By William Fellows
Who or what was it, that gave the green light to credit card use on the web that resulted in the current online shopping boom? Were all those those scare stories about cyber muggings and the ensuing race to turn your PC into Fort Knox just a dream? Day traders were largely responsible for kick-starting the business, reckons Jim Daniell, CEO of order processing network OrderTrust LLC which is doing very nicely thank you as a result. People who were buying Amazon stock started buying books from Amazon, he says. The Lowell, Massachusetts-based private company sits behind the storefront, be it on the web, a call center, retail, or interactive TV connecting order transactions to payment processors, suppliers, fulfillers, merchant warehouses, suppliers and customer service centers. It charges a set-up fee and a maintenance fee but its real money comes from its $1.25 cut of every order it processes. Each order may involve many transactions. OrderTrust says it’s currently processing 1.5 million transactions per day for its 40-odd live customers who are online merchants and catalogers; aggregators such as malls and affinity program providers; and product distributors. They include Lycos, 1-800-FLOWERS, iParty and iVillage. OrderTrust says its current client base is split around 70/30 between call center and web-based customers. It estimates new business is shaping up at around 50/50. Daniell claims the complexity of e- commerce order processing can consume up to 30% of revenues, and pitches OrderTrust as the low-cost alternative to expensive home- grown solutions, calling in the system integrator or turnkey fulfillment house. One of its key value propositions is being able to handle the estimated 5% of transactions that are anomalies: orders not fulfilled, premium services, damaged good, wrong goods, credit note sales and so on. If 50 orders out of a 1,000 are anomalies that usually generates twice as many phone calls and then twice as many emails again, Daniell argues. Soon the resources needed to resolve each of theses orders snowballs to the point where it simply not cost-effective. Daniell claims OrderTrust can take of all of that. On the back of its order processing functions it is being pushed into new areas such as providing customer services, connecting vendors, and measuring business and operations. Daniell, who as right-hand man to then AT&T Unix Systems Lab boss Roel Pieper, handled the sale of Unix to Novell Inc, and was more recently COO of AT&T’s networked commerce services, is still a Unix guy. OrderTrust’s airport command room-like $18m operations center is run on Sun servers. Its older software distribution business is being hung out to dry. It reckons there’s not much mileage in that market, as a handful of other players have found out too. It says it will support its existing customers but won’t be looking for new business. It has no specific plan to go public. We get the feeling this is going to be big business. It’s the kind of work we might have expected a company like VeriFone to undertake as a new business opportunity. But then VeriFone got bought by Hewlett-Packard Co and to this day it looks as if HP was sold a story: SET. Whatever happened to the SET secure electronic transaction protocol anyway? It’s dead in the water, says Daniell; likewise digital wallets and other forms of cash on computers. Why? Because, Daniell says, these and other technologies were developed to support the micro transaction model heralded as the way e-commerce would be conducted on the web. But that simply hasn’t happened. Look at pay-as-you-read, says Daniell. It never took off. People shopping and doing business on the web are doing macro transactions.
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