Enterprise risk

Headnote:

Extending enterprise apps to the Internet has benefits and dangers, users say

Business users are benefitting from extending their enterprise software packages onto the Internet: They get improved customer service, simplified business processes, and closer contact with employees. But these companies are also exposing themselves to security risks and infrastructure constraints.

Security is the top concern among users placing strategic data such as financial reports and employee history on a public network. Bandwidth is another major worry. Many companies don't have the network infrastructure to support the large number of users who can access the applications over the Web. Also, there are reliability issues. "This stuff is still pretty fragile," says Jim Shepherd, a senior research director at IT advisory firm Advanced Manufacturing Research in Boston. "For customers who want to reach me electronically, any performance issue will reflect on me. Any glitches can harm my relationships and even cost me business."

Still, many companies are implementing these enterprise applications on the Web despite the risks. "Our whole vision is heavily leveraged on the Internet," says Don Wenninger, CIO at Vixel Corp. "Our fundamental vision is to use the Web for electronic commerce and all aspects of our interoffice communications."

To make that happen, Vixel recently invested in financial, human-resources, and manufacturing software from Oracle. The Bothell, Wash., maker of highspeed Fibre Channel storage products for customers such as Compaq Computer and Hewlett-Packard is already seeing the payoff. For example, it's teaming with one manufacturing partner to build a private extranet for sharing engineering designs and production schedules. "We want to make sure we are in sync with our subcontractor," says Wenninger. "The benefit is everyone is dealing with the same information in the same mode."

At Vixel, much of this information is generated within the Oracle application. The trick, Wenninger says, is to extract this data from the Oracle system and place it on a private Web site. Vixel uses Oracle's Web server to download the information and populate its Web pages.

Real-time communication helps Vixel collaborate more efficiently with the subcontractors it relies on to make the products it designs. In the past, the company and its business partners air mailed revisions of manufacturing diagrams or engineering drawings. But that resulted in excessive documentation and an inability to have real-time discussions of changes. "This system will provide our partners with incredible data on a daily basis," Wenninger says. "We will be able to react quickly to customer problems and to see what is being done to fix them in real time."

Blackboards And Bandwidth

Not everyone is as bullish about using the Net. Livio Bestulic, acting systems manager at Eckerd Corp., a large U.S. drugstore chain, says it will take a lot of time and effort before his company realizes the potential of the Internet. "Infrastructure is the No. 1 issue here," he says. "Our bandwidth was tapped out, so we've had to revamp our network infrastructure and boost our daily capacity."

Eckerd, in Largo, Fla., recently invested in high-end financial applications from Hyperion Software that it hopes to run on the Web once its network issues are resolved. "We want to distribute all our financial and sales reports over the Web," says Bestulic. "The idea is to dial in and look at reports that are now produced on paper." Because this financial data is so valuable, Eckerd plans to use security and firewall products on its intranet.

The Beckley Cardy Group, a $200 million supplier of school products in Mansfield, Ohio, hopes to eliminate redundant work and lower costs by extending applications to the Internet. The company uses J.D. Edwards and Co.'s enterprise software for inventory management, order entry, and financials, and it has developed an Internet storefront that will let teachers buy school supplies-such as notebooks and laboratory frogs-at any time and from any place.

When teachers log on to the Beckley Cardy site, they can search an electronic catalog, place orders, check order and back-order status, make price and inventory inquiries, and review product specifications. The technology is a combination of J.D. Edwards' WorldSoftware business applications and an Internet order-processing and management system called WorldAccess, jointly developed by Ironside Technologies Inc. in Toronto and Data Systems International in Overland Park, Kan. The WorldAccess piece, on the front end, takes the order information. Then it passes the data to inventory, invoicing, order entry, and other modules in the J.D. Edwards system.

If a customer selects a chalkboard, an order is generated in the warehouse, explains Beckley Cardy CIO Jim Hurst. The chalkboard is then picked from the inventory rack, placed on a conveyor belt, and sent to the shipping department. Once it's shipped, an invoice is generated in the financial module. If a customer requests a product that is on back order, then the J.D. Edwards system can even alert the manufacturer to replenish the stock.

