Can ZixIt Fix It?

Bill Gates, Michael Dell, and Jack Welch are backing David Cook's new plan to make e-commerce hacker-proof.

David P. Cook is a reinventor. He has a knack for taking clunky, low-tech companies, spiffing them up with computer technology, and making barrelsful of money in the process. His best-known venture, Blockbuster Entertainment, which he co-founded with H. Wayne Huizenga, applied computerized inventory control and tracking of rentals to the old mom-and-pop video rental store and built a vast retail chain that transformed the business. Next, the Dallas entrepreneur took on one of the oldest businesses in the world, one that hadn’t changed much in 10,000 years: collecting roadside tolls. Cook’s Amtech Corporation created an electronic toll-road payment system that allowed motorists to affix a microchip tag to their windshield and automatically have their tolls billed to their credit cards without stopping. Toll roads in Dallas, Houston, Georgia, Kansas, Oklahoma, and Louisiana, as well as on San Francisco’s Golden Gate Bridge, all use Amtech’s toll-tag system. Now Cook is setting his sights even higher. Instead of reinventing a low-tech business, his new Dallas company, called ZixIt, is attempting to transform the Internet itself by solving the basic problem of security. That’s no small feat, considering that the Internet, from its inception as a Department of Defense project, was designed for fast, open communications and was never intended as a vehicle for commerce. And the wave of recent hacker attacks—to which even Microsoft’s Hotmail proved vulnerable—and viruses have made many e-mail users wary about sending or receiving anything sensitive over the Internet. There may be something to fear from our own government too. The FBI is now using an ingenious new system called Carnivore that can tap into an Internet service provider’s network and intercept private e-mail, including, say privacy advocates, that of people not suspected of any crimes. It’s not that the technology does not exist to make e-mails secure from prying eyes and hacker attacks. It’s that other privacy systems have proven expensive, unwieldy, or intrusive, violating the first unwritten rule of the Internet economy: It has to be simple and affordable or no one will use it.

But Cook, ZixIt’s chairman and chief executive officer, believes he can do just that, even for a large company with employees, suppliers, and customers scattered around the globe. ZixIt was born in early 1999 from the remnants of Amtech (which eventually sold its toll-tag business, leaving it with a business that supplied electronic access and security systems). In March of this year it unveiled its first product, ZixMail, which lets Internet users send secure messages and documents to other ZixMail users, track online deliveries, and issue certified-delivery receipts. In July the company released two follow-up products to make ZixMail available to all e-mail users. It offered an updated version of the software that lets ZixMail users send secure e-mail to anyone in the world, not just recipients who have ZixMail. And it opened an Internet secure-messaging portal called SecureDelivery.com, where e-mail users can go to send and retrieve protected messages without having to install special encryption software. Cook sees it becoming the central hub for safe messaging on the Internet, offering special features such as secure bulk e-mailing for bank statements or securities transaction confirmations. “E-mail is just like a postcard on the Internet,” says Doug Kramp, ZixMail.com’s chief executive officer. “We envision ZixMail becoming the envelope for messages and documents sent on the Internet.”

So do Microsoft’s Bill Gates, Texas PC magnate Michael Dell, and Jack Welch, the chairman of General Electric. They are part of an investor group led by Cook’s old colleague Huizenga—who owns the Miami Dolphins, founded the giant garbage hauler Waste Management, and is the chairman of car retailer AutoNation—that in April announced plans to invest $44 million in ZixIt. Huizenga and Cook are reunited again at the top; the former has become ZixIt’s vice chairman. With at least half a dozen companies marketing secure online-messaging products, why have so many heavy hitters decided to back Cook? E-commerce analysts say it’s simple: because ZixIt’s product has a better chance of becoming the Internet standard than anything else on the market.

Still, what the company is trying to pull off with ZixMail is massive in terms of sheer math: Its central data center in Dallas can provide keys to hundreds of millions of Internet users ensuring that their messages are hacker-proof by means of a highly complex process of encryption and decryption. ZixIt spent about $50 million on its World Wide Web security server operation, which has duplicate versions of everything to ensure the system never shuts down, uninterruptible power supplies, even access to a diesel generator in case of a power loss. The system has the capacity to handle more than 600 million e-mail addresses and the so-called public keys that encrypt messages. In simple terms, a message from one ZixMail user to another doesn’t get delivered to the recipient until identities are verified, and a system of public and private electronic keys locks the message at one end and unlocks it at the other. (ZixMail debuted three months before President Clinton signed a law allowing businesses and individuals to send all sorts of legally binding documents with electronic rather than handwritten signatures.)

ZixIt’s other big product, ZixCharge, offers secure online payment to online consumers. Cook, in essence, is going back to his electronic toll-tag reading system for the concept: allow a consumer to complete a transaction using a unique digital identity linked to a credit card or other form of payment. Thus, ZixCharge would let consumers electronically “sign” a charge slip on the Internet with a digital signature. (Because of a lawsuit ZixIt filed accusing competitor Visa of waging a smear campaign to undermine the fledgling company, ZixCharge has not been released yet.)

Cook’s new company is dangling a big incentive to use its e-mail security services: This year they’re being given away free. Early next year ZixIt will begin charging users $1 per e-mail address per month. The company also is considering offering a free version of SecureDelivery.com that would pay its

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