E-commerce applications are the flashy newcomers in many companies’ IT departments, complete with glitzy Web interfaces, handy real-time capabilities and enough “blue sky” revenues and cost savings projections to make just about any CEO smile.
But despite the increased attention and extra hours of work that e-commerce has made for many CIOs and their staffs, it’s the other “E” – enterprise resource planning (ERP) software – that controls business processes.
In fact, in companies of all sizes, ERP provides functionality that helps products ship on time, tracks company revenues and distributes pay to employees.
Problem is, the information from the back end of ERP doesn’t always make it into e-commerce applications, and vice versa. Some companies’ efforts at beating competitors to the e-commerce punch have created islands of applications that take and process orders but keep important customer information that should go into an ERP system to themselves. Also, the inability to share e-commerce information has made ERP implementations look dated. Further complicating the situation is that some companies need to figure out how to connect their internal e-commerce and ERP applications to their systems of suppliers and partners.
The burgeoning on-line marketplace has precipitated a need to link an organization’s internal and external systems. Some of the more high-profile e-commerce networks – such as the one being established by a group of U.S. automakers (spearheaded by Oracle Corp. and CommerceOne Inc.) – will face unprecedented integration challenges. Failure to connect systems within and between companies could make the establishment of electronic marketplaces inefficient, instead of cutting procurement costs, which they are designed to do.
What’s happening is that companies are setting up e-commerce infrastructures to meet all kinds of goals, from improving customer service to cutting costs and building new on-line sales channels. As a result, CIOs now face the challenge of integrating the new world of e-commerce with the old world of ERP and, in some cases, the dreaded legacy systems left over from the days when the Internet was still a government-only experiment.
The task of commingling e-commerce and ERP applications is one that requires considerable planning. In fact, experienced CIOs advise a seemingly simple approach: Have a plan, and stick to it. That plan, however, relies heavily on an IT department’s resources and the systems it already has in place.
As most CIOs know, integration is problematic because systems aren’t usually designed to share information.
Barry Weber, vice-president of technical infrastructure at on-line bookseller Barnesandnoble.com in New York City, agrees: Before e-commerce, applications had little reason to share information. “Systems, by their very nature, grow up solving a particular problem as opposed to sharing information with other systems,” Weber says. “They’ve got information inside of them, but they were not meant to use that data other than for their own purposes.”
Add to that the difficulties with defining uniform data fields and ensuring data integrity. The result? IT departments can’t accurately track their e-commerce data in their ERP systems and can’t push information from ERP to e-commerce applications.
Although such problems are all too familiar to most CIOs, the solutions can be daunting. For those companies that were smart – or lucky – enough to have bought their ERP systems from a vendor experienced in developing e-commerce wares, adding easily integrated applications from that same vendor can be a money-saving option. For those companies whose ERP systems came from vendors that are less experienced with e-commerce development, the best – and possibly only – option might be to have a combination of internal staff and consultants hack through a custom integration.
But no matter what the details are, solving the difficult problem of integrating ERP and e-commerce requires careful planning, which is key to getting integration off on the right track.
“To make [our ERP and e-commerce systems] efficient, we needed to be able to connect with anybody,” says Dennis Benner, vice-president and CIO of Fluor Corp., an Aliso Viejo, Calif.-based engineering and construction company. Benner suggests first figuring out what a system needs to do and then building a system based on those requirements.
A well-thought-out planning phase can help root out potential problems with data redirection that are easier to fix upstream in the planning process than later on during the post-integration testing process. After mapping out the functions that an integrated system must perform, CIOs need to decide whether to have their IT department execute the plan in-house or to hand it off to a vendor.
Keeping an integration project in-house can offer the freedom to find creative solutions to integration problems. What’s more, hacking through an integration process in-house lets CIOs experiment with various integration methods and architectures. And while CIOs warn that integration projects can be more time-consuming and expensive than anticipated, that doesn’t mean those projects don’t get results.
David Ramsey, CIO at PSS World Medical Inc. (PSSI), a marketer and distributor of medical products to doctors, in Jacksonville, Fla., offers a case in point. His IT staff needed to link the company’s sales-force automation and business-to-business e-commerce applications to its ERP system and make the integrated system accessible to its salespeople, who use laptops. The goal was to create a system that could run independent of the Internet but could periodically synchronize with a product database via the Internet. First, the company got its disparate databases and hardware into shape, standardizing on an Oracle 8 database and an HP-UX platform. Ramsey’s staff then built custom interfaces from the company’s ERP system – J.D. Edwards’s OneWorld B73.3 – to its e-commerce and SFA applications.
