Business case for Linux is seen at Boscov's

Boscov's, a privately held $1B department store chain in Pennsylvania, is in process of moving major portions of its IT infrastructure to Linux. According to Harry Roberts, CIO, the initial driver for Linux was the expense of managing a growing Windows NT server farm, which required one full time administrator for every 10-12 servers. Rather than continue to add Windows servers at the rate of one per month, Boscov's decided to upgrade its IBM mainframe to the IBM Z-series, which can run both IBM's OS/390 operating system as well as multiple instances of Linux. This would effectively allow a single mainframe to run all of Boscov's mainframe applications as well as function like hundreds or thousands of Linux systems.

As a first step, Boscov's moved file and print services as well as non-critical applications from Windows to Linux, immediately eliminating Windows boxes and increasing up-time. Roberts says, "I used to reboot our print server every two or three weeks. It's been over a year, and I haven't rebooted our Linux print server once." Then, after successfully converting e-mail and network management functions to Linux, Boscov's converted its bridal registry and invoice processing systems, which are heavy transaction processing systems requiring integration to other corporate systems, such as Peoplesoft.

Future plans include converting 3,000 POS devices from MS DOS to Linux in order to avoid the cost of upgrading to Windows, which carries an ongoing license expense and additional upgrades every 24-36 months. Roberts estimates that upgrading Windows costs about $200 in administrative costs per system, plus the cost of Windows itself. In contrast, he feels that Linux systems can be more easily upgraded remotely and require no additional license fees. Roberts is even considering replacing Windows with Linux on the company's 2,500 desktops and is evaluating Sun's StarOffice as an alternative to MS Office.

Forbes has the full story.

More light at the end of the tunnel?

IDC is now projecting an upturn in worldwide IT spending for 2002 and 2003. Spending this year should reach $981 billion, which is an increase of 3.7% over 2001. Although hardware will show a decrease of 4% this year, a projected growth of spending on software and services should more than offset it. For 2003, IDC is forecasting a 9% increase. If these projections hold, it will be good news for providers of IT systems and services, although IDC believes that major new projects will not begin until 2003, when a new budget cycle begins. This projected upturn is consistent with personal observations and anecdotal reports from vendors, which indicate some recent uptick in presales activity.

Web services in B2B applications may need a “provisioning” process. Web services are designed to provide open, ad-hoc, access to an application by means of a standard set of interfaces that customers can simply “discover” and query to gain access. The Web services standard that provides open discovery is called UDDI (Universal Description, Discovery, and Integration). Although most Web services so far have been deployed behind the firewall to enable integration of internal systems, some large-scale implementations of Web services are begining to emerge and are testing the approach of open discovery.

One such example is the National Student Clearinghouse (NSC), with its Web services interface to its enrollment database under development. With hundreds of thousands of employers, credit card companies, and insurers needing rapid access to NSC’s database to determine whether someone is currently enrolled in an institution, web services would seem a natural way to provide integration.

At first NSC attempted to use UDDI to allow customers to dynamically establish integration but found that it was not sufficient to handle the multiple steps required to set up a new customer. NSC found that a “provisioning” process would be needed to initially establish service level agreements, transport protocols, and security. NSC is now pilot testing Web services management tools from Flamenco Networks to provide security and network management capabilities for new customer provisioning.

It appears that the dynamic discovery approach offered by UDDI may be most appropriate for general purpose, ad-hoc, public Web services. But for business-to-business applications, with established trusted trading partners, a more robust and complex process of “provisioning” is required.

InternetWeek has the report.

Will web services kill packaged CRM applications? Emerging web services standards may hold the key to providing integration between CRM point solutions and legacy applications. Or, at least that is the thrust of this article in CRMDaily. No doubt, integration with legacy systems is a key success factor for CRM. But I don't quite see how Web services as an integration solution spells the death of packaged CRM suites. If anything, web services would seem to offer a way for the Seibels of the world to offer individual pieces of functionality as components, lowering the cost of entry and helping them win more smaller deals.

Little-bang supply chain management saves big bucks. Josh Greenbaum, writing for Datamation, promotes the merits of "little-bang" SCM projects, in contrast to big-bang implementations of the past decade that cost too much, delivered too little, and carried way too much risk. Although i2 and Manugistics are suffering the demise of big-bang SCM, companies such as Otis Spunkmeyer are realizing the benefits of a more incremental approach.

Wall Street an early adopter of Linux for the enterprise

Linux has been making strong inroads on Wall Street, where it has moved beyond small, non-essential applications to true enterprise class systems. Linux is attractive not only because of its low-cost but especially because of its high performance in real-time transaction processing, a key requirement for large brokerage firms.

Although such firms are notoriously tight-lipped about their technology initiatives, it appears that enterprise-class Linux systems are fully operational at Credit Suisse First Boston, Merrill Lynch, Morgan Stanley, and Reuters. Vendors pushing Linux on Wall Street include H-P, Oracle, Sun., and IBM, which is building a porting and testing center in New York to help firms migrate to Linux.

"Every major Wall Street firm has at least a pilot going on with Linux," says Vern Brownell, former CTO of Goldman Sachs, "and more than half of them are probably in production with mission critical applications."

CIO Information Network has the story.

It pays to read the fine print. CNet has a good article on the need for buyers to understand and be willing to challenge language in software vendor contracts, which are often one-sided agreements favoring the vendor. Among the recommendations:

1. Clarify definitions: e.g. what is a "named user?" Is it an individual, or a client machine? Is it an account on the system, or only active accounts? What is a "concurrent user?" Are casual web inquiries included, or only local users?


