Distribution software more accessible, affordable

By Jeff Gusdorf -- Industrial Distribution, 1/4/2006

According to the U.S. Department of Commerce, the economy remained fairly healthy in 2005, with average quarterly GDP growth running around 3.5 percent. Business investment in equipment and software grew at almost twice this rate.

Given the healthy economy, we expect that in 2006 even more wholesale distributors will assess the state of their existing software applications and the technology that supports their business operations.

The 16th edition of the Distribution Software Guide is now available. The guide, which has been endorsed by more than 40 distribution organizations, is specifically written for the distribution community from research conducted by Brown Smith Wallace Consulting. (In July, Brown Smith, in conjunction with INDUSTRIAL DISTRIBUTION, will publish a supplement to the guide.)

Most of the software vendors in the guide report that business was very good, with many reporting that 2005 was their best year since 1998-1999 when the Y2K phenomena drove new system sales and professional services to record levels. Most research firms expect this trend to continue for the next three years.

The following area few things distributors might do well to watch for or consider in their technology development:

End of the legacy system

In the “old days,” internal data processing departments would be staffed with analysts and programmers. When businesses needed new application software, they would turn to this group to analyze the internal processes and then write the programs.

Businesses that turned to outside vendors would buy their standard software and have it customized. In the late ‘90s, many businesses were forced to make additional software investments to address the Y2K problem.

These legacy systems tend to execute business processes following strict, carefully defined rules that make changes complicated and expensive. Integrating these systems with e-business applications, customer relationship management software, third party sales tax or shipping software is difficult, if not impossible.

If these packages were written in legacy development languages such as COBOL and use proprietary databases, the challenge is made even greater because you may not be able to find staff that is qualified to work with these systems. If you are fortunate enough to find qualified staff, the risk of having critical business applications dependent upon a few people may be unacceptable.

The pace of technology change is accelerating. The Internet has emerged as the tool for creating integrated business processes across the supply chain. Integration through the Internet has allowed electronic commerce to flourish. Only five years ago, information systems were isolated and difficult to access. Now they can be accessed by employees remotely from almost anywhere in the world.

As the Internet has connected all systems, the demand that a system be 'open' or able to connect to other systems easily has become primary. Software companies have responded to this by making their products “interoperable,” or the ability of different systems to work together on a common task. This describes the capability of different programs to read and write the common file formats and utilize the same protocols.

The two most common development environments for interoperability are Microsoft's .Net (pronounced dot-net) and Sun’s Java. These tools provide most of the 'technology stack'—the tools that are used to develop the programming code and user interface. This allows the software company to put all of their effort into developing the business processes and rules needed to run your business.

Next generation of software

“Software as a service” and “services oriented architecture (SOA)” are buzz words that you'll be hearing for the next five years. SOA treats a service as a basic building block; each service receives a request and provides a response. For example, this service approach can include credit checking. The request includes customer number, order number and order amount. The service checks credit limit, payment status, open orders, etc., and returns an answer to approve or disapprove the order.

Why is this different than how this task is performed now? The service might be performed on your system or the services might be performed by a different application or even by a different company.

With SOA, this credit-checking service could be performed by a credit bureau that is able to check and report their credit rating. Shipping address validation is performed directly by the U.S. post office without needing to maintain your own application or database.

Such is the expertise that can be available to your business through various service providers. Imagine what happens to the pricing model for software fees when you can pay for services only as you use them.

New language for communicating

Have you ever tried to open a file and all you got was gibberish? A new technology called XML can eliminate this problem.

XML is a language that has been under development since the mid-1990s. Originally developed as a more powerful language for developing Web pages, XML has evolved and will become the preferred approach for describing all forms of data.

XML is not a proprietary language. It's not part of a programming language, operating system or hardware platform. It doesn't belong to just one software vendor. Use of this mechanism for defining data promotes the goal of 'interoperability' by making your data files accessible by more than one software application.

XML acceptance has been given a boost by Microsoft’s adoption of this format in the new version of Office. Other “open” formats are being required by state governments to eliminate the problems caused by proprietary formats.

New technology adoption

All of this new technology is “bleeding edge.” Those customers who have adopted them have the staff and resources to test and experiment with the technology.

There are few applications that wholly utilize all of these new tools or approaches to building software. It can also be expensive to adopt and implement these new approaches at his point in time.

In the wholesale distribution market, we expect this technology to be adopted slowly over the next four to six years. Software vendors will develop their own road maps that will allow them to communicate to their current and prospective customers how this next generation of technology will be adopted.

As a buyer of technology, you should be able to discuss these topics with your prospective software vendor and develop your understanding of these dramatic changes that are on the technology horizon.

Jeff Gusdorf is a principal at the Brown Smith Wallace Consulting Group in St. Louis. For information on the Distribution Software guide, visit www.software4distributors.com.