Proper initial integration can spell the difference between success and failure. Many merchants, eager to get online, skip back-end integration--only to find that manually re-entering orders into a back-end system or parsing e-mail messages generated from the site can be more expensive or labor-intensive than taking telephone orders.

For merchants with a well-conceived plan, outsourcing can represent significant savings. For example, Forrester Research estimates that it costs $6.7 million to outsource the operation and maintenance of a $3 million packaged application for 1,000 users over three years; the same steps performed in-house would cost $8.87 million. For commerce-specific applications, the savings climb higher, given the extensive security, reliability, performance, management and multitiered-application demands upon hosts of commerce-specific applications.

Custom design and integration often pushes midsized companies' expenses to the million-dollar mark; it's the area identified by more than half the CSPs in our survey as most likely to be underestimated by merchants. One important reason is that commerce products still lack the "glue" that would easily integrate them with each other and with merchants' ERP and other back-end systems. That interweaving of applications will come, but it will take time (see "In Search of E-Commerce Application Bridges," page 54). For now, the integration effort continues to rest on the tricky art of matching a CSP's skills with a prospective customer's corporate infrastructure and framework, operating system, database, Java, Active Server Pages and similar e-commerce components.

In time, standards may smooth the jagged integration landscape spanning e-commerce components: catalogs, personalization tools, sales carts, order-entry systems, bill presentment, tax calculation, currency translation, shipping-cost calculation, credit-card authorization, customer incentives, customer service, fulfillment, site maintenance, report generation, performance monitoring and many other functions. In the meantime, infrastructures are being carefully handcrafted (see "Questions To Ask Your ISP" at www.networkcomputing.com/923/923f1side1.html).

Are You In or Out?
Whether outsourcing will grow is anyone's guess; even service providers aren't sure. CSPs estimate that an average 50 percent of merchants outsource network plumbing, and some major applications and design; the CSPs we interviewed were equally divided as to whether that percentage would increase or decrease during the next five years.

CSPs are slightly more optimistic about the prospects for outsourcing network plumbing--without apps or design services. Sixty percent of the respondents said they were confident they'd see an increase in that business.

Those who argue that outsourcing will grow tend to believe that few merchant organizations are prepared to pay the price for the kind of skills, redundancy, network peering, security and regular maintenance/patches that e-commerce requires. At the same time, most enterprise and productivity applications are growing a browser crust--one that will add enterprise apps to a growing list of services that can be outsourced.

Those who predict a decline in outsourcing see e-business as so mission-critical that Fortune 1,000 companies will keep it in-house in order to better shape their own destinies. An anticipated glut of cheap bandwidth also factors into reduced reliance on hosting companies; many merchants now outsource network hosting to beef up performance and economically achieve the redundancy and peak-load capabilities that e-commerce demands. Finally, it's unclear whether merchants should or will trust third parties to ensure the security of business transactions.