StockTalk:
TMF Interview With Open Market VP of Marketing Robert Weinberger
With Yi-Hsin Chang (TMF Puck)
and Brian Graney (TMF Panic)

July 16, 1998

This week's guest is Robert Weinberger, vice president of marketing for Open Market Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMKT)") else Response.Write("(Nasdaq: OMKT)") end if %>. Founded in 1994, the Burlington, Mass.-based company develops software allowing for business-to-business and business-to-consumer commercial transactions over the Internet. On July 14, computer products distributor Ingram Micro agreed to license Open Market's Transact software to develop its own e-commerce storefronts on the Web.

TMF: Thank you for joining us, Mr. Weinberger.

Weinberger: You're quite welcome. It's a pleasure to be here.

TMF: Our first question is about the Ingram Micro deal. What kind of services will Open Market be providing to Ingram Micro, and how will that deal benefit your company?

Weinberger: We're a software company. In particular, we sell enterprise software that enables companies to do business over the Internet, and Ingram Micro has purchased our cornerstone product, Open Market Transact. Transact will enable Ingram Micro to establish the business machinery within Ingram to allow Ingram's reseller customers to then do commerce via their sites over the Internet. So, it's a very exciting software licensing deal for us.

We're obviously excited about doing business with a company like Ingram, who is the world's largest reseller and distributor of technology products and services. We also think that what Ingram is doing is representative of a trend that we'll see more and more of in the Internet, with major players like Ingram putting facilities in place that then will provide additional Internet-based services to their business customers.

TMF: In March, you received three patents for e-commerce related technologies. How important are these patents to the company's further growth?

Weinberger: We really thought that the patent announcement was a milestone event for the company. As I mentioned, we're a software company, so we first and foremost evaluate the importance of the patents with regard to how it helps us expand our software business. There were three patents that we announced, and they really covered four key areas of doing business over the Internet.

"Transact will enable Ingram Micro to establish the business machinery within Ingram to allow Ingram's reseller customers to then do commerce via their sites over the Internet."

The first area and the one that's attracted perhaps the most attention covers secure real-time payment over the Internet. Another patent covered session tracking, the ability to analyze how buyers will move through information on a commercial site. One other aspect of technology covered is "shopping carts," and then the last area that the patents really cover is our unique product architecture.

We have product architecture that allows a company -- Ingram is a good example -- to put business machinery in place in one spot on the Internet and then extend the commerce services that they've put in place to websites that are spread all over the globe. The way we do that is very unique, and one of the patents covered that technology. We think the patents certainly support, for our customers and the companies we try to sell to, how innovative and unique our products are. It's certainly going to help us sell our products, having them covered by these important patents.

It also bolsters our defensive position. While we've been a fast-growing company -- we're still only about four years old, about 500 people -- we're not as big as some of the other large software players around the globe and having these patents enables us to bolster our defensive position.

And last, we're also, in addition to using the patents to help us sell our products, pursuing an open-licensing strategy. We've built what we feel are very good products from the technology covered by the patents, and we would like to give other companies an opportunity to license the technology and apply it to support their businesses as well.

TMF: Intel <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> recently took a 1% stake in the company and joined other corporate investors such as Tribune Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRB)") else Response.Write("(NYSE: TRB)") end if %> and Harcourt General <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: H)") else Response.Write("(NYSE: H)") end if %>. Is this more of an investment to bolster the company's defensive position, or is it more of an offensive line of investment?

Weinberger: It's really a collaboration. The investment that Intel took in the company kind of sealed the agreement formally that we had reached to cooperate in a couple of dimensions. Our cornerstone product, Transact, to date has been available only on UNIX platforms, and Intel was very anxious for us to support that product on their Pentium architecture and the forthcoming IA-64 High Performance architecture and on Windows NT. So one of the parts of this deal was our announcement that we will be moving Transact to not just UNIX but also the other Intel platforms down the road.

We'll also be doing joint marketing with Intel. The Internet commerce space is one that Intel feels would be very important for their customers and their products moving forward, an were anxious to do joint marketing with Open Market, who provides some of the key applications in the space.

TMF: One of our readers in Stockholm would like to know your view on the European market for business-to-business commerce on the Internet. How is Open Market positioning itself for this market?

Weinberger: One of the decisions we made very early on and in one of the places we've made some of our biggest investments have been in putting in place worldwide infrastructure to sell and support our products. Very early on as we talked to the companies in the States, they said that one of the things that they felt was a big opportunity was to do business in Europe and the Far East. And as we started to talk to companies in other geographies, they themselves also saw this as very much a global opportunity.

