Copyright 2000 John Zipperer.
(10/18/00) The home page of New York City's Board of Elections proclaims, "Vote. Or Liberty Is History." The home page of Voteauction.com proclaims, "Sell your vote online."
There's obviously some disconnect there, but nothing that the courts and a few determined election commissioners won't get straightened out.
The latest step in that process occurred Wednesday morning when Judge Michael J. Murphy of the Circuit Court of Cook County, Ill., issued a temporary restraining order and injunction against Voteauction.com. The site is being sued by the Chicago Board of Election Commissioners, which is charging that the site's creator, owner, and supporting companies are committing a felony under federal and state laws against vote buying. Chicago election officials say they will process 40,000 absentee ballots this presidential election, and they're most concerned about the potential abuse of absentee voting under vote-buying schemes.
Scott Hemphill, vice president and general counsel for Domain Bank, the domain registrar used by Voteauction.com, said his company was already cooperating with the State of California's demand to take down the site by deleting the site's IP address from the Network Solutions directory. "The [Cook County] court order is really just an affirmation of it, but we had already started the process." He said his company informed Voteauction.com that it had violated Domain Bank's rules and therefore would face being shut down.
Voteauction.com did not respond to a request for comment.
The Voteauction.com site lets voters put their presidential votes up for bid; it even includes a state-by-state listing of the current bids.
Is it a genuine attempt at e-commerce or is it a joke? It's certainly not clear that it's the latter, despite some observers' claims. After the New York City Board of Elections pressured it into shutting down in August, the site's founder, James Baumgartner, sold it to Hans Bernhard, an Austrian businessman. So someone clearly thinks there's money to be had here.
But whether or not it's a joke may be irrelevant, said Thomas Leach, director of public information at the Chicago Board of Election Commissioners. "Obviously, they're committing a crime," said Leach. "It's illegal under state and federal law to even offer to purchase votes."
Maybe it's most irritating to have someone who doesn't understand the issues trying to parody them -- resulting in a joke in which the underlying humor is suspect and the underlying logic is baseless. Political pranks that bring to light the corruption of a system or an injustice are helpful insofar as they correctly identify the problem and offer a solution. This does neither.
First, the corruption of American politics by money occurs at the level of buying candidates, not citizen votes.
Second, elections are a good place to be a little too serious in evaluating claims of corruption. German social theorist Jurgen Habermas has written extensively on the importance of keeping people's private lives from being overtaken by economic-based considerations. In other words, making money -- even on the Wild West of the Internet -- is not the primary focus. But if the creators of Voteauction.com had ever read Habermas, they clearly didn't agree with him. Because instead of zealously developing and arguing for a solution to the corruption of politics by money, they set up a system to make money from it. And if anyone complains, they can snigger and say, "You don't get the joke."
But the various boards of elections that have sued Voteauction.com understand the joke. They also know that elections are a serious business, where more is at stake than making money or appearing cynically hip.
(Internet Whirl is a weekly column written by John Zipperer, associate editor of Internet World magazine. It will appear every Wednesday.)
Navy Contract Boosts EDS
(10/9/00) Calling it the largest government information technology contract to date, the Navy awarded a $6.9 billion, five-year contract to Electronic Data Systems on Monday. The contract, which has an option for a three-year extension worth another $3 billion, helps EDS address concerns about stagnant revenue growth.
The project is massive. It will tie together the Navy-Marine Corps intranet, which will support about 360,000 users in the continental United States, Hawaii, Alaska, Puerto Rico, Iceland, and Guantanamo Bay, Cuba. Military officials praised the deal as a groundbreaking move by a government body to outsource its IT services. As part of the deal, EDS will own and manage all of the computers and connections for about 350,000 desktop systems and about 200 networks that will be tied together. EDS beat out such competitors as IBM and Computer Sciences Corp. to win the contract.
The contract is due to begin in November of this year, but it can't begin soon enough for EDS, which has seen its stock lose about a third of its value in the past year. Lee Houser, an analyst with Raymond James & Associates, said the stock has been dragging because of worries about future revenue growth. With the injection of cash each year under this contract, those worries can recede to the background.
Last year EDS reported revenue of $18.5 billion; it is expected to report about $20 billion this year and perhaps $22.5 billion in 2001. In an Internet business environment where companies hemorrhage money as a business model, many other companies wouldn't mind stagnating at those numbers for a while.
