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eService is Job #1

In the pioneering book, Customers.com, Patricia Seybold says the formula for success for e-commerce is simple, that is focus "on your existing customers, figuring out what they want and need and how you can make life easier for them."

Sounds great, right? Well, many companies are not doing this.

For example, in a Jupiter Communications survey, of the top 125 eCommerce sites, 42 percent either did not accept e-mail or never responded to e-mail or took longer than five days to respond to e-mail. This helps explain why two-thirds of online transactions are abandoned before completed.

Interestingly enough, customer service may be more important in the online world than the physical world. After all, in the online world, there is no face-to-face interaction with customers.

But there are solutions -- from a variety of cutting-edge companies.

One of the best companies is eGain, which plans to offer shares to the public for the first time this week. The lead underwriter is BancBoston Robertson Stephens and the proposed ticker symbol is EGAN.

The primary means of online customer service is, of course, e-mail. But, the volumes of e-mail are usually high and thus are very difficult to handle. It is usually more cost-effective for companies to outsource such technologies.

As for eGain, its software is deployed in two ways, either as a hosted application service (that is, eGain completely manages the technology) or as an in-house installation. In fact, eGain is the first company to offer these two options.

Despite the fact it's a young company, eGain has a comprehensive suite of products. Its Email Management System (EMS) helps companies route, track and respond to high volumes of e-mail.

A company can implement their own rules that categorize email communications using advance artificial intelligence technology (known as statistical vector analysis). Once the data is processed, it is sent to the relevant service rep, along with suggested responses.

Next, the Collaboration System allows customer service reps to provide live assistance through the company's site. The communications are in real-time.

Finally, the eCommerce Bridge integrates EMS with the eCommerce platforms, as well as call centers and customer databases. That is, a service rep will be able to get access to all available information on the customer.

So far, the company has added a variety of top-notch customers, like WebTV, PlanetRx, Snap.com and RealNetworks.

Here's a look at the valuation metrics (assuming the IPO is priced at the top of its range). Keep in mind the company is in its early stages and the revenues are, as a result, minimal.

eGain

EGAN

pro forma IPO

 
   

Shares offered

5.00

Price target/actual

$11.00

Proceeds

$55.00

Shares out

27.5

   

IPO market cap

$302.50

less working cap

$50.10

plus LTD

0.2

Enterprise value

$252.40

1999 Revenues

$1.00

1999 Losses

$11.30

Annualized rev.

$2.00

   

eGain

 

Revenue multiple

151

Rev. multiple enterprise

126

The opportunities for eGain are great. According to IDC, the revenues from such technologies is expected to grow from $42 million in 1998 to $1.6 billion in 2002.

With its IPO, eGain should, well, gain even more in the marketplace, making this perhaps the hottest IPO of the week.