InformationWeek

November 6, 2000

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Amazon's IT Agenda

continued...page 4 of 4

More on Amazon.com:

Amazon Taps Excelon To Redo Supply-Chain System (10/30/00)

Amazon.com Taps SAS For Business-Intelligence Tools (10/16/00)

TechWeb Finance: Amazon Trims Losses, Blows Past Estimates (10/24/00)

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Amazon.com required Manugistics to come up with an inventory-management plan in which no more than 15% of orders would be split. Patrick Smith, Manugistics' product marketing manager, who worked on-site at Amazon.com during the deployment of the software, says NetWorks Strategy provided a plan that's expected to meet the objective while reducing overall inventory at each facility by 25% to 30%. To do that, NetWorks Strategy was used to examine Amazon.com's customer-order history, identify which items are most often purchased together--music CDs and CD players, for example--and determine the best locations to meet the anticipated need for those items.

NetWorks Strategy also is being used in the United States to help Amazon.com determine whether particular facilities should be expanded and to determine if the retailer needs to add facilities to the seven it already has.

With apps in place to get a better handle on its own logistics, Amazon.com is turning attention to improving its business-to-business supply chain. It will begin using Excelon's B2B Integration Server to link up with suppliers' systems, and B2B Portal Server to build a product catalog for use with wireless devices. Larry Alston, Excelon's VP and chief technical officer, describes the setup as a private exchange that links Amazon.com to its suppliers for toys, CDs, stereos, and all other products except books, regardless of the suppliers' technical capabilities.

The system will let Amazon.com and its suppliers communicate in real time on orders and shipments. In addition, Amazon.com's largest suppliers will be able to manage their own inventories via connections to Amazon.com's back-office applications, Alston says.

Amazon.com also is shopping for labor-management software for its distribution centers, according to a source familiar with the requirement. Such software, for example, could track tasks assigned to warehouse personnel, plan staffing, and help identify whether items are taking longer to ship than necessary.

Using a new application to better manage the time of warehouse workers may not seem groundbreaking. But as Amazon.com grows from a startup E-commerce company to a full-fledged E-business with global operations, the little things add up. That's not lost on Bezos, who has a college degree in electrical engineering and computer science. "People underestimate tremendously what will happen in 10 years," Bezos said at PC Expo. "The fundamental technology that we employ every day improves every day."

That last point is an important one, but don't expect Amazon.com's IT staff to expand on it. VP Bell says the company avoids discussing its IT architecture, the programming tools it uses, its database operations, or the size of its IT department. He declines to disclose even the location of Amazon.com's recently opened second data center.

"It's like airport security," Bell says. "The more they talk about it, the less they have."

Amazon.com's highly touted personalization and recommendation capabilities are also off-limits. "I'd be loath to talk about that," Bell says.

Maybe Amazon.com should be a little more open. The projects with E.piphany, Manugistics, and SAS Institute all have potential to help the company reach profitability faster, says Morgan Stanley analyst Phillips. "You grow revenue more than you would have if you target your customers better," Phillips says. "And you can also reduce costs if your fulfillment is optimized."

By all accounts, Amazon.com's IT staff understands the business imperatives behind the projects. "We're part of the business," Bell says. "We do it through infiltration, essentially. We're part of the decision-making process." Cases in point: CIO Dalzell is an officer of the company. And one-time IT exec John Overdeck is now VP of customer-relationship management, a business position.

It says something about the organizational mind-set to hear Angadi, who oversees the company's highly technical systems management work, talk about the importance of adapting to the business. "Tell me what I need to do, and I'll make the changes," Angadi says of the general attitude among his colleagues. "We are very adaptable in not only accepting responsibility, but making core changes to business processes."

The coming months will tell how well that kind of attitude, combined with Amazon.com's numerous new IT systems, is working. For a barometer, just keep an eye on the company's stock price.