The Web site also incorporates an advanced pricing module from J.D. Edwards that recognizes preferred customers and offers them discounts when they log on to the site. Hurst realizes the risks, however. If anything goes wrong with the technology, teachers could feel uncomfortable doing business with Beckley. But the company is betting it will improve the service and convenience it provides for its customers. "We are projecting that within one year, 5% of all our business will come in this way," says Hurst.

Major enterprise-applications vendors have spent the last year racing to retool their products for the Web. But very few customers have wanted to be the first to test the new technology. "Vendors are leading the way here," says Josh Greenbaum, an analyst with Hurwitz Group Inc. in Newton, Mass. "Even though customers have the Internet religion, they still have a long way to go to learn how to implement all this stuff. Everyone is still just putting their toes in the water."

Going Public

A big reason for this trepidation is that enterprise software suites have long been used to manage a corporation's inner workings. Now, thanks to the Net, these systems can connect with the outside world. But first, companies must rethink the very nature of their supply chains and how they communicate with business partners.

Catherine Riordan, director of business solutions at Mott's North America in Stamford, Conn., expresses the same caution that users are feeling: Mott's wants to make sure all its business partners are onboard before it moves ahead, she says.

The $560 million maker of apple juice and applesauce has a Web site that lets distributors check the status of their orders-information that resides deep within Mott's SAP R/3 application suite. Mott's worked directly with SAP for just nine weeks to get the Internet pilot going. In the past, distributors called a customer-service agent, who searched for that information in the SAP system. Riordan hopes that distributors will soon be able to buy products from the site.

Mott's suppliers may also eventually be able to check raw-material status. "After a big order, suppliers may be able to determine we are running low on labels and plastics, and automatically replenish those materials," says Riordan. Mott's is even thinking about adding push messaging technology to its site. When distributors dial in to check orders, for instance, they will be alerted to upcoming promotions or price changes.

But Mott's is careful not to move too fast. "Distributors think this is neat," says Riordan. "But it's still so new to them-they want to get used to what they have and play with it a bit."

While many companies still shy away from full-blown Internet commerce, more and more are embracing the concept of Web-based selfservice applications for internal functions such as employee-benefit information. All the leading vendors-including SAP, Oracle, Lawson Software, and PeopleSofthave self-service modules that let employees do such things as update their addresses or modify their 401(k) benefits over a corporate intranet.

J.C. Penney Co., the $24 billion retailer in Plano, Texas, is trying to take self-service one step further. "We want to reduce the cost of our in-store administration," says Jim Sciano, a personnel manager at Penney. "The way to do that is make our office paperless and empower our employees."

Penney is moving PeopleSoft Inc.'s human resources applications onto the Web and hopes to roll out the software to some 150,000 employees. With help from middleware messaging vendor NetDynamics Inc. of Menlo Park, Calif., Penney is setting up in-store kiosks that employees can use to input and update personal information such as address changes and emergency contacts.

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Captioned as: Enterprise Apps Reach Out Through The Net

These kiosks also help the company recruit and hire. Job applicants use the kiosks to fill out applications and complete a customer-service index test to determine how well they would interact with customers. Applicants can also search the PeopleSoft database for information about available jobs. They can click on the jobs that interest them. Human resources managers can review these applications online, set pay rates, and send the information to the appropriate supervisor. The pilot system is running in one store, and Penney plans to roll it out to more stores soon.

Easier Than EDI

The best thing about Internetbased applications, according to Dennis Miller, CIO of Memorial Healthcare System in Hollywood, Fla., is that they require much less training. That's because the browser interface is so intuitive. The simplicity of these applications stands in stark contrast to the intricacies of electronic data interchange (EDI), which has been used to communicate with suppliers and distributors. EDI requires significant training as well as proprietary hardware and software.

Memorial is implementing Lawson's suite of Self-Evident Applications for human resources and financials. "At first we expect to have 1,000 users," says Miller. "Previously, new applications required hands-on training. Here it will be more like show-and-tell, where we can train many people concurrently. Obviously, that involves great cost and productivity savings."