EXCLUSIVE INTERVIEW

Sterling Commerce’s Joel Reed: B2B2C Equals B2E

In late November, AT&T’s Sterling Commerce acquired Comergent, a competitor in the e-commerce/order hub management platform market, for US$155 million in cash.

The merger brought together two industry-leading companies, though they operated on different orders of magnitude. Sterling Commerce posted revenues of $490 million while Comergent’s revenues are estimated to be in the $40 million to $50 million range.

Comergent’s business has been fast growing, however. Overall revenues have been growing at a rate of over 50 percent in recent years, with its Hosting & Managed Services segment growing even faster, at an 89 percent clip in fiscal 2005 and 140 percent in fiscal 2006, according to management.

The acquisition has added fuel to the convergence and consolidation taking place in the B2B and B2C market spaces.

Since inception, both companies have been designing and building state of the art service oriented architecture (SOA) hosted e-commerce platforms that extend from the multichannel points of sale through order capture and management, on to customer and partner relationship and supply chain management. Comergent likes to call it B2E — “business to everyone.”

In this interview with CRM Buyer, Joel Reed, Sterling Commerce’s vice-president for global marketing, describes what’s happening between the two companies since the merger was announced.

CRM Buyer: Please bring us up to date on what’s been happening regarding the merger of the two organizations in the past month or so since the initial agreement was released.

Joel Reed:

The transaction closed on January 8th, and we have formed the integration teams made up of employees from both Comergent and Sterling Commerce, who are now working on our plans for product and employee integration.

CRM Buyer: Related to the above, can you please focus in on the organizational changes to do with merging the two companies’ respective management, technology sales and support staffs?

Reed:

The company will be incorporating the Comergent employees into Sterling Commerce’s existing business operations, and the integration teams are hard at work to ensure that we continue to accelerate the momentum that both Comergent and Sterling Commerce have had while working to integrate the two companies.

CRM Buyer: And the same regarding plans for the respective companies’ product and service offerings?

Reed:

Sterling Commerce plans to integrate the Comergent products into our existing suite of applications to provide an end-to-end order management solution to both existing customers and new prospects.

CRM Buyer: Have any specific goals been set for the combined organization operationally, technologically and financially? What are they? What organizational changes will or are being made to realize them?

Reed:

The goal in bringing together these two complementary sets of solutions is to provide a broader footprint for our supply chain customers. Both organizations had successful momentum in the market and we will continue to drive the combined teams to enhance this momentum.

Sterling Commerce aims to continue to add functionality to our suite of products in response to our customers’ needs through enhancements to current products as well as acquisitions. Much as we have done with previous acquisitions, we look for products that complement our current portfolio, add value to our solutions and that are compatible from a technology perspective.

The goal is to provide customers with a broader suite of products to solve a larger business problem — all from one supplier. With the addition of Comergent, we will be able to provide customers with a unified, end-to-end order management solution across the extended supply chain, allowing them to increase revenue, shorten sales and order fulfillment cycle times and reduce overall supply chain costs.

The integration teams are hard at work defining the organizational alignment and how the company and the products will be incorporated into Sterling Commerce’s current organization.

CRM Buyer: Please describe the respective strengths and weaknesses of the two companies’ order hub products and services and how they stack up against competitors’ offerings?

Reed:

Comergent is a leading developer of order capture software, and it counts some of the world’s premier manufacturing and retail companies as its customers. Its products include eBusiness Platform and Application suites for marketing, guided selling, configurations, quotes and proposals, product management and pricing.

Sterling Commerce has nearly 30,000 customers worldwide, including 80 percent of the Fortune 500, and provides a solid financial base with global reach. The Sterling Commerce Supply Chain Suite of products comprises multi-channel order management, multi-channel store operations, networked warehouse management, transportation management, global data synchronization and supply chain visibility.

The acquisition will benefit Sterling Commerce and its customers by allowing us to offer a more comprehensive offering that will solve problems that customers historically have handled through a complex and costly mix of point solutions and manual processes.

Comergent extends the breadth of Sterling Supply Chain Solutions with configuration, pricing and quoting, and catalog management functionality to increase revenue and shorten sales cycles for its customers.

The combined solution improves the competitiveness of the solutions relative to integration providers by increasing the depth and breadth of prepackaged applications that Sterling Commerce can provide.

Versus the niche solution providers, Sterling Commerce continues to offer a much broader, holistic set of solutions based on a modular design approach that enables the customer to deploy the solutions that will have the greatest business impact first — and extend and grow those solutions as their business needs dictate.

CRM Buyer: Please give us some insight as to the rationale underlying the acquisition and merger; that is, what makes the combined company more than just the sum of its two independent parts?

Reed:

The Sterling Commerce Supply Chain Suite of products is complementary to the Comergent order capture offerings. The Comergent team brings to Sterling Commerce expertise in e-business, order capture and industry expertise in a number of markets. Comergent’s order capture capabilities address the upfront aspects of direct selling that Sterling Commerce solutions do not.

Both Comergent and Sterling Commerce customers will benefit from this acquisition as we bring together two complementary sets of solutions built on SOA, to provide a broader footprint for our supply chain customers.

CRM Buyer: Are there any opportunities or plans to combine, and perhaps cut resources, either in terms of physical assets (that is, datacenters, telecoms), field offices and/or personnel? If so or if not, please explain management’s thinking regarding this issue.

Reed:

Sterling Commerce plans to continue to sell Comergent’s products. The integration teams are working out the specific integration plans for our products to minimize any disruption to current Comergent or Sterling Commerce customers and should have more details to share by the end of Q1 in March.

While we cannot comment on specific plans regarding employees until the integration team has completed its work, we can say that Sterling Commerce views Comergent’s employees and their expertise as important assets.

CRM Buyer: What impact does Sterling’s being a part of AT&T have on its business and prospects for the combined organization? Are there any specific opportunities that are being considered and/or that management is working out?

Reed:

Sterling Commerce has the backing of an $84 billion company that is investing in our future so that we can grow and continue to add value to the overall AT&T portfolio.

CRM Buyer: What’s been happening on the customer side since the merger in terms of communicating the effect of the merger on products, services and rates? How have customers reacted?

Reed:

Sterling Commerce and Comergent executives have communicated with our customers directly and through e-mail to help them understand the acquisition and benefits. This will be an ongoing process — the response has been overwhelmingly positive.

As we move to integrate the companies, we expect little impact on our customers. Firm plans on the integration of the products are being defined by the integration team and those plans will be communicated to our customers as they become available through our normal customer communication channels.

CRM Buyer: SOA has become the latest trend in software systems architecture, and both companies are known for having state of the art, SOA-based platforms. How do you see the combined organizations’ platforms evolving during the next year? What advantages do you believe this affords Sterling-Comergent? Where do you intend to go with it in terms of expanding the customer base or doing more with existing customers?

Reed:

As we bring together two complementary sets of solutions built on SOAs, we will be able to provide a broader footprint for our supply chain customers. The product lines from Comergent and Sterling Commerce are complementary and the fact that both product suites are built on SOA will reduce the time and cost associated with integrating the two solution sets.

Customers will realize the benefits early on, as we will be able to provide additional capabilities to both Sterling Commerce and Comergent customers immediately. We expect some customers will want to add the front-end order capture capabilities that Comergent offers, and some Comergent customers will want to be able to manage end-to-end order fulfillment with Sterling’s current offerings.

CRM Buyer: Will the Comergent name cease to exist?

Reed:

There will be a brand transition period where both brands will exist and then we will transition to the Sterling Commerce brand. The timing for this is being defined by the integration team and we expect to have more details to share within the quarter.

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