Case Study: Service Provider Xcelerate Speeds CommerceScout Along New Trail

  • Written By: J. Diezemann
  • Published On: June 7 2000



Case Study: Service Provider Xcelerate Speeds CommerceScout Along New Trail
J. Diezemann - June 7, 2000

Case Study Summary:

Sometimes when you start out on a journey, a guide can direct you to a destination quite different from the one to which you originally had set course. Such is the case for CommerceScout, a dot-com located in Seal Beach, California. Their destiny was forever altered when they enlisted the services of Florida-based e-business service provider Xcelerate to serve as a trail guide.

User Background

Eyeing the enormous potential of the B2B Marketplace, Steve Oakley, a software industry veteran, founded CommerceScout In November 1999, with the initial business model to provide transaction processing and order fulfillment services to online auctions. However, through its interaction with Xcelerate, this business model was replaced with one that would bring buyers and sellers together across multiple marketplaces.

Vendor Selection

The paths of the two companies crossed as a result of a preexisting relationship between company executives, which netted CommerceScout a few days of complimentary consulting. "I was just very impressed with their brainpower," said Steve Oakley, President and CEO of CommerceScout; "The Xcelerate consultants quickly became indispensable members of the team."

It should be noted that the two consultants who showed up on Steve Oakley's doorstep were the ones who he wanted on the team throughout CommerceScout's engagement with Xcelerate.

Establishing the Engagement Process

Having demonstrated their value during the initial consultation, Xcelerate agreed to accept work one short-term contract at a time. This demonstrated Xcelerate's confidence in their ability to deliver ongoing value to the client and reap continued business. It afforded CommerceScout a high degree of flexibility and the ability to maintain control of their destiny without subjecting them to the constraints of a longer-term contract. Overriding the contractual arrangements was a sense of partnership that developed between the two parties.

Vendor Services & Value of Solution Delivered

During the initial joint meetings the team examined the de facto strategy. Xcelerate was a major player in the rapid analysis of the market opportunity, potential competitors, and technical challenges. The team concluded that they were heading into very dangerous waters as existing major players were well positioned to enter the market space.

Going back to the drawing-board, the team identified that there was a genuine opportunity to create a portal for multiple marketplace management. In other words, offer end users visibility and navigational tools that span multiple marketplaces in a vertical segment (i.e., electronic components, chemicals). Excited by the prospects, CommerceScout contracted with Xcelerate for another three-week engagement to validate the concept and strategy before fully committing to it. (This also set the model for the contractual relationship between the two parties; with CommerceScout contracting Xcelerate for each discrete phase of the project.).

As the project continued Xcelerate became deeply involved in the development of the CommerceScout service. The joint development team made up of five CommerceScout personnel and seven Xcelerate personnel set up shop in Xcelerate's Atlanta development Supercenter. Although Xcelerate is a "Pure play" digital business service provider, CommerceScout chose to outsource marketing (branding & image) to a local southern California firm. CommerceScout is now certain that Xcelerate could have done the marketing piece, but admit that they were simply uncomfortable being reliant on a single vendor.

Overall, CommerceScout has been very happy with its relationship with Xcelerate. Early weaknesses such as a perceived disconnect related to integrating certain marketing functions into the project plan and perceived high relative percentage of project management time within the plan were quickly and satisfactorily responded to by Xcelerate. Once the present initiative to wirelessly enable the CommerceScout service is complete, CommerceScout envisions maintaining Xcelerate on some type of retainer basis. Either way, the connection between the two companies will continue, either formally or informally, as Bruce Frcek, President, CEO and Chairman of Xcelerate now occupies a seat on CommerceScout's Board. CommerceScout's Oakley envisions a day 12-18 months down the road where they will have in-house talent to meet most of its needs.

Oakley says he is a very satisfied client, giving Xcelerate high marks across the board for their strategic and technical digital business skills as well as their ability to execute and meet deadlines.

The capabilities that CommerceScout achieved from Xcelerate enable it to provide frictionless marketplace participation in a network of marketplaces. This effectively creates markets without boundaries. CommerceScout can now provide an integrated suite of tools to buyers to cross marketplace boundaries, and by integrating functionality into sell-side marketplaces to interact with the buyer tools, CommerceScout thereby provides support for the full buyer/seller cycle. Currently, CommerceScout is developing end user (buyer) e-market tools that will be sold as stand alone modules. These products include Track, Watch, Communicate, Analyze, Negotiate, Automate, Procure and Sell, whose names obviously indicate the suite of capabilities CommerceScout is providing or intending to provide.

CommerceScout also makes its money from a combination of license fees and small transaction fees automatically notched up with each transaction. Transaction fees are derived from e-markets that create order fulfillment as a result of the CommerceScout Network conduit. License fees are derived from end users (Contract Manufacturers), and from e-markets looking for additional functionality and analytical reporting across multiple marketplaces.

Vendor Recommendations:

  • CommerceScout was impressed with Xcelerate's ability to recruit and retain high quality people. This is often an under-appreciated sales angle for vendors, particularly those who rely on sales people alone.

  • Xcelerate secured CommerceScout's business through the use of "complimentary" consulting days.

  • Xcelerate demonstrated a high degree of flexibility with respect to contractual arrangements, agreeing to short-term (often 3-4 week) contracts that were continually renewed.

  • Meeting deadlines with a quality deliverable is the most significant demonstration of the service provider's commitment to your client.

User Recommendations:

  • Maintain control of your projects and your destiny. If this means breaking up projects into smaller pieces and smaller vendor contracts, so be it. If vendors are unwilling to be flexible to this type of arrangement, then maybe you should keep looking.

  • Recognize the value of creating a true partnership with key vendors. This means being flexible with respect to demands and work arrangements.

  • Be open to changing direction in the light of convincing evidence. Verifying your business model is essential in a rapidly changing environment, particularly where major players can enter rapidly at low cost.

Xcelerate has proven to be an indispensable partner for the CommerceScout team, advising them of the risks of the path they were on and collaborating with them to find better opportunities. Xcelerate provided services ranging from market research to business model and strategy development to the construction of CommerceScout's B2B Multiple Marketplace Management portal, i.e., a full end-to-end services delivery. However, it should be borne in mind that the project size can impact the user decision on which vendor can deliver an adequate number of quality people.

Glossary of Terms

B2B - Business to Busienss

DBSP - Digital Business Service Provider

Incubator - a location that provides basic business services and assistance in launching a new business, usually including expert business strategy help, low-cost office facilities, and financing / fund-raising aid. Typically companies remain in an incubator for less than two years.

SuperCenter - a center where effectively full end-to-end services for defining, creating, building and testing a digital business are provided under one roof. This is Xcelerate's term; other companies refer to it as an Accelerator facility (Andersen) or plain test center. Note that this is not an Incubator.

 
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