[From iSource Business, June 2001] Even though its industry niche is about three years old now, it's still a little hard to explain what exactly Atlanta-based Services Resource Inc. (SRI) is without resorting to corporate-speak.
So let's try this: Imagine a facility management company crossed with an energy e-procurement service provider, and you can come close.
Explaining what SRI does is a little easier. Its clients tend to be large-scale businesses or retailers with multiple sites around the country. SRI handles many aspects of building management for these companies, including HVAC and building controls, energy management, procurement or facility suppliers, and repair and maintenance. It also manages some $1.8 billion annually in energy for these clients, a service that not only includes ensuring that customers get the best rate but actually pays the utility bills for them, using the consumer bill-paying services that have sprung up on the Internet.
It was the data contained in these individual bills -- which number in the hundreds of thousands -- that got SRI staffers thinking. "We wanted to do more things with the pre-bill and post-bill information," says Leanne Wilborn, senior manager of information systems. "More sophisticated analysis for our clients, future trends analysis and aggregation of loads for energy procurement, for example. Eventually, we would like to be able to aggregate our loads so if one client wants to procure 10 megawatts of electricity at a certain price we can help arrange that."
With the current volume of information technology (IT) projects at SRI, it was impossible for them to offer these services. "We had individual sets of information, but in order to look at it collectively and get into data mining we had to get all the data -- historical and current -- into a usable format," Wilborn says. "Then we needed to have all of this data in one, central space."
Clearly, a new system was called for. The only question became, "Which one?" Ordinarily, this issue is hard enough for most companies to address a system selection can take months, if not longer, depending on the size and complexity of the company. SRI had the additional problem of being a leader in a new whole industry niche, which is a problem that, ironically enough, quickly solved the dilemma of what system to choose: there were no systems on the market that could be tailored to fit their industry space.
Build Versus Buy
In a way, SRI may well have gotten off easy. For most companies, the problem has become the abundance of choices. There are probably some 300 or so supply chain solutions on the market that automate or facilitate some link or links in the chain. Then there has been the rise of the application service provider (ASP) model in which the solution is hosted and managed off-site by a third party. And, finally, there is a whole mishmash of B2B Web sites, which offer services ranging from procurement handling to the provision of transport management solutions. Suddenly, the possible permutations a supply chain can undergo have become endless. For companies that are short on time and research staff, this is not necessarily a good thing.
Indeed, supply chains have become very complex creatures. Consider, for example, the state of the multi-billion-dollar supply chain at Eastman Chemical Co. There are at least two enterprise resource planning (ERP) systems, one advanced planning system, electronic data interchange software (EDI), and links to the planning and order systems of Eastman's collaborative partners. "New Internet technology has allowed us to explore all sorts of new models," says Bill Graham, integrated direct program lead for Eastman.
But despite the proliferation of technology, the classic methodologies for constructing a winning supply chain do still apply. Ultimately what it boils down to, says Steve Jones, executive director of Trifolium, a Raleigh, N.C.-based enterprise application integration and e-commerce provider, are three options.
Option 1: A company can buy a product that fits its needs as closely as possible and then adapt its business around the purchased product. Products in this category can be deployed relatively quickly but tend not to integrate well with existing systems.
- The advantages: relatively fast, cheap and predictable as to the length of time it will take to install.
- The disadvantages: It will be more difficult to add functionality, more difficult to support separate business units, it provides little support for sharing data or transactions with other systems, and it is very dependent on the product-release decisions and cycles of the supplier to obtain new features.
- The advantages: This class of products (which includes offerings from Siebel, SAP and Agresso) allows customer-specific business rules and customer views to be implemented. Often the supplier will be able to suggest changes to the customer's business based on best practices found elsewhere in the industry or included in their product.
- The disadvantages: Due to the product's high degree of flexibility, a consultant is usually required to install, configure and deploy the product, increasing the cost from three to 10 times the initial cost of the software. If managed poorly, the deployment can disrupt business. Even in the very best of circumstances, these solutions can tend toward the unpredictable in terms of schedule and cost. New features can be costly and difficult to obtain quickly, since they are dependent on the product plans of the supplier.
- The advantages: There are products on the market that can provide a platform for new applications, allowing custom applications to be rapidly deployed. Capabilities specific to the customer can then be added onto the basic application framework. This type of solution can be manipulated to evolve rapidly, offering new capabilities as the business requires and providing complete control of the application to the buyer. This approach is often cheaper and more flexible than option one or two.
- The disadvantages: This choice is only recommended if the customer is confident that he or she can build a competitive system, since they are not tapping the specific expertise of the software package suppliers. Then, there is option four: the application service provider (ASP), the infotech industry's latest sleeper offering.
The Case for ASPs
When to Buy?
Building As a Last Resort
How Do You Know?