One Vendor's Exploit of Marrying Infrastructure with Selling and Fulfillment Applications

Mergers and acquisitions (M&As) in the enterprise applications arena are certainly not uncommon. In fact, if a week goes by without an intra-market acquisition announcement, a market observer might even begin feeling out of sorts. Often, many acquisitions have meant outright bad news or at least anxiety for existing customers of the (usually beleaguered) acquired software provider. However, the market has also witnessed a number of mergers between relatively well-performing supply chain software companies that have joined forces to deliver even broader and deeper set of solution footprints and better value propositions to the market.
Such an example is Sterling Commerce, a $630 million (USD) subsidiary of AT&T Inc. (NYSE:T), which has long been a prominent provider of solutions that connect client enterprises' business communities, processes, people, and technology in a global economy. Over the last few years, the company has acquired a number of supply chain management (SCM) software companies that, at the time, were not perceived as companies in distress or in any pressing need of a "white knight" to help stave off a hostile takeover or abate financial woes. However, these relatively small vendors were apparently not loath to more liberal access to new funds for product development and international customer cross-selling opportunities within Sterling's huge traditional install base. This is particularly true in light of Sterling Commerce's operations in 24 countries, with regional headquarters in four geographies: 1) the Asia-Pacific region in Singapore, 2) the Europe, Middle East and Africa (EMEA) region in London, England, 3) Latin America in Sao Paolo, Brazil, and 4) the North American region in Dublin, Ohio, (US). Headquartered in Dublin, Ohio (US), Sterling Commerce has offices in 17 countries and most major cities around the world. The company also has engineering laboratories in 5 countries (France, Germany, India, Singapore, and US). Gradually, Sterling has become more of an enterprise applications vendor by diversifying its traditional focus on being a business-to-business (B2B) infrastructure provider. Namely, apart from core B2B communications and recent SCM applications, Sterling also offers application integration and network service; electronic data interchange (EDI) applications, and translation products.
Sterling Commerce's Genesis
To better judge the rationale behind the SCM acquisitions, it's helpful to explore Sterling Commerce a bit deeper. Stemming from an EDI and value- added network (VAN) communications and integration background, the company has been in business since 1976, and with decades of profitable growth and currently with over 2,500 employees around the globe. It has over 30,000 customers in virtually all industries, which constitute about $23 trillion (US) of the global economy. Amid that install base are many of the largest banks in the US. The vendor also serves the financial services, manufacturing, logistics, communications/media and retail markets.
Given its longevity, Sterling was involved in electronic commerce way back when transactions took place on closed, proprietary systems using the rigid EDI format. In its more than three decades of existence, the company has seen the emergence of the World Wide Web (WWW) and the Internet-based EDI protocols (see EDI versus. XML—Working in Tandem Rather Than Competing?); the dot-com bubble; and a share of its own corporate changes. Namely, Sterling Commerce became an independent entity in 1996 after being a division of former Sterling Software (which was subsequently acquired by Computer Associates [CA]). In early 2000, Sterling Commerce was acquired by SBC Communications Inc., which later became AT&T Inc. following the merger with Ma Bell. Then there were rumors in the early 2000s of SBC being uncertain what do with Sterling Commerce, SBC's $3.9 billion (USD) investment at the peak of the dot-com boom. For a while, Sterling was not considered core to SBC's business, so much so that at the end of 2002, SBC reportedly tried to divest it, with Sterling Commerce receiving strong interest from Bain Capital in late 2002.
However, that the spin-off never took place and EDI/VAN provision became a limited growth business (albeit still quite lucrative). Nonetheless, since the early 2000s, Sterling Commerce and its VAN service providers offering EDI transport and translation services have been engaged in the most sweeping re-engineering of their businesses and value propositions since the advent of Internet-based EDI during the late 1990s. Namely, traditional document interchange and guaranteed message delivery services have recently been enhanced with a new series of integration and application services designed to enable inter-enterprise business process execution, collaboration, and management for SCM, and customer relationship management (CRM) strategies. While emerging as a new breed of inter-enterprise integrators, these providers' services have increasingly been including data cleansing and syndication, product information management (PIM), global data synchronization (GDS, see The Role of PIM and PLM in the Product Information Supply Chain: Where Is Your Link?), cross-platform and inter-enterprise transaction management, document reconciliation and analytics, trading partner business intelligence (BI) and analytics. They have also included an array of enterprise applications to assist businesses with collaborative processes, ranging from dispute and financial process management to demand planning, supply chain visibility (SCV), and vendor-managed inventory (VMI).