The PSSI staff ran into the classic problem of mismatched data formats and had to bring in experts to help link the various formats. Table structures differed between PSSI systems, which meant that data-intense files often did not have a clear path between systems. To compound problems, PSSI had to write every interface twice because some of its worldwide locations were running legacy systems.
To solve its growing list of problems, the company hired two independent J.D. Edwards consultants, who were instrumental in linking the J.D. Edwards data formats to those of other systems and writing interfaces. Ultimately, the team created a middleware layer between OneWorld B73.3 and the e-commerce apps that fed the B2B database with ERP information.
“As the system sees transactions coming in, it would look for (transaction data) and populate the B2B database,” Ramsey recalls. “That was a strategic move. We weren’t going to write our B2B applications to hit the ERP databases.” By not linking the B2B applications directly to the ERP database, PSSI could continue to perform maintenance on the ERP system – which required some ERP downtime – without interrupting 24-hour access to B2B applications.
The opportunity to take control of integration projects has led other CIOs to bring their projects in-house. Barnesandnoble.com faced a particularly daunting integration challenge. The bookseller’s task – hooking a homegrown Web system with SAP AG’s R/3 ERP applications – would have been tough on its own, but the company also had to deal with data for multiple products. That meant that integrating Barnesandnoble.com’s systems involved figuring out a way to have its systems share financial and real-time inventory information on 15 million products.
Weber’s team created a publish-and-subscribe architecture for product and inventory information using e-Gate, an enterprise application integration tool from Software Technologies, to create a middleware layer that takes data from one system and transforms it into a format that’s compatible on multiple systems.
In addition, Weber’s staff used e-Gate to build interfaces that linked directly to SAP to control the flow of financial information, which Weber considered too critical to trust to the occasionally unreliable publish-and-subscribe method. “Sometimes you need to be able to guarantee that data is flowing end to end. Publish and subscribe breaks this [process] in the middle.” When data integrity is at stake, Weber advises building interfaces that link directly into ERP systems, which let IT staff verify data flow – something that publish and subscribe does not permit.
Like PSSI’s Ramsey, Weber found that he preferred the freedom to experiment that the in-house project gave him. Ramsey, however, had a tension-filled wait for the benefits of PSSI’s integration to become apparent. In fact, the PSSI integration took 18 months to complete and went $500,000 over budget. Fortunately, the project ultimately increased the company’s bottom line: PSSI’s new on-line selling capabilities increased annual revenues by $75 million to approximately $2 billion. Even better, the SFA integration efforts have helped boost the performance of sales representatives, who can now place and service orders that once had to go through a customer service call centre. That feature, along with improved on-line customer service, has allowed the company to cut its call centre staff by almost half.
Despite the rewards of keeping an integration project in-house, some smaller or less IT-intensive companies prefer to let their ERP vendors do most of the work. That may be especially true for IT departments that have neither the expertise to complete a major integration project in-house nor the budget to hire consultants to help with the process. The ongoing shortage of IT professionals can thwart even the best-laid plans for in-house projects. For some companies, outsourcing integration to an application vendor or tacking an ERP vendor’s e-commerce applications onto that vendor’s ERP system has been a lifesaver. That certainly was the case for Rick DaPrato, manager of enterprise information systems at Alpha Industries Inc. in Woburn, Mass. In fact, his company’s integration experience was a joy, largely because of a choice he made when e-commerce was in its infancy. In May 1995, DaPrato’s company replaced its outdated legacy system with Point.Man, a manufacturing-focused ERP system that’s now offered by Mapics. DaPrato initially considered using one of the larger vendors, such as SAP or J.D. Edwards, but found that they were more interested in working with Fortune 500 companies than with smaller businesses like Alpha, which supplies semiconductors and integrated circuits to such companies as Motorola.
That dilemma eventually benefited Alpha, which ended up hiring PivotPoint to handle its integration. While large ERP vendors struggle to balance customer support with building and releasing e-commerce applications, PivotPoint (purchased by Mapics in December) was available to handle all the headaches of e-commerce integration for Alpha. What’s more, two years ago, when Alpha’s global customers needed to check inventory status in real-time, PivotPoint provided an integrated solution by building an e-commerce application from scratch.
“We gave them the server and said, ‘Here’s the hardware; configure it,'” DaPrato says. “They brought it back fully configured.”
