FRAMINGHAM (11/03/2003) - In its annual "Marketing to Life Scientists" study published in July 2003, market research firm BioInformatics notes that the Web is the No. 1 medium for new product information, eclipsing catalogs, print ads and trade shows. "Prior to 1997, the same survey didn't even include the Web as an option," says Brad Johnson, director of e-business for Sigma-Aldrich Co., a St. Louis chemical company that sells to life scientists and puts a lot of stock in the study.
In the mid- to late 1990s, Sigma-Aldrich was among the companies getting business-to-business Web efforts off the ground, making decisions on architectures and vendors that it couldn't be sure would last for the long term. But it became well known in the chemical industry for its early e-commerce efforts, just as Ford Motor Credit Co. did in the automotive financing business and Staples Inc. in the retail world. Sigma-Aldrich and Ford Credit, in fact, are past winners of our
E-comm Innovator Award, while Staples has shared its experiences with us throughout the years.
"Back in 1998 or '99, there were no real market leaders in this space," says Larry Blazevich, CIO at Sigma-Aldrich. "Everybody was lined up at the starting gate, and the horse race was on."
In 2003, the race is far from over, but it's lots easier to handicap. Market leaders have emerged in the vendor and user communities. Sigma-Aldrich's Web site, for example, was named best in its class worldwide in the July BioInformatics study. The company's sales numbers seem to indicate the study is dead on, with e-business sales increasing from US$4 million in 1998 to a projected $200 million in 2003. It even buried at least a couple of dot-com competitors, the marketplace companies Chemdex (belly up in early 2001) and SciQuest Inc. (now operating as an IT product and service provider).
Johnson and Blazevich say their site has evolved in a number of ways over the years. One is business-to-business integration. After successfully integrating its Web site with a new SAP ERP system to get its own house in order, Sigma-Aldrich is doing much the same with its customers. It is integrating the site with its procurement systems. Another focus is on providing useful content by enhancing the amount and type of information available on the site. A third area is globalization, so the site can be relevant to customers in each of the 160 countries in which it conducts business, yet still maintain overall consistency.
Ford Credit likewise continues to add to its Web services infrastructure, the roots of which date to 1995, when the company first investigated the use of Java. The Dearborn, Mich., company now has more than 40 application suites built on its Java 2 Platform Enterprise Edition (J2EE) frameworks and services, up from 23 going into this year. In part because of Ford Credit's success, parent company Ford Motor also is concentrating on J2EE, decreeing that all new line-of-business applications be built on the technology, says Terry Bone, manager of frameworks and architecture at Ford Credit.
A shining example of Ford Credit's J2EE Web services efforts is XNet, a portal for receiving and processing credit applications. Launched in August, the portal already is processing half of the applications that come from Ford dealers. That amounts to about 150,000 transactions per day, or nearly two per second, Bone says. True to the reusable nature of Web services, the same platform in September went live to tie Ford Credit into RouteOne, a joint venture it forged in April 2002 with DaimlerChrysler Services, General Motors Acceptance Corp. and Toyota Financial Services. RouteOne facilitates the loan-origination process in dealerships.
Staples, meanwhile, saw orders placed electronically reach 53 percent of volume in the fourth quarter of its most recent fiscal year, which ended Feb. 1. And net income increased 47 percent for the second quarter of this year on a sales increase of only 11 percent. By last count, customers that have standing contracts with Staples place 70 percent of their orders electronically, says Mike Ragunas, vice president of technology strategy and architecture at the Framingham, Mass., office-supply retailer. At least some of those results can be attributed to the company's focus on making it easy for customers to shop at Staples, whether online, in the store or from a catalog.
Often that effort involves making Staples.com simple to use. For example, the "Easy Reorder" feature helps customers quickly find items they have ordered previously - handy for repeat items such as fax and printer toner cartridges. Similarly, a "Help Me Decide" tool in the electronics section asks customers a series of questions to help them find the printer, PDA, computer or camera model that best fits their needs.
Such efforts result from a commitment to putting customers first. "I look less at what technologies are critical and focus more on what is going to make the experience easier for the customer," Ragunas says. For example, Easy Reorder required only relatively simple programming and database work. "The bigger challenge was working with customers on finding the right way to present it," he says. He adds that Staples puts significant effort into usability studies "so when we put something new out, we know customers will get it."
Sigma-Aldrich likewise focused its investments on enabling easier online buying rather than on streamlining its own supply chain, as so many other companies did. "Stragically, we saw the customer side, the demand side, as being more important," Johnson says.
Much of the effort went to making more content available on the site and making it easy to find. Many chemicals require a Material Safety Data Sheet that details safe handling requirements and a certificate of analysis that breaks down their exact composition - crucial information for the scientists and researchers that are Sigma-Aldrich's customers. Previously, customers ordering from a catalog would have to phone to get these documents. "The Web as a medium has succeeded in integrating the buying experience so you can move from selection to buying in one click of the mouse," Johnson says.
Because the system has 250,000 chemicals from which to choose, finding the right one is also a challenge. Sigma-Aldrich came up with a Web-based tool that lets customers draw a picture of the structure of the chemical compound they seek. The picture is translated to text describing the compound, and the text is matched against products in the Sigma-Aldrich database. The closest match is presented to the customer, also in a graphical format.
Tools like these result from close IT-business alignment at Sigma-Aldrich, a quality that all three early adopters say is crucial to success. "Brad's job is to find out what customers are looking for, how they want to search and how to present it; our job is to provide the capability," Blazevich says. "We do have a very close relationship between the IT side and the business side. I think Brad spends more time in my office than I do."
