[From iSource Business, April/May 2002] For this issue's cover story, iSource Business surveyed a group of chief information officers (CIOs) to learn where savvy companies are spending their e-business dollars in 2002. We found a variety of projects underway, involving different business functions and different systems within the enterprise. But one common concern shared by all the CIOs was the need to have an IT infrastructure in place that could support the diverse e-business solutions their companies were adopting.
The Multi-Solution Environment
Rare indeed is the corporate IT system running a single, enterprise resource planning (ERP)-size solution, as John Bermudez and Bob Parker of Boston-based technology consultancy AMR Research remind us. The multi-supplier corporate system is a reality, the researchers wrote last year in a report focusing on AMR's vision, called enterprise commerce management, for managing applications, processes and technologies across the enterprise. Today's multi-solution reality dispels the 1990s notion that a company could install an ERP system that would handle all its business needs, they assert. It wasn't possible then, it's not possible now.
Nevertheless, AMR points out, throughout the 1990s many enterprises set up ERP-centric IT infrastructures, with a planning system serving as a hub and such major applications as supply chain planning and customer relationship management (CRM) systems hard-wired to the ERP. Subsequently, as enterprises added more applications, IT departments found themselves awash in integration projects, weaving one software package after another in a web of intersecting code. Add multiple ERP systems in different divisions of the same company and what do you get? Data isolated in functional silos, solutions overlapping in scope within and between business units, and persistent disconnects between critical enterprise systems -- say, sales cycle management and CRM systems -- resulting in interruptions in the process flow within the enterprise.
Perhaps nowhere are these internal disconnects so keenly felt as in the perennially fast-moving electronics industry, where brief product lifecycles place a premium on the ability to respond rapidly to market shifts -- and on the ability to quickly adopt new solutions to speed up the movement of products through the supply chain.
Working from a Template
None of this was news to Barbara Martensen when, in 1999, she arrived at her new job as global information officer for Tempe, Ariz.-based technology reseller Avnet Computer Marketing (Avnet CM) and found the standard IT woes: siloed data, overlapping solutions and disconnected systems. Avnet CM, a $3 billion division of Avnet Inc., with fewer than 3,000 employees, had more than a dozen databases supporting CRM alone. The company was looking for Martensen to take on the daunting task of using IT to help smooth out its supply chain while simultaneously bringing the company closer to its customers and suppliers. No doubt a challenging charge, but Martensen brought more than just 20-plus years of IT management experience with her. She also brought along a template for building a flexible technology infrastructure that would allow the company to adapt quickly to a rapidly changing business environment while reaping the benefits of new e-business solutions.
Martensen had helped develop the template while working at Motorola, where she spent 22 years, eventually becoming chief information officer of the company's Semiconductor Product Sector. In that position, her charge was to cut IT spending by 30 percent, a goal her team met by implementing initiatives to streamline business processes and to establish a standard set of systems and processes across the sector. All we did was understand exactly what the business process should be from the beginning of the demand capture all the way through shipping, and we streamlined it, Martensen says.
Sounds easy, right? But to support the new processes that Martensen and her team were putting in place, the Motorola unit required a new IT system architecture. Martensen turned to fellow-Motorolan Bill Chapman to help design, from a holistic standpoint, a new IT system to support the company's supply chain. Chapman had prior experience supporting supply chain IT initiatives in the petroleum and semiconductor industries, but architecting the new system proved challenging because the company had so many different platforms and processes in use to manage its supply chain. Each business, in each region, seemed to be doing its own thing and had been for a number of years, explains Martensen. Still, by pursuing a consistent strategy that called for implementing a baseline set of tools and processes across its business units, the IT department was able to meet its goal of reducing headcount while improving performance.
Untangling the Web
The situation at Avnet CM when Martensen arrived was familiar to the new information officer: Because the organization was siloed and no one was looking at strategy and architecture overall, there were multiple solutions in every one of the business process spaces, she explains. In addition, it was difficult to move information into and out of Avnet CM's legacy ERP system, called Genesis, so various business units were running different databases and applications created from copies downloaded from the mainframe.
To untangle Avnet CM's IT web, Martensen began by understanding the company's business strategy so that she could ensure the IT strategy aligned with Avnet CM's overall objectives. She then developed an IT program, based on the IT strategy and with concrete benchmarks, with the goal of enabling the business strategy. For the architecture side of the project, Martensen again turned to Chapman, who had joined Avnet CM shortly after Martensen as senior vice president for IT enterprise solutions. (Both left Motorola after the semiconductor division moved its headquarters from the Phoenix area to Austin, Texas.)