2. Understand what's included in "basic support," especially when renewing contracts where vendors definition of "basic" may change.


3. Determine the planned support window for the current version, especially if you plan customizations or additional development around it.


4. Watch out of "entity based pricing" or "right of use" clauses that limit your ability to use the system at a sister division or subsidiary, or that do not allow you to transfer the license to a new corporate entity in the event of a merger or divestiture.


5. Avoid "compliance or mandatory audit clauses" that give vendors the right to periodically audit your compliance and can lead to costly disputes and renegotiation.

Weather report for IT spending, 2002. Recent discussions with clients and vendors regarding IT spending trends in the current economic climate can be summarized in a few main points.

1. “Tactical” wins over “strategic.” Companies are willing to make small incremental investments that have a clear, short-term payback. There is little immediate interest in making large bet-the-farm bets that may result in “strategic advantage.”
   


2. But...investments for cost reduction are no slam dunk. In some industries, even initiatives that have a clear cost savings are being deferred simply because CFOs do not want to write a check.
   


3. Compliance is king. IT investments involving regulatory compliance are more likely to be considered. Examples include HIPAA compliance, FDA regulatory compliance, and state-level compliance of financial service offerings. Privacy and security initiatives, even if not strictly mandated for compliance, are also high on the list.

In spite of depressed spending, there is not a general disenchantment with the role of IT in business. Companies have simply become much more realistic in their expectations for what is needed to make technology succeed and are biting off only as much as they can chew at one time. When spending levels do recover, the winners will be vendors that can deploy technology in smaller chunks and interface easily with legacy or third-party systems.

Companies still spending on IT, just more selectively. A recent AMR survey of 500 midsize to large companies finds significant differences in IT spending levels and priorities by industry. Although spending across the board dropped to 3% of revenue in 2002, from 4% in 2001, there are pockets of increased spending and indications of further increases in 2003. Stronger areas include HIPAA compliance in the healthcare industry, supply chain synchronization (CFPR) among consumer packaged goods manufacturers, CRM in telecom and financial services, and pharmaceutical manufacturers in the area of clinical trials and FDA regulatory compliance for electronic records.

When CRM Means "Client Relationship Managment"

Richard Karpinski writing for InternetWeek points out the things that make CRM in professional services--such as law firms, accounting firms, and consulting firms--different from CRM in product-based businesses. Key characteristics of professional services include the lack of formal sales organization or call centers, partners doing their own selling, and sales opportunities being highly episodic. Here it is truly intelligence about the client relationship that must be maintained and not just the pipeline of sales opportunities. Ultimately, CRM should allow such firms to leverage existing relationships throughout the organization while respecting the professional's need to keep some client information confidential.

Karpinski identifies Interface Software as one vendor that offers CRM specifically for professional service firms. Its product, Interaction 5, focuses on four key CRM business processes: relationship discovery (seeing and leveraging existing relationships), relationship management (tools to maintain client data), client services automation (creating relationship-based marketing programs), and knowledge delivery (interfacing with existing systems and information channels). Some interesting features include watch lists, whereby a professional can track all activities or changes taking place for key contacts, and relationship maps with "who-knows-whom" features to help professionals discover not-so-obvious opportunities to leverage relationships.

Leading SCM vendors continue to tank

AMR reports on the latest quarterly results from supply chain leaders i2 and Manugistics. Both vendors report continued fall off in license revenues. It is tempting to simply lump SCM in with the rest of the Internet bubble, but that would be a mistake. It's more a case of client expectations for supply chain management becoming more realistic. Both i2 and Manugistics have excellent products, but no piece of software, especially one with an entry point of multiple millions of dollars, is going to generate supply chain efficiencies by itself. It takes software, plus quite a bit of education, process improvement, and organizational change. The future for both vendors will likely be one of smaller deals and phased implementation by clients.

Manugistics V7 seeks to deliver profit optimization in small bites

Manugistics recently announced version 7, which includes web-based component solutions for pricing and revenue optimization (PRO). PRO is a class of applications now being introduced by some of the supply chain vendors such as i2 and Manugistics, as well as point solutions from vendors such as Vendavo. Manugistics claims that its PRO solution analyzes pricing for all of a company's products across its distribution channels to determine the optimal price for each product. Specific functionality includes price list optimization, price quotation optimization, profitable promotions management, and revenue management.

Although PRO applications may be considered somewhat leading-edge, they do have an appeal in the current economic climate, where top line growth may be limited and companies are seeking to maximize profit from whatever level of sales they have. Manugistics is wise to deploy V7, including PRO, as a component-based architecture, which allows clients to implement it a bite a time, realizing important benefits quickly before committing to additional capital expenditures.

Aberdeen has a good summary of V7.

Adoption of CPFR remains slow. Computerworld reports that in spite of clear benefits to all trading partners, adoption of Collaborative Planning, Forecasting, and Replenishment (CPFR) in the consumer goods industry remains slow. Contributing factors include costs, resource requirements, lack of tools, difficulty in extracting data from legacy systems, and lack of trust between trading partners. In my opinion, the current economic climate forces companies to place a higher priority on simple cost-cutting initiatives. Although the benefits of CPFR are clear, they tend to be more strategic and longer term, and hence, lower priority. Conversely, now is the time to for retailers and their suppliers to take real steps in implementing CPFR, in order to reap the benefits when the economy ultimately turns around.