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Coup d'Etat at Grand Central

Halsey Minor, the Internet veteran who founded Grand Central Communications Inc., has ousted the San Francisco-based company's outspoken president and CEO Craig Donato and will assume the role of CEO effective immediately, the web services enabler announced Wednesday.

Minor himself hired Donato in May 2001, a year after he founded Grand Central. Reached at his home, Donato confirmed his departure from the company.

"I'll be consulting in the transition," he told internetnews.com during a brief telephone discussion. He deferred all other questions to Grand Central.

Even prior to the release of this morning's press statement, all evidence of Donato had already been removed from Grand Central's Web site. But Minor emphasized during a telephone interview that his decision to remove Donato was more of a tactical business decision than a fundamental difference in strategy or management philosophies.

The decision comes as Grand Central is set to close on a new round of funding this month. Minor declined to provide additional financial details. But he did add that he felt it was important to make the change first.

"We would have closed the round with Craig in place," he said. "But that wouldn't have been fair to investors. Now was the moment I had to make the change."

Minor said, in fact, he had been thinking about taking over for two or three months and told Donato last week that he wanted the CEO responsibilities. "I've been working with Craig for the last 18 months," he said, "and I decided I wanted to get back into running a company again. I've done well as an investor, but I'm really an operator at heart."

In his tenure, Donato often served as the company's figurehead, conducting interviews, writing articles and giving presentations at various conferences. Minor and other Grand Central execs will handle his future scheduled appearances. Minor said the company had done a good job of maintaining visibility but could do a lot more to explain what it does.

As Donato himself described it in an interview, San Francisco-based Grand Central is like the public switched telephone network, but for business systems instead of for people. "Instead of enabling any two people to communicate, Grand Central enables any two applications to interact," he said. The network uses emerging standards including XML, SOAP, UDDI, and WSDL, as well as the traditional electronic data interchange (EDI) format.

Donato "was a very technical guy," Minor said. "I think we need to move past a very technical story and start telling a story about how businesses benefit by adopting the technology. It's been very much in the weeds about the architecture and not enough about the benefits."

Minor said Donato's vision was 90 percent consistent with his. "The primary difference between us," he said, "was in solidifying key partnerships that will help us sell and market our services and establishing some large key customers that validate the company."

But that remaining 10 percent difference in philosophy was clearly evident as late as last month during a CNET-sponsored panel discussion at the CeBIT-America show in New York that featured Donato. During the forum, the outspoken Donato provided colorful commentary but also publicly disagreed with fellow panelist, Novell Vice Chairman Chris Stone, about the importance of the current business process outsourcing (BPO) trend.

As a provider of enterprises-level subscription-based Web Services networks, Grand Central could no doubt be greatly helped out with Novell as a strategic partner. But instead, Donato downplayed the necessity of moving toward standardization or commoditization of business processes, asserting that BPO would only be viable if processes never changed. "That will never happen," he said.

"I think business process outsourcing is going to be very successful," Minor told internetnews.com. Over the next few months, Minor said he would focus on solidifying key partnerships and promised to make some announcements in the near future. And at least one analyst familiar with the company believes that is exactly what Grand Central needs as a start-up entity.

"It's important for Grand Central to close some high profile deals," said Gartner analyst Benoit Lheureux. "Their biggest challenge is getting some traction in the industry."

"You don't want to set up a trading community with hundreds or thousands or partners and have it be disrupted by problems with a vendor. Having Halsey at the helm ... with his background ... might be a way of reassuring this community that they will survive the inevitable shakeout of the value added networks."

Minor already has his money where his mouth is. Minor developed and sold to Vignette the technology for its Story Server product, founded CNET Networks in 1992 and was a founding investor in Listen.com and salesforce.com. He is the lead investor and biggest shareholder in privately-held Grand Central. Now, if his company tanks, he'll have only himself to blame.

EDITOR'S NOTE: CNET is a competitor of Jupitermedia Corp., the parent of this Web site. Jupitermedia was a client of Vignette.