Digital River Acquires Calico’s Market Maker

VARBusiness recently spoke with the Joel Ronning, CEO of commerce service provider, Digital River regarding the company's recent acquisition of Calico Commerce's e-commerce division Market Maker. Additionally, the boss offers his opinions on the learning curve of ASP customers and the ill fate of some of his competition.

VARBusiness: How does the recent acquisition support Digital River's long-term strategy?
Ronning: Our agreement to buy Calico was announced a week ago Wednesday, and we wanted to do this for a few reasons. First of all, this group we bought has just outstanding technology and this will allow us to answer the question a lot of our clients have been asking, which is do we have the ability to install the outsourced application into their in-house environment two or three years down the road.

We have never been able to give the answer they want to hear to that question. Before this it has been difficult to do, but now we have an application that is shrink-wrapped and will allow us to install it in-house if that's what they want.

Historically, we are more comfortable outsourcing the application--that's our expertise. We can be the outsource manager for the client permanently or for a period of time they are comfortable with. We can get the product set up on our own servers and set it up at the client's site if they want as well. It really lowers the risk for the client, but it also opens up our market by about 50 percent in terms of who we will be able to work with.

VB: How does the B2B technology from Calico differ from the platform you had originally?
Ronning: There were real similarities between our product and theirs, but it was Calico's architecture that we were really after. This will be our hosted solution going forward, but it will also allow us new options. We can keep it on our servers or install it on the client's site. That flexibility is the No. 1 reason for the acquisition.

VB: Why is that flexibility so important to the future of Digital River?
Ronning: We talked with dozens of prospective clients on a daily basis, and more than half say if we can't move the application to their internal environment at some point, then they're not interested. Customers are becoming more educated in technology issues, and they want more options now than they used to want.

VB: One of the original barriers to the ASP industry was customer education. Do you now see positive effects from the industry's crusade to educate its customers?
Ronning: We like the fact that they are more educated, because then they get the concept of Return On Investment (ROI). A year and a half ago our prospects were not educated, and they were asking for things that didn't make sense. We would have to inform them that they wanted to spend a million dollars on a feature that would offer virtually no return at all. Now customers are almost solely focused on ROI.

VB: Similarly positioned companies like i2 and Ariba are in the midst of nightmare quarters. How does Digital River's position differ from those companies?
Ronning: We're in a much better position than those guys. I mean a far superior position to them. Our client base is cumulative, and i2 and Ariba have to regenerate their client base on a quarterly basis. They have to find new business all the time. We don't need to do that. We have a combined base of 8,000 clients who pay us on a recurring basis. For us to grow, we need to find a much smaller quantity of clients on a quarterly basis than they do.