Subject: September 2001 ECMgt.com: Evolving Infrastructure and Tools
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September 1, 2001 *4,200 subscribers* Volume 3, Issue 9
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Taking a Piece of Technology Cake…
Corey Hutchison, CEO of Aqueduct

Current economic trends are forcing companies to re-focus on core business efficiencies, dumping IT projects that complicate the management of their core business and reconsidering plans for expansion into new businesses that cannot show concrete return. Isn't there a way to exploit technology to streamline core-business efficiencies and allow for profitable expansion into new businesses?

Online businesses were the first attempt. Organizations viewed Internet technology as a quick and inexpensive way to improve business efficiencies: by automating communication and order processing with vendors and customers. However, millions had been spent on Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) systems that were still being customized to meet expectations of the business. The juxtaposition of ERP and SCM deployment with business expansion projects using the Internet (e-procurement, e-marketplace enablement, B2C storefronts and more) proved a recipe for disaster.

The first of these tentative online businesses were order-processing systems that were separate from the rest of a company's customer information. Companies ended up with two systems: one for traditional operations and a second for their Web business. Building integration between the two systems was an afterthought.

Customer Relationship Management (CRM) systems were the next technology; they professed to "integrate" the front- and back-end systems using customer data as the inflection point. The CRM system tracks order history and queries the ERP system about product availability. The ERP system communicates with the SCM system to validate whether raw materials are available to make product to satisfy the customer order. The SCM system schedules manufacturing time through the Materials Resource Planning (MRP) system. The ERP system books and ships the order. This all sounds good, but the software and custom integration work required to link the systems resulted in skyrocketing costs, elongated development cycles, and error-prone manual processes (such as data imports and file transfers). It was hard enough showing return on just the ERP investment, let alone online business expansion and integration between the two.

The online business is a good example of an unfulfilled promise because the Internet reeked of opportunity for efficiencies and profitability. However, the Internet business offered such low risk that companies didn't perform thorough ROI analysis, think through integration challenges, or manage the online business according to traditional metrics. Internet expansion projects failed, and the technology providers who had promised success failed too.

Failure was caused not by technology, but by the lack of focus on the business created with the new technology. Focus and commitment to new technology projects is what made ERP deployment projects ultimately successful (let us not forget that 80% of ERP implementations were past due and way over budget in the first few years). Technologies that ultimately win:

  • Allow businesses to focus on their core competence
  • Enable growth and collaboration through existing channels
  • Implement quickly and integrate with existing systems

Focus on Core Competence: Manufacturers design and build products with a focus on speed-to-market. They are experts at technologies for managing the supply chain and communicating with their suppliers. They rely heavily on sales partners to take the finished product to market.

Sales partners merchandise, promote and offer value-added services that leverage the product and brand. They are experts at technologies for managing product information, inventory, point-of-sale, and marketing promotions. Neither are experts at building, nor exploiting for competitive advantage, the hardware and software infrastructure necessary to sell products directly and through online channels. The technology they choose for collaborative online selling should be selected by both the manufacturer and their selling partner, but owned by neither. Each must stay focused on the business they know.

Growth and Collaboration through Existing Channels: Neither the manufacturer nor the retail partner doubts the need for leveraging the other's strength in closing a sale (online and offline). But because of economic pressures, or previous stumbles with technology that promised incremental sales, IT projects and technologies dealing with business expansion and through online channel collaboration are dropped. Technologies that survive the cut must leverage legacy technology in which selling partners have invested (EDI, APIs, or even Fax) to automate and grow the business. There simply isn't enough return in the automation of existing processes if the result is a drastic departure from the manual version that works. For this reason, e-procurement networks and e-marketplaces are being replaced with private exchanges.

Private exchanges do more than automate existing business processes; with business growth comes the ability to exchange customer information and enable a feedback loop that can result in incremental revenue and margin. Private exchanges connect manufacturers with their distribution, reseller and dealer networks and their customers to ensure collaborative selling success across all related parties. The same technology adapts to give end-users the choice to research a purchase online and take delivery from any entity they deem adds value in the value-chain (manufacturer direct included).

Successful technologies will enable growth and collaboration through multi-channel web marketing to ensure each selling partner is able to monetize the customer relationship. A recent IBM study of J.C. Penney shoppers showed the average in-store transaction amount to be $122. By invoking online selling, the average transaction amount rose to $500. When technology for multi-channel marketing was introduced (say an online coupon for products related to an in-store purchase, or the opportunity to shop online and pick-up or service in-store), the average purchase reached about $1,000.

The responsibility for such technology is shared, and again should not be owned by either entity but must be manageable by both.

Implement quickly and integrate with existing systems: Technologies which offers value-chain efficiency and channel expansion must synchronize with inventory control, product forecasting, customer service, materials management, resource scheduling, shop floor production and other such technologies. These systems run disparate software and platforms (from CICS to VMS, from SAP to Oracle), and are 'hardened' to the point that they work reliably. As a result, they are cost-prohibitive to replace. Today's integration technologies must bridge the platform gaps and offer real-time data exchange and centralized data management. XML, Web Services, and integration tools like WebMethods and Biztalk offer such a solution. The technologies do not require changes to existing business processes, operations or workflows, but instead expedite their automation for streamlined efficiency.

When technology allows a business to focus on its core competence, exploit existing channels for growth, and integrate front-end and back-end systems, you've got promise. Employees from every department in a company can depend on having access to the most current and accurate customer history and transaction data as they attempt to focus on top-line growth and on expense control. Even more impressive would be the ability for a company to leverage the same technology without having to own any of the infrastructure.

