Electronic Commerce

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Digital Dollars

Microsoft-Intuit deal speeds the day when most financial transactions will be online

By Clinton Wilder
Issue: 10/31/94

Is your company ready for electronic commerce? Bill Gates is. The unstoppable Microsoft Corp. chairman and CEO shocked the software industry on Oct. 13 with a $1.5 billion acquisition of personal-finance software leader Intuit Inc., the largest software company buyout ever.

It's clear that Microsoft's real motivation for buying Intuit was to grab the pole position in the race to put financial transactions online. As that race gets under way, it could fundamentally change the way many companies do business. It could also challenge organizations to revam p their technology infrastructures to compete in a new online environment.

Thumbs up. Intuit CEO Cook (left) will have a 'license to be big-picture'
when he becomes Gates's director of electronic commerce.

Electronic commerce-consumers and businesses shopping for, ordering, and paying for goods and services via computers and networks-isn't a new concept. But after a more than a decade of fits and starts in home banking and electronic data interchange (EDI) projects, electronic commerce finally seems poised to hit the wires. Companies and consortia to promote business on the Internet are sprouting up. The nation's largest banks, along with credit-card suppliers Visa International and MasterCard, are moving ahead with online ventures. And large corporations such as Lockheed Corp. and General Electric Co. plan to harness the Internet as a place to reach their customers.

The learning curve for technology managers is st eep, however. "There's a lot of technology such as the Internet, TCP/IP security, and Mosaic software that most technology managers aren't necessarily familiar with," explains Daniel Schutzer, a VP in Citicorp's Technology Office in New York. "There is a lot of learning to be done."

The Microsoft-Intuit combination is a good place to begin. Intuit's Quicken financial-management software for home users and QuickBooks for small businesses and corporate departments already sport electronic links to banks and credit-card companies. They are the starting point for Microsoft to offer a host of PC-enabled online transactions.

"Up to now, our products have been mainly standalone," says Scott Cook, the 42-year-old founder and CEO of Menlo Park, Calif.-based Intuit. "But from here on, our important work will be in electronic services. We will put in the systems and structures to enable electronic commerce to flourish in the next millennium." Cook will become Microsoft's executive VP of electronic commerce, report ing directly to Gates.

''We Won't Become A Bank''

Although Microsoft won't discuss specific plans, observers agree that the company's forthcoming online service , known as Marvel, and the Windows 95 operating system will integrate pieces of Intuit's software to enable online and possibly Internet-based transactions. "Both the network side and the front end are business opportunities we'd like to pursue," says Microsoft executive VP Mike Maples. "We won't become a bank or put banks out of business, but we think we'll dramatically improve the payment process."

Intuit's Cook thinks information systems (IS) executives, especially those at banks, also will play a big role in electronic commerce. "I still find senior decision makers in banks who believe PCs in the home are not a real trend," he says. "But the IS people know better. They can help their banks understand the effect PCs have in our society."

Financial IS professionals must also lead the way in e stablishing new electronic links to their companies' customers-consumers as well as corporate treasurers. Although this won't happen overnight, Microsoft-Intuit and a raft of emerging third-party players could usurp banks' traditional roles in transaction clearing and processing as business moves online.

"There is a wall between the banks' payment systems and their customers' general ledger and financial management applications," points out Richard Crone, senior manager of financial services at accounting and consulting firm KPMG Peat Marwick's Los Angeles office. "Banks must open up their systems to allow more meaningful information to be wrapped around the transactions."

Leading-edge banks agree. "We have to build a veneer around our accounting systems to make them live in an online environment," says Tim Meier, VP of IS at U.S. Bancorp in Portland, Ore. His bank is one of four financial institutions using Microsoft Money-which Microsoft gave to Novell Inc. after the Intuit acquisition-and the Intuit-owned National Payments Clearinghouse as the basis of a home banking service. "We've got to come up with systems that interface with, but stand outside, our core systems," Meier adds.

High Notes

Banking isn't the only industry seeking new ways to connect with customers. In the past year, a plethora of ventures and technologies have burst on the scene to facilitate electronic commerce environments. For example, AT&T Network Notes, announced in March, enables companies to exchange documents through Lotus Development Corp.'s Notes groupware via the AT&T EasyLink service. Early users include retail chain Egghead Software and insurance brokerage Johnson &Higgins.

The Internet now offers four major business-to-business linking services: nonprofit CommerceNet consortium in Menlo Park, Calif.; MecklerMedia Corp.'s MecklerWeb in Westport, Conn.; O'Reilly &Associates' Global Netwo rk Navigator in Sebastopol, Calif.; and Cambridge, Mass.-based OpenMarket . But these services have not gained much of a customer base. In fact, MecklerWeb on Oct. 19 overhauled its service because of poor response from advertisers.

Backers of Internet-based business also have launched attacks on the nettlesome issue of security. CommerceNet, which on Oct. 17 added Bank One to a roster that includes Lockheed, Hewlett-Packard, Apple Computer, and BankAmerica, has formed a joint venture with RSA Data Security Inc. in Redwood City, Calif., to make Internet transactions more secure. Citicorp's Schutzer heads the Financial Services Technology Consortium, a banking industry group that aims to have prototype software for secure Internet funds transfer available by next year.

With so many electronic commerce opportunities, fears of Microsoft dominating the electronic marketplace as it does the desktop are misplaced, says Marty Tenenbaum, CEO of Enterprise Integration Technologies, the project manager of CommerceNet. "Sure, many companies will have storefronts that can talk to Intuit, but there's a whole other world out there," Tenenbaum points out. "Anyone who thinks they can monopolize the marketplace misses the point of what electronic commerce is about."

For banks, electronic commerce presents challenges in business as well as technology. "More people want to bank outside branches," says Chuck Hieronymi, senior VP of marketing at NationsBank Corp. in Charlotte, N.C. "We want to offer customers a full array of access choices. The consumer's question used to be, 'Who has the closest branch?' Now it's, 'Who can give me better access to my money and solve my problems?'"

For more than 6 million PC users, the answer has been Intuit's Quicken software. "For online financial transactions, more people have loyalty to Quicken than to any bank," says Paul Saffo, a director of the Institute for the Future in Menlo Park, Calif. "In that environment, what is the banks' piece o f the pie? The banks are struggling to avoid becoming commodity service providers."

Microsoft may not be able to control all electronic commerce, but it does want to provide the standard interface from the desktop to the online business world. "Imagine a world where your bank statements, bills, and brokerage accounts are all online," says Microsoft's Maples. "If that world happens, you'll need a personal financial dashboard to integrate all of that information from a variety of sources in one place. The Intuit application is the beginning of that set of tools."

Cook says his new position at Microsoft "is a license to be as big-picture as we want to be." Microsoft's vision of the future is clearly a world in which the majority of consumer and business transactions will take place online.

Microsoft has bet $1.5 billion that its vision is accurate. Corporate IT and business had better be ready. with additional reporting by Bruce Caldwell

Photo: San Francisco Chronicle

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