.

Furthermore, let's look more closely at those "consumer" transactions they process, and examine what they actually consist of. Although eBay started out catering to enthusiast coin collectors and Beanie Babie speculators, most of its regular sellers today are small businesses trading in antiques, craftwork, collectibles, excess inventory and specialist manufacturing.

For most of these companies, eBay is not so much an online auction company as a convenient and important extra route to market. There is no other company better equipped to set up and process the highly atomic, one-off casual transactions that were never before possible before the Internet came along, but which now lie at the heart of many of these companies' Internet-based business processes.

PayPal supplements that by adding an easy, quick-to-clear and trusted payment mechanism that vastly simplifies the process of clearing payments when a credit card is not a suitable option. Despite all their attempts at simplifying electronic payments, traditional banks have signally failed to deliver what PayPal is now recognized the world over for its competence at doing.

So by acquiring the online payments broker, eBay has added PayPal's leadership in facilitating online financial transactions to its own quiet leadership in facilitating online commercial transactions.

eBay Off the Auction Block
It's time to stop thinking of this company as an online auction company; eBay is an online transactions company, one that excels at the small, one-off transactions that are characteristic of the Internet, just as Salesforce.com excels at the componentized, functionally discrete software capabilities that are characteristic of Web services. If Salesforce.com is indeed realistically able to threaten the enterprise market share of established software companies, then what of eBay? Is it outlandish to imagine that one day it could threaten the enterprise market share of established financial services companies?

At a time when Wall Street bankers are fast losing the trust and respect of the public, it's salutary to consider just how much trust and goodwill the eBay and PayPal brands have built up among Internet users. Can eBay become the number-one commercial bank of the Internet? There's no way of knowing whether its management will choose to go there, but acquiring PayPal has put that possibility onto eBay's roadmap.

This column was first posted on ASPnews.com, an internet.com site.