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EDS' Web shop aims to merge fragmented online commerce solutions

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Its headquarters look like a Main Street movie set: The general store and bank double as offices; notes are taken in black and white composition books; and the "townsfolk" are young, wired and decidedly Gen X.

The latest white-hot Web shop? No, it's c2o Interactive Architects, the Dallas-based Web boutique owned by Electronic Data Systems Corp., the Plano, Texas, Fortune 500 company and world leader in the unsexy business of systems integration.

EDS' Web mission

Despite its studied coolness, c2o has a serious business mission: To bring "chaos 2 order."

c2o is attacking a thorny problem facing its young industry. It's trying to consolidate the fragmented process of developing online commerce solutions -- branding, marketing, design and legacy systems integration -- under one roof.

Backed by the technological prowess -- and deep pockets -- of parent EDS, it is well positioned to do this.

"A lot of creative agencies are just skin-deep and cannot integrate the back end," says Scott Smith, principal analyst with Current Analysis, a Sterling, Va.-based company that tracks electronic commerce. "If they do their job right, EDS will be positioned for the long run."

Indeed, as corporate America loosens the purse strings for high-level e-commerce ventures, marketers are becoming increasingly frustrated when they try to find one outside company to do it all.

Avoiding disaster

"If we hadn't chosen c2o, we would have been forced to use multiple vendors and coordinate those services ourselves," says Tom Eggleston, president of Driver's Mart, a chain of used-car superstores that chose c2o in competitive bidding. "It would have been a recipe for disaster, both in terms of cost and failed results.

Mr. Eggleston is not alone. A survey of 50 corporations conducted in fall 1997 by Forrester Research, Cambridge, Mass., confirms this trend. More than two-thirds of respondents said they were using two or more developers for a given project, up from 33% the previous year.

"Corporate marketers are frustrated that they're not getting quality service or talent from one company," says Dana Tower, senior analyst at Forrester.

Filling the gap

c2o aims to fill that gap. "We're integrating three competency sets -- business strategies, design and technology," says Butch Winters, president of c2o. "We see a lot of Web initiatives that don't take all those pieces into account."

In just one year, the company has set up shop as a trusted source for mission-critical commerce ventures. It has hired more than 400 employees, recruiting from its formidable systems integration and management consulting ranks as well as from top Web shops like Eagle River Interactive, Chicago.

c2o has also been tapping a little-known division, EDS Digital Studios that has handled post-production work for film studios, for experts and human factors gurus to test system usability.

The company now has more than 200 blue-chip clients, Mr. Winters says. Its business-to-business roster includes Du Pont Polyester Films, the Air Transport Association, Hachette Filipacchi Magazines and Driver's Mart Worldwide, among others.

Strategic consulting

To date, most of its clients have been lured by EDS' technological reputation. But c2o is working hard to play up what it sees as its other key strength: Strategic consulting.

Drawing on the expertise of sister consultancy A.T. Kearney, Chicago, c2o analysts spend six to 12 weeks on the front end, studying a client's business processes.

"This is not just a bunch of people sitting around a table for a weekend with Starbucks coffee," says Mr. Winters. "This is a real consulting gig."

On completion, c2o presents the client with a comprehensive strategy document that's also a blueprint plan and budget. "They can shop it if they want to, although few actually do," he says.

Such detailed analysis also allows c2o to enter into partnerships that are lower-risk for clients. Using simulation modeling, c2o predicts how the site will perform in terms of usage, transactions and brand awareness. It then sets benchmarks for performance and bases its compensation on improvement of that business metric.

"It's one of the best ways to deal with ROI," says Neil Wilson, VP-consulting services, c2o.

These shared risk scenarios take several forms. In one, c2o gets a cut of ad or product revenue in exchange for its upfront investment. Driver's Mart, for example, gives c2o a percentage per car sale.

More pay as success grows

"We pay them more as volume of success of stores ramps up," says Mr. Eggleston.

The higher the revenue generated by a site, the lower the percentage cut. For sites that generate billion-dollar revenue, for example, c2o might take 2% to 3%, according to Mr. Wilson. For revenue in the single millions, it could garner 20% of sales.

Either way, it "reduces the entry cost for clients and allows us to continue to invest in a client to get the payoff on the back end," says Mr. Winters.

Even if c2o fails in its effort to single-handedly address corporate America's electronic commerce needs, it's still in an enviable position. When asked why he chose c2o over other Web shops, Driver's Mart's Mr. Eggleston responded: "It was their Star Wars technology."

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