competitors chosen to go and buy all the players. That presents them with the challenge of
continuing to have to make significant investments in each of those players to remain, if you will
best of class in each of those areas that are there. Thats an expensive capital intensive endeavor
to continue to do that.
And you can see that by the amount of money that theyve invested in their technology
infrastructure over the last 10 years. We in the mid 90s made a strategic decision to diverge to a
path of aligning ourselves with the best of industry or best of class players with that. And the
Demandware a perfect example of that. And, but we are nonexclusive. So, we will continue to if a
client has a choice to work with a different front end software provider, for example, WebSphere,
then we are qualified and capable to integrate with that particular platform as well. So, not only
does it allow our client to make choices in terms of what platform that they use, but also allows
us to reduce the capital expenditure that we need to make to stay best of class in terms of our
offering and if a new guy comes along, which will always happen, we can go and create that
relationship with the new guy. And were immediately on board with those types of capabilities.
So, we think it provides us an ability to remain more fleet of foot as we look for the next five or
10 years down the road. And frankly, just provides us a greater EBIT contribution in terms of the
things that we do, going forward. So its two different models, two different ways of going about
it out there, but again, we feel very comfortable with the competitive offering that we have in
each of those particular areas.
<Q Marco Rodriguez>: Okay. And then I was wondering if you could talk a little bit about
the gross margins in the Service Fee business. Looking at it quarter-over-quarter rather a
year-over-year, is a pretty significant uptick in the margin. Can you talk a little bit about the
drivers behind that and how you see that kind of moving in the second half of the year?
<A Thomas Madden>: Okay. This is Tom. Weve continued to communicate that our gross margin
range for our Services business is in that 25% to 30% range, which this last quarter it was right
around 27%, if you round the numbers, as compared to 24% or so last years second quarter. One of
the things that impacted us negatively last quarter or last years second quarter was the fact
that we did have this decline in Service Fee business activity. And as we try to allocate as much
of our cost as possible to our Service Fee clients, as opposed to those costs ending up in SG&A, we
ended up having certain fixed costs that we werent able to adjust, when the revenue went down that
were now getting the benefit of the economies to scale with a larger revenue base to be able to
cover those costs with the growth that weve had over this past year. So, as we look forward, I
believe that the 25 to 30% range is an appropriate mix. Things will change as we are able to take
on the project activity or other things that come in, but our stated goal there is to stay
relatively unchanged over the last several years.
<Q Marco Rodriguez>: And then lastly, you guys talked a little bit about eCOST and how
theres very little wiggle room there for unforeseen events and obviously you guys have no control
over. And you made some changes here in the quarter that are hopefully going to see improved
results here in Q3, Q4. Im wondering if we assume that these changes dont realize the returns
youre looking for, has there been any discussion or is there anything that we can look for to
where perhaps that division is either spun out or sold or anything of that nature?
<A Mark Layton>: Well, I dont want to get in to details in terms of exactly what we do. I
would say that, we have had some discussions around planning of what would be next if things didnt
work. All I can say is that were committed to an improving financial trend from that business. As
I said in my prepared comments, were learning a lot from it. Its out in the frontier land of
eCommerce in terms of pioneering things that are going on out there and everyday we learn something
from the activities in that business that become applicable to all of our clients from the services