ASPs/BSPs/IBSPs are founded on just such a concept. Customization of the technology, however, is discouraged by a need for the ASP to scale the solution across hundreds of customers. Assuming customization is critical, the customer should look for a new breed of technology provider that offers a solution platform like an ASP, but has the flexibility, modularity and expertise to utilize standard integration protocols to ensure proper and timely data integration. Such a provider will offer these technology solutions (commerce, channel management and collaborative customer relationship management) on a hosted infrastructure, allow the customers to control the business externally day-to-day through a web interface, and do so for a monthly subscription fee.

Companies are refocusing on core businesses and are cautious about investing in top-line growth. The technologies that win will be those that allow for refocusing on business processes, while allowing for affordable growth and integration with legacy systems. Better yet, when the technologies allow the customer to control the business without having to invest in the infrastructure, customers will be able to have their cake and eat it too…

Corey Hutchison joined Aqueduct, a leader in outsourced e-commerce services, in April 2000. Aqueduct hosts and manages online collaborative businesses for 50+ Fortune 500 companies. Prior to joining Aqueduct, Corey held executive management roles at IBM, Cognos Corporation and Platinum Technology, Inc.



Managing the Technology Integration Process
By Reid Carr, Director of Interactive at McQuerter

Technology that makes it easier to integrate front-office and back-office systems is being developed and improved daily. The question isn't whether this new technology will impact a company's ability to compete in its marketplace - of course it will. Rather, the most important thing to consider is the evaluation, integration, implementation, and adoption of the technology tools. Regardless of the approach, strategy is the most valuable factor in the technological success of your company. With an increasing number of service providers emerging to support industry needs, one of the most critical aspects of successfully implementing a new tool has become evaluating the company that is producing the tool.

The first step is to identify your processes. Look at how you interact with your customers, partners and prospects, how you interact and collaborate within your organization, and how your customers, partners and prospects interact back with you. Most companies have some processes that are worth automating and others that are not. It is important to realize which are which. You will find a lot of answers throughout the various departments in your organization. The information you need lives in your sales department, human resources, accounting, and every facet of your company. These people all have a stake in the state of your technology, including the front office.

It's interesting to note that some processes that have customarily been restricted to the back office are now interacting in a front office venue. A good example is billing. Employing real-time automated billing within your customer base may be a welcome service to offer, but you need to be prepared to react in the same real-time manner that your information is presented.

Effectively managing the integration process requires taking a close look at your situation. What is your timeline for implementation? The longer your timeline, the more open you might be for a custom application. What is your budget? Companies that are unfamiliar with the territory often embark on the process without a budget in mind. Identifying the magic number that sits between 'yes' and 'no' will guide you in selecting the best product for your money. It's also important to look at your existing resources, which could be information, infrastructure (software and hardware) or staff. Prioritize and layout a plan for execution. Begin with your foundation, then evaluate how different items will plug-in to that foundation.

Application Service Providers (ASPs) are often industry experts who identify a problem and create a software or technology solution to remedy it. ASPs foot the initial development costs of the software and make their money on licensing and long-term customer commitments. Oftentimes ASPs will let you "test the water" on software applications to see if you like the technology before you purchase it. Another advantage of using an ASP is the high level of support it provides: someone is there to ensure the application is running correctly and to manage upgrades while you focus on your business. A disadvantage of using a hosted model is that your competitors might choose to use the same software, which eliminates its potential to be a differentiator. Also, some applications might not be exactly what you need, which means you must conform your system to fit an industry model.

When selecting an ASP, you should think like a venture capitalist. You are not only making an investment in software or technology, you are making a commitment to a partner. Check out the management team and their strengths. Do they have a viable business model? To achieve profitability, will they have to increase their prices or change their offering, thus affecting you as a customer? Meet your account manager and make sure you can develop a working relationship with them.

Keep the teams in charge of deciding on a solution small. Having too many decision-makers will only result in confusion. Make sure that one person is in charge of the timeline, that there are regular meetings with the implementers, and that deliverables with their respective deadlines are decided upon up-front. Knowing about the status of little things will make it much easier to prepare for the big things. Give notice to those who need to participate in critical stages of the project life. Nothing is more annoying than when you receive a vacation-status auto-reply from someone who is supposed to spend the next week knee-deep in the project. Make sure you develop a custom (as it applies to your company) user/reference guide to assist those who are going to be utilizing the new IT solutions.

When it comes to adoption, realize that implementing anything - software, technology or even a new process for anything will meet some resistance. The biggest obstacle to overcome will be getting people to use the new system, and the only way to overcome it is to manage closely and to educate the users. Take good notes about your success with this round of technology upgrades, because it's very likely you will have to do it again.

Remember that you are going through this process because it will improve, expedite, streamline or diversify something you already do. Do not change your business model around an ASP. Do not sell this offering as something that sets you apart from your competitors, because tomorrow, that competitor could have Version 2.0 while you are still running 1.0. ASPs can only satisfy your company on an application level. The most efficient and effective way to manage the integration of outsourced technology is to carefully evaluate providers, blend resources when possible, and continually revisit your strategy.

About Reid Carr:

Reid Carr is the Director of Interactive for McQuerter, a tech marketing and public relations agency based in San Diego with offices in San Jose, CA, Washington, D.C. and London, UK. Reid was formerly COO and Director of Accounts at PBJ, a bi-coastal interactive development and incubator shop based in Los Angeles. Prior to that, he was with TBWA/Chiat/Day where he handled account management responsibilities for Nissan.

Over Reid's career in interactive, he has been involved in the development or advancement of over 40 Web sites and strategies as well as numerous campaigns, and has been named to several advisory boards of Internet-age companies.

A full length bio is available at the McQuerter Web site at: http://www.mcquerter.com/WhoWeAre/Staff/reid.html


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