[Infoworld] OnStar, et al: Controlling the client...

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From: Adam Rifkin (Adam@KnowNow.Com)
Date: Sat Aug 26 2000 - 04:02:18 PDT

[Great line: "There is a war about to emerge for owning both new assets and
new technology platforms to create new relationships with buyers and
sellers and investors and owners. Before companies wanted to own the means
of production; now they want to own the means of acquisition -- to own the
economic transaction."]


Controlling the clients
By Ephraim Schwartz

AS E-BUSINESS MOVES beyond the desktop, nimble companies are creating a
multitude of new client platforms -- and in the process they are finding
themselves with virtual monopolies over the client types they are helping
to define.

In automotive it's GM's OnStar, on gas pumps it's Ten Square, and in the
vending machine industry it's TeleVend and Isochron.

Ten Square has been building its de facto monopoly over the information
shown on gas pump dispensers' LCD screens by signing exclusive deals with
petroleum companies BP Amoco and Chevron and finalizing a deal with Texaco.
It has also signed up pump dispenser makers such as Marconi and Dresser
Wayne that account for more than 82 percent of the gas pump dispensers in
the United States.

San Jose, Calif.-based Ten Square is gaining market share by developing its
own business-to-business personalized marketing programs that it sells to
consumer-focused companies such as 7-Eleven as well as by sharing revenues
with all of the platform participants.

One deal alone with Chevron gives Ten Square exclusive access to 28 million
customers a day processing 1.3 billion transactions. Within 45 days Ten
Square will launch a unique loyalty program that lets customers earn points
which give them the right to buy shares in their favorite company."

Chevron did a study and found that its credit card holders who also own
stock in the company are 384 percent more likely to go out of their way to
use a Chevron station," said Scott Slinker, CEO of Ten Square.One marketing
program will, for example, offer interactive coupon programs as the gas
starts flowing. Ten Square knows that it has 123.9 seconds as a consumer
fills 20 gallons of gas to make an offer. So a company such as Starbucks
could offer a discount coupon through the pump receipt printer redeemable
at the local Starbucks, thus earning the consumer points toward stock

Gas station owners are encouraged to participate in these marketing
programs and gain an equity stake, turning a cost center into a profit
center, Slinker said. Similarly, Ten Square's partners on the equipment
side also benefit."Marconi [the largest supplier of gas dispensers] sells a
gas pump every five years. But by sharing revenues with platform system
providers [such as Ten Square] they can to a certain degree subsidize the
cost of the device," Slinker said. Ten Square is also signing up NCR for
its ATM machines, IVI Checkmate for its credit card verifiers, and has an
unannounced deal with a British telecommunications provider that will bring
that company's unprofitable phone booths into the New Economy, said a
source familiar with the project.

The telecommunications company is required by the British government to
maintain the phone booths as part of its license, but Ten Square is
developing a project that would turn them into interactive information
kiosks where, for example, users could download MP3 files onto their RIO
players , said a source familiar with the program.

Even Old World soft drink companies such as Coca Cola and Dr. Pepper/Seven
Up are partnering with new platform companies like Isochron and
Jerusalem-based TeleVend to bring new capabilities to their machines.The
next-generation soda machines will have displays and will allow consumers
to pay for a soft drink in any form they want, said Steve Winter, CEO of
Austin, Texas-based Isochron Data, a new platform provider in the vending
industry. Once a credit system is set up, companies like Isochron and
TeleVend own the customer and can also offer content from other vendors.

Companies such as Ten Square and Isochron are reinvigorating stale markets,
according to Zachary Kaiman, a consultant at Datamonitor, in New York. "The
idea of what a platform is is changing completely and if it goes well [with
Ten Square] anything can be a platform. This is the tip of the iceberg, and
models beyond everybody's wildest dreams will be discovered," Kaiman
said.As another example of this, Kaiman cited General Motors' in-car OnStar

According to observers, GM has been quick to spot that a restriction on how
in-car technology can be deployed -- that it must be tightly integrated
into the car during manufacturing to override a regular call in case of a
911 emergency -- which will place the company in the catbird seat ahead of
mobile service providers.

This fall, GM will roll out a Personal Calling service that incorporates a
hands-free, voice-activated in-vehicle cellular phone service. Because GM
is required to integrate services such as these tightly with the car, GM
takes ownership of the system, and mobile phone providers such as Verizon
become tier-1 suppliers to GM rather than owning the platform. Virtual
Advisor, another service due to launch this fall, will bring hands-free
Internet access with OnStar controlling the choice of content providers.

With between 50 percent and 80 percent of all cell phone usage occurring in
cars, according to the Cellular Telecommunications Industry Association,
and with 1 million vehicles deploying the new services this year and 4
million by 2003 on GM cars alone, OnStar will most likely not lack for
mobile service providers and content providers that want to participate.

"We own the customer," said GM CTO Dennis Walsh, not the service provider
or content provider.

Emphasizing the momentum behind OnStar, industry analyst Rob Leathern, of
New York-based Jupiter Communications, estimates that GM, a $180 billion
company, may at some point see a staggering 25 percent contribution to
revenues from OnStar services.And GM has exploited the other potential for
its early lead in in-car services by also targeting other automakers.
Honda, for example, which was reluctant to develop a costly technology of
its own, has signed an agreement to deploy OnStar in some of its models and
Toyota is expected to follow suit.

There is irony in the fact that GM has relegated mobile phone providers to
the position of suppliers because they were among the first vendors to
leverage their control of clients. Amazon.com, for example must pay a fee
for access to the platform and even share revenues with the mobile service
provider. If a deal is not made, a consumer will not be able to access
Amazon over that network.More such attempts to control client devices are

"There is a war about to emerge for owning both new assets and new
technology platforms to create new relationships with buyers and sellers
and investors and owners. Before companies wanted to own the means of
production; now they want to own the means of acquisition -- to own the
economic transaction," said Barry Libert, an analyst at Arthur Andersen and
the director of MIT's New Economy Business Lab.


"We think that the future is about moving towards XML and SOAP as a strategic, language-independent and platform-independent way to address this," the Microsoft statement continued. "And for the past nine months, we've been working to develop this in the next generation of OLE DB for OLAP. We think this is the way that people want to develop their .NET applications." -- Microsoft disses JOLP Initiative, http://www.zdnet.com/zdnn/stories/news/0,4586,2618858,00.html

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