But then, those newer companies have probably seen EDS much as investors have seen it, as a company stuck in time and technology that made it unlikely to succeed in the e-commerce world.
Analyst Greg Gieber, vice president of A.G. Edwards & Sons, said, "There was a perception among some investors that they were kind of legacy technology dinosaurs." Gieber noted that people questioned whether or not 38-year-old EDS could compete with newbies such as Exodus, whether it could make it in newer areas of technology, and whether investors were patient enough to wait around until the revenues promised in their contract wins of the past year started showing up in the balance sheet. EDS may well be on the way to putting those concerns to rest.
Shares of EDS rose nearly 10 percent, to $44.62, on Monday.
Secretary of the Navy Richard Danzig estimated that the Navy and Marine Corps already spend $1.6 billion a year on their IT network, so for the roughly $1.2 billion they will pay EDS annually, the military branches stand to save hundreds of millions of dollars. That's less than the $1 billion a year in savings estimated by EDS chairman and CEO Richard Brown in a conference call to analysts Monday morning, but it's significant nonetheless. Danzig said the savings will be put toward his organization's information applications and the expansions of its operations.
There will be some layoffs -- about 330, according to Navy estimates -- but Danzig said that most of the military personnel affected can be used in "more classically Marine-like functions."
Established Firms and Startups Use The Net to Empower a New Breed of Investor
(10/1/00) Decades ago, banks and investment houses were built with imposing blocks of marble to project an image of rock-solid stability. Because few investors took a day-to-day role in their money's growth, the financial institutions of the time truly had to be seen as "trust" companies. But for today's banks, facades are fading in importance, now that older investors are becoming more sophisticated and new investors keep entering the market. The new focus is on rock-solid services that leave investors well informed and in control.
Now, everyone from the very rich to the working stiff with a 401(k) account is seeking -- and getting -- direct control over, or at least access to, their investments.
The approaches financial institutions are taking to deal with this sea change bear watching by other industries that are also looking to reach the new consumer.
The newer investors are into developing and managing their own investment strategies, and that has created online opportunities for both online pure-play and old-line solutions to create time and money savings all around. Financial services firms have responded by rolling out programs to educate consumers and let them track stocks, plan investment strategies, assemble portfolios, make trades, and handle stock options. The new players are doing the same, and are sometimes partnering with their seasoned rivals.
"As a general rule, younger people tend to be more inclined to use the Web and do these things themselves," says Gerard Michael, president and cofounder of SmartLeaf.
SmartLeaf addresses those eager young customers by letting them develop an investment plan that is built around their beliefs about the stock market, their investment needs, and their portfolio data. Users of the first release of SmartLeaf, which launches this fall, will have to execute the actual trades elsewhere, but Michael says future releases will be hooked directly into Net brokerages. He's tried to keep the entire process simple, and he believes that the data-entry requirements are "probably the biggest hurdle to using the system." It's a hurdle all such services face, but some of them are able to prepopulate their systems with at least partial customer information -- especially if they are working with a brokerage firm or with 401(k) investors who have signed up for the service through their company's human resources department.
Simplicity is just one hurdle. The whole point of direct control by consumers means that they likely will never see a financial services company's actual offices, so it doesn't matter if they're marble or cardboard. However, quality service -- including good customer service -- can help the new generation gain at least some of the prestige enjoyed by their old-economy counterparts.
With this, there's the matter of making new names known. The Internet-only offerings "need to build a brand presence," says Shalin Patel, a research analyst with Gomez Advisors. "A lot of people out there are more interested in the Merrill Lynches."
The HR market in particular is alluring, because these staffs must invest a lot of time managing benefits plans and educating workers. Invesmart, formally launched in May, focuses on retirement services. It allows HR administrators to set up programs in which employees can directly manipulate their retirement plans. It also allows smaller companies to set up and manage "the type of plan they could otherwise have gotten only if they were a larger company," says Martin Barkman, managing director of emerging growth-company markets for Invesmart.
Another niche that has opened up in recent years involves helping employees take the most advantage of their stock options. OptionWealth is one vendor helping to fill the need with a Web-based system prepopulated with employee information that explains how and when to exercise options.
