Straight talk with vendor hits pay dirt

FRAMINGHAM (11/07/2003) - The oil industry's blunt language seems out of place when applied to IT, where sales and marketing lingo are often mixed with analyst prognostications in order to obscure reality. Perhaps it's the straightforward nature of oil and gas exploration that invites direct talk: You either hit pay dirt or you don't.

So talking to Reid Nuttall, vice president of IT at Houston-based Varco International Inc., about supply chain management takes some adjustment. For example, his primary concern isn't cutting costs. It's customer lock-in.

"The first issue was to have something facing the customer that lets them do business quickly and easily," Nuttall says. "We're connecting system to system and want to lock in the customer, lock them into our spare parts."

Varco, which makes and sells US$1.3 billion worth of drilling rig equipment annually, believes that if it offers good prices and an easy way to do business, the customer will, as Nuttall says, stick around.

That same attitude describes the bake-off Varco held with three IT vendors to build a supply chain system that could flexibly connect with EDI-, XML- and even e-mail-based customer systems and then link to Varco's own back-end systems. Flexibility was crucial, since Nuttall hadn't seen two customers with the same ERP system.

Varco evaluated a commercial hub consisting of a hosted middleware product. It also considered using standard Microsoft tools and paying a consultant to set up the system. But in the end, the company settled on a system to be set up by its ERP vendor, Glovia International Inc., because integration with the existing architecture seemed easier. Varco also had more clout with Glovia, and it was able to persuade the El Segundo, Calif.-based ERP division of Fujitsu Ltd., to really dig into each type of customer connection. Glovia managed to put together a system that combines e-commerce middleware for all the transport, error-checking and handshaking between the customers and Varco.

Varco's system, used in operations in the U.S., Britain, Canada and Singapore, can automatically send requests for quotes, shipment dates, purchase orders, invoices and any order changes that might occur.

For Nuttall and his IT staff of 80, the most difficult challenges involved knowing where the messages moved in the supply chain system and how to make the system automatically check the health of operations. "For folks on the front end, you're the one controlling the information, so you've got to be ready to fix any bad information at the source," says Nuttall.

In addition, Varco had to draw all the relevant connections to the different XML versions used by customers.

Now, with just one IT specialist and a business analyst, Varco's package is up and running -- and, coincidentally, saving the company money.

Pimm Fox is a freelance writer in Santa Barbara, Calif. Contact him at

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