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7/28/2004
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Hunting Big Game

When you think of customer value, don't think CRM - think B2B processes.

If I mention Wal-Mart within earshot of my 19-year-old brother, I have to whisper its name or else suffer a tirade about its evils and exhortations to boycott it. Although he's been a political conservative since at least the age of eight and proudly admits to his avarice, two qualities likely to make a person lenient toward the retail giant, he's incensed about how Wal-Mart treats employees. The iconic retailer is loved and hated in perhaps equal doses and is the catalyst for many societal debates about the relative merit of low-priced goods vs. local ownership. What is less debatable is how good Wal-Mart has been at driving away efficiency losses in the supply chain.

Wal-Mart is the leading driver in the United States for adoption of global data synchronization (GDS). GDS reduces time to market, errors that cause missed opportunities and tie up labor to sort out, and (at least in the long run) costs of doing business. Those errors cost businesses a lot of money. The Yankee Group reports that bad data causes the CPG and retail industries to lose 3.5% of sales, or $40 billion a year.

As a side effect of requiring suppliers to implement GDS, Wal-Mart has spawned a healthy consulting industry around the practice. But it doesn't stop there. GDS seems to have catapulted product information management (PIM) to a whole new level of status. PIM is essentially master data management applied to product data, including engineering specs, tiered pricing, promotional information, workflow rules, and myriad other possibilities. Forrester analyst Erica Rugullies stated in December, "The PIM software market, which has languished for the past couple of years, is getting a boost in the form of heavyweight players in the retail industry requiring that suppliers send them clean electronic product information." IBM acquired leading niche player Trigo, and soon after SAP snatched up A2i. When the world's biggest enterprise app vendor and the world's biggest systems vendor both want a piece of the same pie, you know that's a good pie.

What does all of this have to do with customer value, the theme of this issue? The most valuable customers are businesses, and a lot of their value is leached away through inefficient interenterprise processes. For instance, more of your customers would pay you on time if you would just invoice them correctly in the first place. Sanjay Srivastava says he can free up $20 to 25 million in annualized returns for large enterprises by greatly reducing days sales outstanding (DSO), dispute resolution efforts, and fines levied by big customers for noncompliant invoices. Srivastava, COO of Silicon Valley startup Aceva, calls what his software does "working capital management."

Opting for a different label, Avolent of San Francisco attacks a similar set of problems and calls its BizCast software FRM, or financial relationship management. Avolent doesn't claim to prevent errors as Aceva does, but it cuts down on reconciliation time through automation. Both companies offer analytic components. Another option for pharmaceutical companies, with their special brand of troubles, is "revenue management" vendor Model N. All three vendors serve large enterprises.

PIM is in this game, too. Daniel Druker of IBM's WebSphere (formerly Trigo) Product Center cites invoice dispute avoidance as one of the side benefits of creating applications that combine PIM capabilities with GDS and radio frequency identification (RFID) readers. Heck, if my little brother knew the ways Wal-Mart saves money that don't affect employees, his customer value could suddenly increase dramatically.

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