Feature: The great application amalgamation

Maintenance, repair and operating supplies distributor W.W. Grainger Inc. – in business since 1927 – launched a Web site in 1995 to bring its wares closer to customers. The company also continued to take orders the old-fashioned way – manually.

The Chicago supplier worked with disparate Internet and legacy order-entry systems for the next four years, taking orders on the Internet and then entering them into a legacy order-entry system. Internet orders would be faxed to Grainger’s call centre, where they would be manually entered into the main order management system.

Order updates were performed nightly, so in some cases, customers would place orders, and find out later that items weren’t in stock.

“Our old, online purchasing process served as an obstacle that” didn’t let customers have the best information and correct products on time, says Pat Davidson, Grainger’s vice-president of information systems. “This was frustrating for our customers, and it was frustrating for us. We had to make a change.”

So Grainger revamped its legacy order systems, implementing an SAP AG R/3 enterprise resource planning (ERP) system and webMethods Inc.’s integration platform to connect the R/3 software with the Internet via XML.

Grainger’s tale is a typical one. After years of building separate ERP, customer relationship management, manufacturing, accounting and marketing systems – often customized for different internal divisions – businesses are confronting their back-end set ups and the reality that these systems need to be integrated as they rush to connect to customers, trading partners, suppliers and manufacturers.

According to a recent Gartner Inc. study, the worldwide application-integration and middleware market totalled US$3.8 billion in 2000, and is expected to rise to $11 billion in 2005. IBM Corp., webMethods, Tibco Software Inc., SeeBeyond Technology Corp. and Peregrine Systems Inc. are some of the companies involved in the application-integration arena.

“Business-to-business generated a lot of excitement a year ago, and businesses thought this would be a great opportunity to automate what goes on between themselves,” says Chris Dial, an analyst at Forrester Research Inc. Businesses thought integration was a matter of plugging some systems together, but they realized integration went beyond that.

“They realized (integrating applications) was done point-to-point, and it opened a can of worms. In order to hook up with partners, they must clean up their own backyard,” he says.

As a result, companies often hand-code applications to each other as a temporary fix.

“Hand-coding doesn’t work because you can’t stop and glue everything together for each business you start – you’ve got to be ready all the time,” says Amy Hedrick, an analyst at AMR Research Inc. Companies that hand-code are connecting 50 to 100 applications, and often the process isn’t documented or includes different languages. “It’s a mess,” she says.

Analysts expect emerging Web services to ease the burden of integrating applications and systems. Web services rely on XML; Simple Object Access Protocol; Universal Description, Discovery and Integration; and Web Services Description Language, and lets businesses build applications that pull together information from multiple sources internally or over the Internet. Application integration is expected to become easier for companies when integration packages support these standards.

“Web services will be an important part of the IT infrastructure and ecosystem, but right now people are still making plans for how to use them,” Hedrick says.

Application integration doesn’t always get the attention it deserves within organizations, experts say.

“Integration is neglected. It’s the black hole in IT budgets,” Dial says. Business-integration software packages cost an average of $6 million to $8 million, with $2 million per year in maintenance fees. Most companies have difficulty measuring return on investment for integration projects, he says.

Integration isn’t glamorous – like e-commerce – or trendy – like Web services – but it’s critical and often ignored, cropping at the most inconvenient times, such as during mergers.

CareGroup in Massachusetts started its integration project in 1996 when six hospitals – Beth Israel, Mount Auburn, New England Baptist, Deaconess Waltham, Nashoba and Glover – were merged. The project combined clinical data from all the hospitals to create a common view of records.

The healthcare group, which has more than 15,000 employees and 100 affiliates in eastern Massachusetts, used SeeBeyond’s eGate Integrator platform and eXchange Partner Manager software to manage business partner relationships, and eIndex software to cross-match customers.

This created a central view of its patients and where they were registered – hospitals, nursing homes or outpatient facilities. CareGroup has about one million patients and nine million records on file.

“(Integration is) 75 per cent politics, organization and policy, and 25 per cent infrastructure and technology,” says Dr. John Halamka, CareGroup’s CIO. Integrating systems and data becomes a “turf war,” one that only gets amplified when it comes to mergers. “At first you think: ‘Gee, it’s a merger – it’s great and we’ll all work together.’ Then it’s competition, fighting and ‘I hate you.’ And then you agree to work with each other.”

One of the more challenging aspects of integration is that it never ends.

“Are you ever finished? No, but the lion’s share of the work is done,” says Ken O’Brien, CIO of Wallace Computer Services Inc., a Lisle, Ill., print manufacturer. “It’s an ongoing effort as you continue to introduce applications and new products to fit in.”

Wallace Computer Services started its integration project in 1992 combining proprietary Hagen Manufacturing Ltd., IBM’s MQSeries and PeopleSoft Inc.’s ERP software. It also integrated 50 manufacturing sites in Georgia, Texas and Colorado; more than 100 sales sites; and customers such as J.C. Penney Co. Inc., Royal Caribbean Cruises Ltd. and Johnson & Johnson into its system.

The print manufacturer has spent $80 million on integration projects over the years, including offering pricing information to customers at a central location and its e-commerce order-management and billing system.

Meanwhile, CareGroup recently went live offering multimedia capability to all affiliates to watch films, magnetic resonance imaging and computerized axial tomography scans.

Grainger recently added punch out capability to Ariba Inc.’s marketplace, which would let buyers entering Ariba marketplaces enter Grainger’s site for product information.

Companies that give short shrift to integration projects would do well to change their ways, industry experts and customers say.

“The Internet forced us to rethink our business model,” Grainger’s Davidson says.

“It has affected the way we service customers, the way we transact business and the way we communicate with one another. As a result, IT is integrated now, more than ever, into our strategic business planning process,” Davidson adds.

“If companies don’t pay attention to this, they’ll get creamed,” O’Brien says