On December 21, 1999, CheckFree announced that it would acquire privately held BlueGill Technologies in a stock deal valued at $250 million, which is expected to close in the first quarter of 2000. CheckFree�s acquisition of BlueGill Technologies puts the dominant electronic bill presentment and payment (EBPP) company at least one year ahead of its competition in offering billers a complete end-to-end software and services solution.  With this acquisition, CheckFree fills an important gap in its e.bill offering � software that enables billers to convert legacy system data to Web-enabled formats in HTML and XML. Combined with CheckFree�s distribution, payment and customer care services, the combined company can now offer e.billers an end-to-end solution that encompasses transformation of Key gains made by CheckFree include:
� Significant BlueGill reseller relationships with IBM and EDS, which have also needed professional service teams that know how to implement the BlueGill/CheckFree solution.
� Additional service bureau capabilities through companies already licensing BlueGill software, such as Bank One, billserv.com and Moore Business Communications Services.
� Software for the business-to-business (B2B) e.billing market, an area CheckFree has not served, since its consolidator and payment services are tailored for the business-to-consumer (B2C) market.
� An international presence in South America and Europe where companies like Barclay�s Bank and Cable and Wireless use BlueGill software, but have no need for CheckFree�s US-centric consumer payment and distribution services.
� Incorporation of an XML-based biller software, which features print and datastream conversion capabilities as well as integration with third-party marketing tools. Billers consider integration with legacy billing and accounts receivable systems the single most important criterion they use when choosing an e.bill vendor. Integra-tion is achieved through data transformation, which is core to the BlueGill offering.
� Faster sales cycle, as CheckFree can now sell its own biller software and doesn�t have to wait the several months it normally takes for billers to evaluate alternatives.
� The ability to offer billers who sign up an off-the-shelf, bundled in-house solution. BlueGill already sells a module that links its software to the services of CheckFree, but the two firms plan to more tightly integrate their solutions, enabling faster biller implementations. IBM and EDS will also gain as they can now sell a more complete solution.
In a move that has already raised many e.biller eyebrows,  CheckFree announced in February it will acquire its key competitor, TransPoint. The combined relationships and competencies of the three entities, CheckFree, BlueGill and TransPoint, are expected to accelerate the move of billing and payment processes from paper to the Internet by giving billers an end-to-end solution and (hopefully) advancing the rate at which consumers sign up for electronic billing. The CheckFree-TransPoint transaction will be accounted for as a purchase by CheckFree and is expected to be final within the next few months. Looking ahead, BlueGill competitors such as edocs and Just in Time Solutions lose the most with the CheckFree acquisition of BlueGill. CheckFree has the greatest market share among billers (which will increase by about 15 more billers with the planned TransPoint acquisition) and is now going to be peddling BlueGill software as a bundled product. Until now, each e.bill software company that linked to CheckFree had equal advantages in terms of access to CheckFree services. 
BlueGill�s competitors should pick up new business from CheckFree competitors like Spectrum banks, who may prefer buying software from the independents rather than from a company many banks consider a major threat with which they are forced to do business. Still, the banks have a long way to go in catching up with CheckFree, according to GartnerGroup research, and may not bring in enough business for BlueGill competitors to compensate for any likely loss of biller sales to BlueGill. Bank consolidators, including Spectrum and Bank of America, are now used by only 10% of billers implementing e.bill, a market share that dramatically pales next to CheckFree�s 77% and TransPoint�s 42%. (Billers often use more than one consolidator.)
BlueGill reseller M&I Data Services competes head on with CheckFree and is likely to reevaluate its relationship with BlueGill. M&I is already trying to further develop its own e.bill software solution by leveraging and augmenting its CSF product. Late last year, M&I announced the CSF Connect suite, which provides enhancements to its Customer Statement Formatter product to make it easier for billers, including its own biller customers worldwide, to use CSF for presenting statements and invoices on the Web.
CheckFree�s dominance of the e.bill market is further sealed by its acquisition of BlueGill and by knocking out its key competitor, TransPoint, which will enable the company to drive the e.bill market for at least two more years. Considering the infancy of the EBPP marketspace, the pending CheckFree acquisitions should move ahead with no resistance. On the horizon, competitors like Spectrum banks will continue to gain new customers, but for at least one year will be relegated to a distant second in the market. Billers can�t afford to ignore the power and reach of the new CheckFree offering of software and services and, at a minimum, will need to hook up with them as one way to help gain customer adoption. CheckFree�s dominance with billers will ensure consumer access companies, such as banks, brokerages and portals, continue to do business with the company.
For more detailed information on the CheckFree/TransPoint merger, please see page 10, �Dominant Players Merge.� Avivah Litan is the research director of Payment Systems for the GartnerGroup.