On April 14th, GSI and Intershop announced that they had entered into a licensing and distribution agreement. As a part of the agreement, GSI gains a minority and controlling interest in Intershop. With a relatively small ownership stake of 10.5%, GSI will have significant influence over Intershop, due to Intershop’s very diluted and diverse stockholder base. This gives GSI control over one of the oldest and most established eCommerce software solutions in Western and Central Europe. Additionally, under the agreement GSI will have exclusive rights to distribute Intershop’s solutions in the Americas and also have access to Intershop’s software, engineering talent, and integration experience.
What the agreement means:
- For GSI, it immediately enables the company to market a software solution in addition to its full-service outsourced solutions. This enables GSI to extend the conversation with prospects who may otherwise not be interested in GSI-based eCommerce platform solutions, and deliver an enterprise-class solution. It also enables GSI to serve B2B clients in highly configurable ways, something that the company has been challenged to do in the past. As the B2B solutions market continues to grow, this will enable GSI to diversify from its focus on B2C specialty retail and branded manufactures.
- For Intershop, it means the support of an eCommerce solutions company. Under its current leadership, Intershop has been making the transition from a technology and IT orientation to a business and solutions orientation. GSI brings that culture to Intershop as well and will enable Intershop to continue on the path of maturing its business-user tools and continue to develop its services business.
- For GSI, it presents a chance to leapfrog on its own replatforming efforts and advance its road map. GSI began a very ambitious systems overhaul effort in late 2008, with the goal to improve the core platform and overcome some of the system limitations that frustrated its clients and affected its bottom line. With this investment, GSI gains Intershop technology, which can be used in selective fashion, such as within product information management; CMS integrations; order management; and B2B-specific capabilities such as purchase-order management and distribution support. In my view, there will be a long-term effort to integrate the Intershop offering into the GSI hosted environment, but this will not happen quickly. GSI will likely leverage pieces of the Intershop applications to improve its core platform as it continues to work to execute a critical road map for its clients.
- For Intershop, it is a chance to gain a better foothold in North America. Since the dot-com bust caused Intershop to retrench to its German-market roots, the company has been challenged to develop a name and solution-delivery footprint in US and Canadian markets. While Intershop has maintained a few notable high-profile clients such as Hewlett-Packard (HP) and Xerox, it has struggled to grow in the largest eCommerce market in the world. GSI’s resources will help fuel Intershop’s re-entry into the North American market.
The “marriage” between GSI and Intershop, like any marriage, will present challenges. And those challenges may be amplified primarily due to the following factors:
- Very different solution orientations. While Intershop has begun an important transition, the company has remained on footing as a technology solution, enabling IT and integration service providers to implement the product in highly configured and customized fashions. GSI has been focused on being a services company, oriented to the business user. It will be challenging to effectively market and deliver solutions to companies in this highly configured and technology-centric fashion.
- Reputations each challenged in their own ways. GSI must routinely overcome a reputation as an inflexible solution, largely driven by the basic solution philosophy of a solution that must scale across clients to deliver on the value proposition and deliver on the expected business results. GSI, to its credit, has acknowledged the problems and begun the work to improve the core capabilities required to be more flexible in its technology and services. Intershop, for its part, must overcome the perception that its solution presents a high total cost of ownership and is very developer- and resource-intensive. The combination of these reputations will require GSI to address them head on and work to build the teams, partnerships, and marketing tools to reach the new licensed application market opportunity.
- Very different business cultures. Intershop and GSI are very different organizations, in very different cultures, with different approaches to developing solutions. Any merger and close marketing relationship is challenging, but a cross-market and cross-approach one will certainly be more so. (DaimlerChrysler ring a bell?)
GSI and Intershop both have tremendous talent, and both have recently seen positive business results. I certainly look forward to seeing the joint offering develop and these two organizations come together.
Thanks, and I look forward to your questions. Forrester clients with questions on Intershop and GSI solutions, I suggest an inquiry so we can discuss. I look forward to connecting with you.