We've established sales offices now throughout Europe as well as in Australia, Hong Kong, Japan in the Far East. I guess it was about two years ago that we actually put a European support center in Amsterdam as well, so the European market is very important to us. We've seen some segments of the European market develop very rapidly, and others are a little bit behind what we're seeing in the U.S.

"The investment that Intel took in the company kind of sealed the agreement formally that we had reached to cooperate in a couple of dimensions."

One of the things we see really emphasized in Europe is what we call the emergence of commerce service providers: large banks and telecommunications firms principally who are putting facilities in place to enable their business customers to do business over the Web. This approach of companies outsourcing Internet commerce services has really taken off in Europe. We've got customers over there, like France Telecom <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTE)") else Response.Write("(NYSE: FTE)") end if %>, Swisscom -- the big telco in Switzerland -- Barclays <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BCS)") else Response.Write("(NYSE: BCS)") end if %>, Lloyds, Belgacom in Belgium, several large providers over there who are putting these services in place.

We have not seen individual companies in Europe, particularly in the business-to-business space, move as quickly as we've seen some of the leaders here in the U.S. But we are sensing a recognition among those companies that the status quo is probably the one course that they can't follow, that they really have a choice here. They can take advantage of the Internet to expand their businesses and their critical mass globally, or they will be threatened by other companies elsewhere in the world, who now over the Internet have an increased opportunity to penetrate their markets.

Although I would peg the European market perhaps six to 12 months behind that in the U.S., there's just no question that the leaders over there are grasping the opportunity, and we'll start to see them make aggressive moves as we go forward.

TMF: How do you see Open Market's software evolving in the future? Do you think the business-to-business software segment will integrate itself with other enterprise software systems, such as procurement and supply chain management software?

Weinberger: Yeah, absolutely. Right now, if you look at the business-to-business software segment, there are really two thrusts, and sometimes they're happening in parallel within a company. You have the information systems organizations who continue to focus on increasing efficiency and streamlining the operations of the company in areas like supply chain management and procurement. Then you have the business parts of the company. Those are leading the business strategy and the marketing and sales strategies recognizing that the Internet presents a tremendous selling opportunity, the ability to offer higher levels of service to current customers and to extend business to new sets of customers that haven't been reached before. We think that over time the integration of the buy side and sell side will become very important, and we're starting to see the emergence of standard efforts to make that happen.

The other thing we see happening is a blurring between the business-to-business segment and the business-to-consumer segment. One real trend here is for big business manufacturers to say, "I want to put something in place on the Internet, and I'm going to focus it first on my top 100 or top 300 corporate customers, offer a higher level of service, gain cost efficiencies by doing business over the Web for current customers." But then they say, "Having done that, I will now have a facility in place that will let me provide the same product, the same level of service economically, not just to the big corporate customers, but also to small businesses and individual consumers as well, so we think there will be a time you'll really see a blurring between these divisions that we recognize today of B-to-B and B-to-C.

TMF: Where do you think the next growth in e-commerce will come from?

"We've established sales offices now throughout Europe as well as in Australia, Hong Kong, Japan in the Far East."

Weinberger: From where we sit, we barely scratch the surface. Companies really need to do two things to do business over the Web. The first one is just to establish a Web presence, establish a website describing products and services, interact with customers, and so on. If you really look at where the action has been over the last three years, companies have been pretty much focused on that.

The second thing they need to do is then turn that Web presence into a business. It's only been within the last six to 12 months that companies have shifted their focus from just getting out there to turning a presence into a real, fully comprehensive business, one that not just sells products but also offers wholesale support and enhances relationships, and so forth.

So that's going to be, as you look at the next year or two, a real focus -- companies turning websites into businesses. We then see beyond that a recognition by companies that just marketing from their own website is not sufficient, that really they're now operating in what we call the network marketplace. Not only can companies reach out to the consumer over the Web, but consumers can reach every business.

Consumers have a tremendous amount of choice, and for companies to really be successful, they're going to have to try to reach out and offer value to consumers from multiple vantage points -- not just from a single website, but by participating in communities of interest, by looking at where buyers aggregate and figuring out how to market through those other aggregations. The development of this network marketplace is something that we're just starting to see an indication of but something that will become very important over the next five years.

TMF: Thank you, Mr. Weinberger, for taking the time to sit down and talk with us today.

Weinberger: Thank you very much for having me.

TMF: This has been another edition of StockTalk. Join us next week for an interview with the CEO of Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>, Tim Koogle.

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