CIO Barry Carden has an IT staff of 14 at Mayer Electric Supply Co. Inc., a $600 million distributor of electrical supplies that does business throughout the Southeast and is headquartered in Birmingham, Ala. The IT team's responsibilities run the gamut from help desk and database administration to application development. But when it comes to the business-to-business (B2B) integration required to allow Mayer customers to seamlessly place orders through a Web-based catalog, Carden turned to the cloud.
Starting soon, customers who order through Mayer's online catalog will get punchout or roundtrip service -- that is, the ability to fill up a shopping cart, have the items translated automatically into a requisition order, then routed through their internal approval processes and -- once approved -- turned into purchase orders that pop up in Mayer Electric's ERP system. No double entry, crows Carden. Total data integrity. All of it handled in the cloud by an outside provider.
"The beauty of it is, you have got one person who is selecting the material just one time, and whenever they check out they are populating their system, which in turn will populate our system," said Carden, whose annual IT budget is about $3 million. How? Through a new cloud-based B2B Integration as a Service, WebSpan, from IBM and Hubspan Inc., an on-demand business services integrator.
"The second beautiful part is that to get that integration going for a new customer, all I have to do is call up Hubspan and say, 'Hey, I have got one here; hook 'em up!'"
Customer push for e-commerce integration services
Mayer Electric is not on the cutting edge of technology; neither are most of its customers. Many don't even have an IT staff. About 65% of sales come from large contractors who do not enter their orders via the Web, "mainly because we have to bid jobs and the quoting goes back and forth," Carden said. Mayer Electric also supplies manufacturers, transactions that bypass the Web as well.
"The percentage of sales done through the [online] catalog is very small today," he said.
But a fast-growing segment -- which includes state governments and utility El Paso Corp., Mayer Electric's largest customer -- not only orders through the Web but also wants punchout services, said Kenny Siegal, director of corporate alliance and national accounts at Mayer. Punchout helps companies phase out large procurement departments and eliminate paper systems that do not add value. El Paso told Mayer it would soon roll out punchout nationwide to help meet its strategic goals for process improvement.
"They sat us down and basically said, 'You are either on the bus and part of the solution, or history,'" Siegal said.
IT learned that other customers would be following suit, some of them with SAP, others with PeopleSoft, others that use Ariba's procurement systems, all of which now come with punchout capability. "We needed to be in a position to do this," Carden said. It did not make sense to him to handle this labor-intensive process of creating or managing the punchout functionality in house.
Benoit J. Lheureux is a Gartner Inc. analyst who covers B2B e-commerce and middleware and claims to have coined the term Integration as a Service in 2004. Companies like Mayer Electric, he said, are the reason B2B integration outsourcing is now a $1.5 billion market growing at 25% a year. They have also breathed new life into electronic data interchange value-added network providers, he said.
Left for dead in the early 2000s, as B2B offerings like Microsoft's BizTalk encroached on their territory, companies like Sterling Commerce Inc. and EasyLink Services International Corp., as well as pure plays like Hubspan and GXS Inc., invested millions in figuring out how to provide integration for order transport, translation, process visibility, archiving -- the whole schmeer -- as a service.
Lheureux said, "Not everyone is going to want to do B2B integration themselves, even if you give them the software and tools to do it on premises or if the infrastructure is made available in the cloud," as through platforms like Microsoft's Azure or Boomi.
"There will always be companies that say, 'Here is the list of companies. If there are maps for translation, I want you to implement them. Put them in your network and take the calls if there are problems.'"
A hybrid outsourcing solution that kept catalog in company control
Finding the right fit for e-commerce integration has been a bit of a journey for Mayer Electric. The company's quest goes back to 2002, when the in-house IT team took a stab at e-commerce, Carden said. The company then went with a small (which-must-not-be-named) provider that both hosted the catalog and performed the punchout service. When customers began demanding a better catalog search engine, however, and Mayer wanted to make changes to the catalog, the provider would not accommodate, so Carden began researching other options.
However, other providers that could host the catalog and provide the punchout integration services more flexibly proved "very expensive," on the order of $7,000 a month. Doing the work using contract and in-house resources would cost between $120,000 to $200,000, not counting the integration labor as new customers came on, Carden said.
Carden decided his team should write and host the catalog and could do it in six weeks. "We understood the data and the metrics. But we did not want to have to do that integration for punchout, so I began looking for a supplier to fill that void."
Enter WebSpan, for which he pays $1,700 a month for up to five connections to customers. Carden said he struggled a bit with the decision to pay rent, "but I felt we could fill the five slots fairly quickly." Indeed, four are already spoken for, with El Paso ready to go live as soon as its ERP upgrade is finished. Carden said it may take three weeks to set up a customer, depending on the testing methodology of the customer.
"It does not happen overnight. But I can make a phone call, put the parties together and let them work it out," he said. "Those guys already have the expertise in-house to facilitate the connectivity process in a short time with the least amount of cost and aggravation on the customer side."
Let us know what you think about the story; email: Linda Tucci, Senior News Writer