Chapman and his architecture team, following the pattern established at Motorola, set about identifying duplication of effort and process breaks in Avnet CM's IT infrastructure. Martensen, meanwhile, built top-level executive support within the computer marketing group for the changes ahead. She also devoted time to educating the other business units within Avnet CM about IT architecture, why it is necessary and what would constitute a good architecture for a distribution-type company such as Avnet Computer Marketing. At the same time, she consolidated pockets of developers that previously were aligned with different business units in Avnet CM into key functional areas where they could focus on developing targeted solutions that fit into the overall IT strategy.
The architecture itself, designed over the course of a year, consists of the existing ERP system with an isolation layer -- an operational data store -- built on top of it to serve as an intermediary between front-end applications and the back-end systems. Operational data stores (ODS) contain critical data that are updated on a continual basis in the course of business, providing front-end applications with access to information without having to wait for an ERP system. These real-time virtual transaction-processing databases, which run Avnet CM's entire business, are modeled to support all applications, data and tools in the architecture. The company has also created a real data warehouse instance -- a derivative of the ODS -- in which data is structured for ease of reporting retrieval. The data warehouse links is a reporting instance of the operational data, delivering reports or information dashboards through any application or directly to the portal.
Under the architecture strategy, Avnet CM connects directly with strategic suppliers and customers through electronic data interchange (EDI) and RosettaNet, the electronics industry's e-business standard. Connections can run directly out from Avnet's ERP system or through the isolation layer. In either case, this direct link entangles the connected partners in Avnet CM's supply web, Martensen says, essentially using the company's IT infrastructure as a tool for getting closer to key suppliers and customers.
Separately, Avnet CM connects with other suppliers, customers and its own employees through a Web-based portal that overlays sales cycle management, CRM and supply chain management (SCM) applications. These applications, in turn, connect to the isolation layer and through it to the ERP system and the data warehouse. This architecture allows Avnet CM to present different front-end interfaces to different constituencies while maintaining a consistent back end and a consistent set of core applications.
First Test
With the system design completed and approved by November 2000, Avnet CM spent the first quarter of 2001 implementing the foundation for the new architecture, including hardware, software and development tools. That done, Martensen's team set about implementing the various applications to support CRM, SCM and other functions. These solutions included SalesLogix for customer relationship management and Vignette for portal management, while Avnet CM used webMethods to connect the applications to the back-end system.
The new architecture was quickly put to the test when, in mid-2001, Avnet CM's relationship changed with Hewlett-Packard. Previously Avnet CM had held HP inventory and configured the computer systems for shipping to customers. When Hewlett-Packard elected to do the integration itself, moving Avnet into the role of demand generation and financing, Avnet CM's IT team worked with HP and HP's other distributors to design a quote-to-order system that leveraged Avnet CM's IT infrastructure.
Under the new system, when an Avnet CM customer generates an order using an HP-provided configurator, Avnet CM receives a quote as a transferred file from the customer. The quote flows directly from Avnet-resident systems, through HP's firewall and into Hewlett-Packard's supply chain system, which, in turn, generates a commitment date that is sent back to Avnet CM. Armed with that information, Avnet CM's systems send pricing and delivery date information to the customer. The resultant purchase order number is essentially a reference to the quote number from HP, and if the customer has available credit, the order flows through to HP and nobody at Avnet CM touches it, except perhaps to offer value-adds to the system. The product ships from Hewlett-Packard, and all the shipping information comes from HP, along with serial numbers and warranty information. Avnet CM closes on the deal and collects the money, completing the transaction loop. This new system has worked so efficiently for all parties that Hewlett-Packard has increased both business and margins with Avnet CM, according to Martensen.
Turning on a Dime
The return on investment in the new architecture has come in large measure from process savings. For example, the new quote-to-order system and underlying architecture have reduced the time necessary for salespeople to process orders by 70 percent while reducing work redundancies and eliminating order-entry errors. More efficient data handling has reduced the time required to get information out to customers and has cut the time necessary to perform profit analyses on orders by 25 percent. In all, Avnet CM estimates a return of nearly six times the investment in the new architecture and applications for 2001, and a like amount for 2002, even with an anticipated slowdown in business. Moreover, Martensen believes that this system, in streamlining the process of buying from the company, will be a key differentiator for Avnet and therefore will lead to high customer satisfaction and, ultimately, retention.
Moving forward in 2002, priorities for Avnet CM's IT team will include fully deploying all aspects of the new quote-to-order system in every Avnet CM business division; using RosettaNet as a platform for more closely integrating with Hewlett-Packard, IBM, Cisco and other key suppliers; and deploying a solution from Maconomy to enable cross-sales of integrated solutions and job-cost management.
In the rapidly evolving electronics industry, Martensen argues that a successful company must have IT architecture that is sufficiently flexible to adapt to changes in the business. Avnet CM's strategy, she says, is truly to be agile, to have an IT architecture that allows us to turn on a dime.
