SOFTWARE FOR BIG COMPANIES BRINGS E-COMMERCIAL SUCCESS
It doesn't take a cyberguru to figure out that InterWorld Corp. isn't a typical Silicon Alley start-up. Not with its blue-chip roster of partners, clients and backers, including Federal Express, Toys "R" Us and global financier George Soros.
InterWorld has found itself in such heady company by developing software that allows large businesses to buy and sell goods and services on the Internet. With e-commerce expected to become a $37.5 billion business by 2002, InterWorld is poised to be a major player in the virtual marketplace.
"InterWorld recognized the need for this technology four years ago, and now they're beautifully positioned," says Chris Stevens, an e-commerce analyst at the Aberdeen Group, a Cambridge, Mass., consulting firm.
A key factor behind the company's swift rise has been its ability to lure deep-pocketed investors.
Chief Executive Robert Zangrillo, a former merchant banker, has pulled in $50 million from high-powered backers such as GE Capital, Microsoft co-founder Paul Allen, Mr. Soros and Donaldson Lufkin & Jenrette.
Investment management foundation
"Bob's done a really good job of bringing in very good investors from the start," says Scott Smith, principal Internet commerce analyst at Current Analysis in Sterling, Va. "He brings a good investment management foundation to the company."
Providing InterWorld's technology foundation is co-founder and Chief Technology Officer Michael Donahue, who ran his own consulting business in New York before joining forces with Mr. Zangrillo. The two have gone on to import top-flight management from technology powerhouses such as Siebel Systems Inc. and Comdisco.
"What we've done is harness that experience to deal with the rapid growth that we're going through," says Mr. Zangrillo.
Charging millions for high-end software
He declines to provide financial figures for the privately held company, but does say that InterWorld saw 300% revenue growth in 1997. An initial public offering is expected soon.
Driving revenues is business from big retailers such as Toys "R" Us, which are using InterWorld's high-end Commerce Exchange software to expand sales to the Web. A basic system to handle tasks such as displaying catalogs and processing orders typically runs about $195,000. More sophisticated versions can run into the millions of dollars.
The biggest emerging market for InterWorld is business-to-business, as manufacturers and distributors turn to the Internet as a way to reduce operating costs. The company has teamed up with computer industry giants such as Electronic Data Systems Corp. and NCR Corp. to market its e-commerce software as part of an integrated technology system.
Federal Express, one of the country's most respected corporations, selected InterWorld in April to offer e-commerce capability to its large business customers.
"InterWorld was the logical choice," says Michael Janes, FedEx's vice president, e-commerce and logistics marketing. He noted that the company's system was the most user-friendly and adaptable of the many he considered.
InterWorld faces a host of competitors ranging from start-ups such as Cambridge, Mass.-based BroadVision and Open Market in Los Altos, Calif., to dominant players like Microsoft. But the company's consistent focus on targeting large-scale customers has so far helped separate InterWorld from the pack, says Current Analysis' Mr. Smith.
Mr. Zangrillo is especially pleased that InterWorld was recently selected by Silicon Valley's Upside magazine as the country's best e-commerce company in its annual listing of Hot 100 Private Companies. "It shows that not all the top software companies are on the West Coast," he says.