As a result, a couple years ago GXS introduced Trading Grid, an EDI services business, acquired from IBM, and announced a partnership with WebMethods (now part of Software AG). It also acquired HAHT Commerce, a former partner relationship management (PRM) vendor (see GXS Acquires HAHT Commerce for More Synchronized Retail B2B Data). On its hand, Inovis has acquired QRS (see Inovis Delves into PIM by Snatching QRS), while Perfect Commerce has acquired the Internet trading exchange Pantellos.
Realizing Opportunity from Trading Complexities
Somewhat resembling Click Commerce's approach (see Will a Tool Manufacturer and a Supply Chain Software Vendor "Click" in Matrimony?), Sterling Commerce's supply chain thinking and strategy also stems from the premise that collaborative commerce turns traditional linear value chains into multi-enterprise supply chain networks. The business challenge, which can thus be turned into opportunity, comes from the fact that selling and fulfillment across an extended supply chain have become quite complex. Namely, the word "multiple" and "cross-channel" has become part of the complicated game, starting with multiple enterprises involved in trade, whereby each enterprise will often have multiple locations with multiple brands, divisions, independent business units (IBUs), each with their own back-end systems, sales channels, etc. Most of these have come, in great part, due to frequent M&As in the market.
Consequently, multiple catalogs with products or services and multiple product choices that require configuration and guided selling have long become the matter of course (see The Basics of Quote-to-Order Systems). Further, globalization and more demanding customer expectations have resulted in the need for multiple fulfillment methods, whereby goods can be delivered from warehouses, stores, or directly from suppliers (via drop-shipping, see Drop-Shipping—Internet Retailers' "Little Helper"?), through third-party logistics (3PL) networks or the company's own fleet (in a full truckload [TL], less than a truckload [LTL], or parcel delivery), or through a service network, a third-party service network, etc.
As seen in Retailing Trends—Shopping Anyway and Everywhere, Internet-based technological advancements have caused consumers to expect interchangeable multi-channel (e.g., retail store, catalog, call center, commercial contractor, web site, kiosk, etc.) inquiry, shopping, goods return, etc. In fact nowadays, a consumer expects a true cross-channel experience, and rightfully so, where they are able to buy something online and return it to the closest retail store for a refund, without any questions asked. Last but not least, when one counts in multiple customer segments (such as consumer, distributor, or corporate customer), effective collaboration should provide visibility and transparency, optimize shared assets, and orchestrate common processes in the demand, supply, and service chains (consisting of sales force, key accounts, consumers, retailers, distributors, suppliers, manufacturers, field service, etc.).
Failing to execute well in such intricate environments typically results with lower revenue growth, declining profit margins, and declining brand equity, with the all-too-common symptoms of high operating costs, inaccurate orders, and poor on-time delivery (see The Perfect Order—Inside-out or Outside-in?). It can also result in high stock-outs (missed sales opportunities), lower customer satisfaction, or a myriad of other problems. Nowadays it's become cliché to call traditional phone, fax, and paper-based communications systems labor-intensive, inefficient, and prone to error. Yet, companies have historically dedicated significant resources and time to the manual entry (re-keying) of information from faxed or phoned-in purchase orders (PO), and on manually processing paper checks, invoices, and shipping notices. While spreadsheets and e-mail are also used to somewhat better manage partner relationships, these electronic systems can also be inefficient and difficult to integrate. The large volume of paper generated by these systems and the mass of information to be sorted and processed frequently produce hidden costs, such as errors and delays in information delivery. Moreover, timely changes can be difficult to implement in manually intensive processes and the cost related to such changes can also be significant. For example, a paper-based catalog cannot be quickly or inexpensively updated to inform customers of changes in product offerings, availability, or pricing (see Differences in Complexity between B2C and B2B E-commerce).
It is also important to integrate channel partners into the selling experience. Companies should to be able to allow their partners to not only have a web portal to purchase products and services, but they also need to allow them to be part of the quoting process and leverage quoting capabilities of a manufacturer or retailer, and allow partners to add their products along with the manufacturer's to the quotes that they send to prospects.