And to DaPrato’s surprise, the system worked. Customers in Europe and Asia, who had previously waited for as many as two days for order information, could access inventory data instantly. DaPrato estimated that the project – including hardware and the cost of software development – was less than $30,000. And outsourcing e-commerce integration to a vendor freed up DaPrato’s 16-member staff to spend more time supporting the company’s 700 or so users.
Ron Pollard, CIO of Specialized Bicycle Co. in Morgan Hill, Calif., had a similarly pleasant experience. Back in 1995, Specialized used Oracle’s ERP offering to upgrade its back-end technology. The company now runs the manufacturing and financial components of Oracle 10.7 and plans to upgrade to Oracle 11i. More recently, Specialized had the alarming realization that its customers were being swept away by e-commerce competitors. To combat that worrisome trend, the company decided to create its own on-line store.
Such a store, however, meant that Specialized would have to integrate its e-commerce applications with the Oracle back end. When estimates for integration projects came back with the word “million” on the price tag, the company, whose ERP and e-commerce administration staff comprises fewer than 10 people, decided to turn to Oracle. The company implemented Oracle’s iStore, which provides a Web storefront and facilitates the flow of e-commerce information into Oracle 10.7. Specialized’s newly integrated ERP system, which feeds inventory information to iStore, allows customers to check their orders in real-time. Pollard also enlisted implementation partner FutureNext, based in McLean, Va., which worked with Oracle to complete the iStore implementation in 40 days. Because Oracle’s application programming interfaces for iStore matched those of 10.7’s components, custom interfaces were unnecessary.
VALUE OF SINGLE-SOURCE ERP
Though companies that rely on a single vendor for ERP and e-commerce applications risk sacrificing some functionality and the freedom to create their own architecture, a single-source set-up can be the saviour of small IT departments. Pollard says his company would not have been able to create e-commerce capabilities had Oracle not provided an integrated e-commerce piece that tacked on relatively easily to its ERP. But Pollard admits – as does DaPrato – that e-commerce applications were not on his mind when his company chose Oracle.
Pollard and DaPrato also confess that, at the time that they chose their ERP systems, they didn’t think that they would be returning to that same vendor for e-commerce help. Most large companies have already chosen an ERP provider – meaning they do not have the luxury to choose a vendor that offers strong e-commerce capabilities – and many have finished implementations or are into them too deeply to turn back.
For smaller companies with limited resources, buying integrated e-commerce applications from an ERP vendor can be an answer to integration nightmares.
But not every ERP vendor is dedicated to producing integrated e-commerce applications. Those companies whose ERP vendors are not sufficiently e-commerce savvy should, however, take heart because there’s an alternative: packaged middleware, which can reduce the work involved in writing interfaces. Advancements in enterprise application integration middleware and new e-commerce offerings from ERP vendors should continue to make ERP and e-commerce integration efforts more accessible and less costly for IT departments.
“It has moved from black magic to just hard work,” Benner says.
Lee Pender is a Senior Writer with CIO Magazine in the U.S. He can be reached at email@example.com.
The Plunge Not Taken
Despite analyst estimates, e-commerce investments lag
By now, it’s no secret that e-commerce is big business, but that doesn’t mean corporations have hit the ground – or the Web – running when it comes to ramping up their e-commerce capabilities. In fact, a surprising number of companies haven’t even begun to tackle e-commerce projects.
Such e-commerce lethargy flies in the face of industry analysts who predict e-commerce activity to continue to skyrocket. The Yankee Group, a Boston-based analyst company, anticipates that companies will, on average, purchase nearly 30 per cent of their goods and services electronically by 2004. In some industries, that number could hit 50 per cent. And in 1999, only 2 per cent of maintenance, repair and operating (MRO) supplies changed hands via the Internet, whereas The Yankee Group estimates that by 2004, that number should hit 40 per cent.
Another industry watcher, Meta Group, in Stamford, Conn., polled 357 U.S. companies with annual revenues of US$100 million or more. That survey indicated that companies are not getting out of the e-commerce blocks as fast as its growing popularity would suggest. Of the companies surveyed, only about 10 per cent are spending more than US$5 million a year on e-commerce, whereas 65 per cent aren’t even spending US$1 million per year on e-commerce.
In such a Web-obsessed business environment, it’s difficult to understand why those investment numbers are so low. One reason might be the tight labour market for IT professionals. Among Meta’s survey respondents, a plurality (24 per cent) indicated that staffing tops the list of e-commerce investment needs.
Apparently, technology concerns have taken a backseat to people problems.