Buena Vista Internet has adjusted by purchasing back-office technology from other companies and having its staff focus on systems integration. Many other companies, including San Diego-based IBaby.com, have coped the same way.
"Vendors, hardware, software, marketing partners--that's pretty universal, and you can do that from anywhere," said Shop.org co-chairwoman Elaine Rubin, who helped launch IBaby.com. The decision to locate in San Diego was based not on technology but on the fact that its retail partner, Kids Warehouse, was already located there, Rubin said.
In addition to engineers, the main commodity in short supply is money. But local entrepreneurs say the situation is starting to improve now that venture capitalists are casting their gazes beyond Silicon Valley.
"The more the venture capital people see this area breed successful start-ups, the more they're going to think twice about passing on companies here," Lenk said.
Southern California's e-commerce industry could get a major boost from the entertainment industry--if the studios embrace the Internet. Their movies and albums are certainly in demand, as the popularity of MP3 music files demonstrates. But the big entertainment companies have been slow to embrace Web-based distribution, in large part due to fears about piracy.
Entertainment companies must get over their "paranoia" soon and find a way to sell their wares online this year, said George Geis, who teaches a course at UCLA's Anderson School called "Strategy in the Digital Economy." If the studios wait too long, they will have less control over the distribution technology and won't be able to strike the most favorable deals, he said.
"The real question is influence," Geis said. "Who's driving the deals and the partnerships? Who's in control of a massive wave of content that's entertainment-based? Who is structuring the deals in such a way that Southern California benefits the most?"
The answer to that question could affect not only the entertainment companies but the Southland's entire e-commerce industry, which will rise or fall together. Each successful e-commerce firm helps build the region's talent base, attract investment and inspire budding entrepreneurs to start their own companies, said Massoud Entekhabi, a partner with PricewaterhouseCoopers' global technology group in Woodland Hills.
"It's a virtuous circle as more and more e-commerce companies emerge here," agreed Jan Brzeski, president and chief executive of STV Communications, a Santa Monica firm that produces streaming Web-based video clips to help companies sell their products online. "We're in the frenetic growth phase now, and we've reached the point where it can begin to feed on itself. It will spiral up even further."
Karen Kaplan can be reached at firstname.lastname@example.org.