A manufacturer and the members of its distribution network often have limited capability to track orders, inventory, warranties, and other information (or to compile useful databases) using paper-based or semi-automated processes. These forms of communication do not permit manufacturers and their business partners to exchange information on a real-time basis, and thereby prevents easy access to key information needed to transact business. Manufacturers and trading partners may also suffer from differences in languages, cultures, and time zones, which are additional barriers that traditional methods cannot easily overcome. Yet, increasing market and supply chain complexity motivates companies to improve operations and communications with their trading partner community. The continued growth of outsourced manufacturing, an increased focus on low-cost international materials procurement, and heavy market reliance on vendor- or supplier-managed inventory programs to control costs all require a solid infrastructure for coordinating the extended supply network (see What Does the Future Hold for PRM?).
Furthermore, traditional enterprise resource planning (ERP) systems typically cannot handle these types of multi-enterprise complexities, and they tend not to provide the visibility and control required to efficiently manage and synchronize extended business processes – and were really never designed to be customer and partner-facing. Inefficient processes and poor customer service often result. Indeed, most ERP systems were not originally designed to coordinate business processes across a multi-enterprise supply chain, including outsourced manufacturing, 3PL deliveries, partner fulfillment, etc. and neither were they designed to be customer-facing. Subsequently, traditional systems often require multiple instances across an organization (see Standardizing on One ERP System in a Multi-division Enterprise). And, in many cases, this is based on entirely different processes across various divisions, sectors, business units, or regions of an organization. Yet, the ability to view complete and accurate orders, integrate data, and manage inventory and activities for effective fulfillment execution is necessary to effectively respond to challenging customer requirements and achieve a competitive advantage. Their absence typically results in orders that are stored in different systems; difficult and often manual interactions with external partners; and poor inventory visibility. Ultimately, business process changes are very expensive and time consuming. Likewise, it's not only smaller, lesser known enterprises that have fallen prey to this type of neglect. Even some of the big corporate names with automated web storefronts still have processes that require significant manual interaction. It is common, for example, for an enterprise to pass its fulfillment to a third-party transportation company with no direct electronic communication between the two.
Laying the Foundation for the Solution
Realizing that enterprise applications catering to holistic selling and fulfillment processes across multiple channels would be a value-add for existing and prospective customers, Sterling Commerce saw a growth opportunity and began acquiring some best-of-breed point SCM solutions in 2004. These solutions were focused on coordinating and optimizing supply chain processes across multiple channels of suppliers, customers, and other potential trading partners. However, before any blending of disparate technologies (or "plumbing" infrastructure with an enterprise applications layer atop) could happen, Sterling had to espouse a sound, underlying technology blueprint based on open Internet standards and component-based, service-oriented architecture (SOA). To that end, the vendor has been striving to provide self-provisioning solutions for collaborative commerce, including intuitive user interfaces (UIs), packaged applications, process automation, data security (in partnership with Entrust), and user administration. Most of these components can be delivered in an application service provider (ASP) or managed service provider (MSP) hosted model, which provides companies with deployment options to assist IT departments with a backlog of projects achieve a quicker time to value.
Because most enterprises have to compete through differentiated processes and strategies, only a well-devised SOA framework can typically provide the flexibility necessary to support processes and strategies with the goal of improving customer service, meeting compliance requirements, adopting new business models, etc. As a result, Sterling Commerce has since developed all of its applications using SOA principles (see The Future of SOA-based Applications and Infrastructure). This means including Sterling's current supply chain portfolio and B2B communications software. By embracing the SOA tenets to be granular, extensible markup language (XML)-based, stateless, and protocol and transport independent, Sterling Commerce believes its applications are better able to interoperate with disparate systems and be scaled to accommodate mission-critical, high volume environments. The company's comprehensive platform also features a services library and an integrated development environment (Process Modeler) for configuring or extending solutions without extensive customization, with the aim to reduce total cost of ownership (TCO) and accelerate deployment.
One illustration of Sterling Commerce's continuous delivery of SOA-based applications that address specific business problems that demand the capacity to process information from disparate sources, systems, and formats, is the recently released Sterling Supply Chain Visibility On-Demand (to be detailed later on). Also, Sterling Commerce illustrated the benefit of its SOA platform by demonstrating process-level integration between on-demand technology acquired from Nistevo (also to be detailed later on) and the Sterling Commerce existing supply chain application portfolio. Through SOA, the company was reportedly able to handle this complex integration that had to account for different delivery models in a short timeframe of a few months.

SOURCE:http://www.technologyevaluation.com/research/articles/one-vendor-s-exploit-of-marrying-infrastructure-with-selling-and-fulfillment-applications-19552/