Customer demand was instrumental in driving Staples and Sigma-Aldrich to integrate their respective Web sites with customer procurement systems, such as those from Ariba Inc., Commerce One Inc., Oracle Corp. and SAP AG. Such initiatives let customers use their own procurement systems to order from their chosen supplier, without ever visiting the supplier's Web site. Each company also accepts orders in various other means, including electronic data interchange, custom electronic catalogs and fax. "We're trying to be flexible in letting customers work with us in any way that meets their needs," Staples' Ragunas says.
Such efforts don't necessarily make the ordering process any easier on the supplier end, because orders are handled just as if they were placed on the Web. For example, at Sigma-Aldrich orders from customer procurement systems go to the firm's back-end SAP system for processing, just as orders coming from the Web site do. But tying in to procurement systems creates a tighter bond with the customer. "We have evidence that we become a preferred supplier, which manifests to 1 percent to 3 percent additional sales in the first 12 to 18 months of deployment," Johnson says.
Tech tools of the trade
Accomplishing a task such as integrating with a procurement system is where some serious technology comes into play, notably XML. Sigma-Aldrich uses an XML-based product from Haht Commerce to integrate with the handful of procurement systems it supports, while Staples.com uses XML-based tools from webMethods.
Ford Credit goes a step further, having leapt into not only XML, but also into Web services. The company has a series of reusable services and frameworks. A service essentially performs a specific function - perhaps faxing a document or paging someone - for use in any number of applications. A framework is a well-defined, tightly integrated set of services that tend to be repeated in each application, such as security, exception handling, accessing mainframe programs and performance logging.
In creating XNet, Ford Credit used a lot of the latest in Web services and J2EE tools, Bone says. That includes the Sun Java Web Services Development Pack, Java Architecture for XML Binding (JAXB), the Simple Object Application Protocol (SOAP), Web Services Description Language (WSDL) and digital signature technology. To help make sense of it all and to ensure that the development effort could be reused again and again, the company made sure it followed a well-defined "pattern."
The idea of using a pattern came from a JavaOne conference in 2001, where Bone met the authors of a book called Core J2EE Patterns: Best Practices and Design Strategies, and liked what they had to say. "Developers implement solutions to recurring problems in lots of ways, but usually there are one or two well-established ways of doing it," Bone says. "Following those patterns, you're better off."
Bone had two of the authors examine the frameworks and services Ford Credit already had developed and try to match them with patterns documented in their book. With only minor modifications, often as simple as a name change, the team was successful in that effort. "We got a lot of value because now we had a book we could use as off-the-shelf documentation for our frameworks and services," Bone says. Ford Credit also contributed heavily to two new patterns documented in the book's second edition.
J2EE has proven cost-effective for Ford Credit. One example lies in Pinnacle, the core line of business application suite to handle loan origination at branch offices and long-term account servicing from six regional service centers. Pinnacle replaces a fat-client system called Compass, built on OS/2 and requiring servers at each of the 150 branches across the country.
Most of the business logic for Compass has moved to the J2EE platform that resides on two Sun Microsystems Inc. Solaris machines in the Ford data centers. Branches require only thin client, browser-based systems. "Turning on branch users for Pinnacle means pointing them to a URL, setting up security profiles and doing a little bit of training," Bone says. "The rollout took about three months, compared to a couple of years for Compass."
With the branch rollout done, Ford Credit has turned to the account-servicing portion of Pinnacle. Customer service representatives need access to more applications than branch users do, with integration between them to avoid data entry duplication. So, even though it could not build a completely browser-based system, Bone's team thinned the client down considerably. Key to that effort is an internally developed Java application, dubbed the Desktop Integrator, which acts as a communications hub between all client-resident applications and the host servers, enforcing rules on what data will be passed when.
"In the second phase, we'll look at moving more of the integration back to the servers," Bone says. "What we really want to do is take the desktop piece out and thin the client out completely."
The road ahead
Looking forward, these pioneers say issues like standards, security, globalization and online customer interaction are the next set of vexing challenges.
For instance, XML is still difficult to work with. "The semantics aren't well-defined," Staples' Ragunas says. "Having XML doesn't mean you can talk with a partner. You have to define the way in which you're going to have a conversation. Those standards are still evolving."
Bone agrees, noting that Ford Credit had to work with BEA Systems and Sun to flesh out each vendor's implementation.
Bone sees the security issue as opposing forces on a collision course: one side trying to lock down the network to protect it from Internet threats, the other using Web services to extend the enterprise and make it easy for trusted partners to get in. "We're walking fine lines in trying to work through all these issues," he says.
For Sigma-Aldrich, with its offices in 34 countries each trying to build a business geared to the geography it represents, globalization is front and center in Web development efforts. "The challenge is to give ownership to them appropriately, while locking down certain features," Johnson says.
Translations are problematic. While many of its customers speak English as a sort of universal language, they are uneasy about conducting financial transactions online using a language with which they aren't completely comfortable. To date, the company has 30 local Web "portlets" that support 26 of its worldwide offices and 18 languages. But the job is formidable, because the company does business in 160 countries and must support 16-bit character sets like those used in the Arabic, Greek, Israeli, Japanese, Korean, Russian and other languages.
Sigma-Aldrich also is wrestling with online customer interaction, looking at technologies including instant messaging and chat. The company is also looking at a technology called co-browsing in which a customer service representative could take control of a user's browser and helps him surf through a site. Johnson calls interactive customer support the next frontier. "It's not an area where we've had tremendous achievement, but I think we will," he says.
Like Ford Credit and Staples, Sigma-Aldrich has no choice but to continually enhance its online integration efforts. "When you're running 30 percent of your orders through the Web, it's no longer a project," Blazevich says. "It's part of the business."
Desmond is president of Paul Desmond Editorial Services (www.pdedit.com), an IT publishing firm in Framingham, Mass.