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Acquisitions and ASPs: What's in It for You?

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This article profiles application service providers (ASPs) that have strengthened their offerings by acquiring other companies.
This article is excerpted from his book Realizing e-Business with Application Service Providers.

Reliance on partnerships is making the difference between the success or failure of many application service providers (ASPs). Extending the reach of a company, building a strong infrastructure, and even completing e-commerce transaction processing for customers—all are reasons why partnerships are happening daily in the e-business arena.

BroadVision, Inc.

How does BroadVision make decisions on which companies to acquire? Their purchase of Interleaf in 2000 illustrates that they're actively making decisions to create a foundation for the next stage of growth in the company. Interleaf is an e-content company dedicated to the development, marketing, and sale of XML-based content-management tools. These tools enable the creation, publication, management, and reuse of dynamic, intelligent content for Web and wireless applications. The e-content business unit comprises nearly 70% of Interleaf's approximately 400 employees and has been its most significant area of growth and investment.

BroadVision's intent in acquiring Interleaf was to expand its ability to deliver personalized e-business applications across Web and wireless by combining the two firms' strengths to meet the objectives of improving e-business time-to-market, better integration with content sources and back-end systems, and high performance and scalability. The deal also combined the two firms' customer bases of more than 2,500 blue chip and dot-com companies.

The combination of the suite of BroadVision One-To-One personalized e-business applications and Interleaf's XML-based e-content management tools creates one of the most comprehensive, end-to-end offerings for companies needing to manage content-rich and transactional e-businesses for delivery over the Web and wireless devices. The Gartner Group estimates that by 2003 80% of application-to-application traffic passing over public networks will be in XML (Gartner Group, October, 2000).

Specific benefits of the combined offering are described in the following sections.

Less Time and Lower Cost for E-Content Management

The integrated offering combines Interleaf's XML-based e-content management tools and BroadVision's real-time instant publishing tools to shorten time to production for content. This lowers the total cost of ownership for companies by enabling publishers to more easily create, publish, manage, and re-purpose transactional content. Additionally, the integrated offering is differentiated by its support for the publication of XML-based documents from Microsoft Office applications, greatly expanding general business users' ability to publish Web and wireless content.

Automating B2B E-Commerce Through Intelligent Content

The integrated offering makes the integration of intelligent content with companies' existing e-business initiatives possible, often streamlining operations processes. Intelligent content is personalized, reusable, and dynamically assembled in real time to increase collaboration and communication among commerce partners. Unlike static content, intelligent content automates interactions and transactions among participants, creating a highly productive information value chain.

Expanded E-Business Reach

Interleaf brought to the table its X-WAP (Wireless Application Protocol) and XSL (eXtensible Style Sheet Language, which enables content to be separated from data so that content can be shared across any number of XML documents). These technologies are being steadily adopted by Broadvision customers. The integration of X-WAP and XSL gives users access to dynamic content from mobile and other wireless devices, such as digital cellular telephones, pagers, personal digital assistants, and e-books. End users now are able to access real-time personalized product information, inventory, price, and catalog data, and execute orders from Web sites and wireless devices via BroadVision's capability to deliver e-business anywhere, anytime. The Yankee Group has estimated that wireless subscribers accessing the Internet will continue its aggressive growth, from 669 million in 1999 to 1.26 billion by 2005 (The Yankee Group, November, 2000).

Cisco Systems

In 1999, Cisco Systems, the king of networking gear, agreed to invest $1.5 billion for a 20% stake in KPMG's consulting business, and teamed with Motorola to acquire the fixed wireless assets of Bosch Telecom, forming joint venture SpectraPoint Wireless to provide high-speed networking services to businesses. In one of its largest acquisitions, Cisco bought Cerent (fiber-optic network equipment) for $7 billion. The company also snapped up several smaller networking companies, including Sentient Networks (ATM products) and GeoTel Communications (call-routing software). Cisco also acquired Aironet Wireless Communications (wireless LAN products) for about $800 million. Also in 1999, Cisco and Qwest Communications collaborated on a nationwide project to bring Internet access to secondary and tertiary geographic markets throughout the U.S. In early 2000, Cisco teamed up with GTE, Whirlpool, and Sun Microsystems to develop the home gateway, an answering machine–sized device that enables high-speed networking of multiple PCs, as well as smart appliances, over a home's existing phone lines. Whirlpool and General Electric are readying appliances that have Internet connectivity for both management of the device and Internet access to the customer from the appliance itself. (Examples include refrigerators with touch screens that provide browsers for Internet surfing.) The company also bought Perilli's fiber-optic telephone equipment operations for more than $2 billion.

Cisco has been acquiring networking companies at a rate of one every month or two, and CEO John Chambers expects this pace to continue for several more years.

Here's a sampling of their acquisitions:

  • Internet: TGV Software, Network Translation, Internet Junction

  • Workgroup/LAN: Grand Junction, Nashoba Networks, Granite Systems

  • Remote access: Combinet

  • WAN: StrataCom

Cisco has had a lot of success with acquisitions. Granted, a few didn't work out as planned. For example, due to a technology overlap, the value of the acquisition of Lightstream was greatly reduced by the subsequent purchase of StrataCom. But such failures are a rarity for Cisco.

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