Although the market for options software could be huge-- OptionWealth CEO Rick Schultz says 27 percent of the average tech employee's assets are in stock, and there are many non-tech companies that have adopted some form of options plan - the company has broader aspirations. Schultz says that he is looking for a strategic partner whose offerings, when combined with OptionWealth's services, would provide for a complete array of financial services.
The one-stop-shopping model is compelling these days. Many experts say that consumers don't want to go to several different places to handle each of their investments, insurance policies, and retirement plans. "Make sure that you are providing well-rounded services to customers," says Gomez's Patel. "This is a great place for consumers to be able to do all of their financial business at one site."
A Roar from the Mice
W. Jonathan Wride, CEO of E-Invest, is a former broker who saw an opportunity to offer 24-by-7 online investment advice from licensed professionals. E-Invest lets new users open accounts via online chat, the phone, downloadable forms, or even snail mail. Similarly, when customers want live advice, they can get it through online chat or over a phone. E-Invest boasts of its 24-hour access to advisors: Each customer's account is handled by a six-member team, at least one of whom is available at any hour of the day. The cost is based on a percentage of a user's assets managed by the company, ranging from a high of 2.5 percent for less than $5,000 in assets to a low of 0.85 percent for $500,000 or more in assets.
The ideal E-Invest advisor is "someone who's been working at Smith Barney, but who maybe wasn't the best salesperson," Wride says. "We're asking them to come here and manage money."
That mixture of old-line expertise and new-economy delivery, too, needs to fit into an overall plan for attacking the online services market. Sapient, an Internet business consultancy, has developed e-business projects for financial services firms. In preparation, it studied the financial services companies that it determined were doing the best in terms of shareholder value and profitability growth.
The companies that ranked highest included Charles Schwab, Morgan Stanley, Chase, and Freddie Mac. Stephen Kane, Sapient's VP of marketing, says these companies have five things in common that have contributed to their success:
ð They manage their alliances with an eye not toward what makes their jobs better, but what serves their customers best.
ð They address their customers' needs in terms of life events rather than simply performing random actions. For example, instead of offering auto loans, they'll deal with the entire issue of buying a car, including financing, finding and purchasing the vehicle, insurance, and a maintenance contract.
ð They combine human contact with electronic information services.
ð They operate in an open market - even if that includes selling competitors' products.
ð They leverage new technology to bundle information and add value to that information for customers.
All that may just sound like common sense. But "it's really difficult to make those five points common practice," Kane says. "These companies were able to execute."
How can companies succeed at providing the new economy's new consumer with online services?
Two experts at Ernst & Young stress the challenge of this cultural shift, particularly withincorporations, noting "a broader change from a paternalistic to a self-reliant culture" among employees regarding retirement investments. William Arnone, national director of employee financial education and counseling for E&Y, and Scott McCallister, E&Y's former national director of tax e-commerce strategy and ventures, co-authored a recent article in the journal Benefits Quarterly.
"Employees will expect to have themost current data at their fingertips," they noted. "Employees who have access to automated tools are unlikely to tolerate imported data that is even a week old. Employees will want instant access, 24x7x365, to highly personalized information ... They will want both the style and the substance to reflect their own situation. They will want dynamic modeling, where they can perform 'what-if' analyses in a much more sophisticated and powerful way."
Substitute "customers" for "employees," and you have a good description of the challenge.
E-services consultancy Sapient helps its clients, like Bank of America, Answer Financial, Morningstar, and Janus, by first developing experience modeling of the customer. Sapient uses techniques from anthropology, such as observing people as they pay bills -- even noting facial expressions. Done in-person and through filming, this one-on-one approach gets beyond focus groups, where consumers sometimes tell you what they think you want to hear. "A focus group is the worst way to do it," says Larry Colvin, co-manager of Sapient's financial services industry group.
Colvin says financial companies need to take a sober, objective look at themselves and their abilities before jumping into online delivery. Not all companies are equipped with the technological know-how, and they may need to take a group of people who understand the online market and put them in a separate division or even a separate organization so they can concentrate on the new market.
And if a company is without in-house online expertise, it's probably too late to develop it from within. "These are the days of alliances, because they are quick," Colvin says. "Companies don't have the time to build an extensive capability they don't have."