Very late last year, eDiets.com, an online provider of nutrition and diet information, decided to expand into providing packaged meals to dieters. Its goal was to make the service, complete with online ordering, available by Dec. 31, the day many people are thinking about New Year's resolutions and vowing to lose weight.
CTO Tom Wicorek managed to get the system up and running by Dec. 31, offering would-be dieters a week's supply of the foods they chose online. But the actual shipping of the meals to the right address proved to be more difficult than anticipated and could have thrown the project off schedule.
"It would have taken us several weeks--at least a month--to build an address-verification system," Wicorek recalls. Verifying an address is critical when shipping food in refrigerated containers. The system had to ensure that when an order left the loading dock, it was headed for the right destination. Delivery mix-ups mean spoiled food, lost revenue, and dissatisfied customers. EDiets has avoided those pitfalls, even though erroneous addresses are one of the most common problems for online businesses. Instead of building an address-verification system itself, the company turned to StrikeIron.com, an online marketplace of Web services.
Ever since the Web became a reality, it's been assumed that someday Web services would form a universal platform for business interactions. But only a few companies, such as eBay and Amazon.com, have been able to make that happen. Both extend their internal business services, such as online auctions or bookselling, to external partners through Web-based APIs.
StrikeIron is one of the first companies to assemble Web services and make them available through an online marketplace for general use. The startup, which launched its StrikeIron Web Services Marketplace in September, looks like the first of many online Web services markets where IT managers will shop for what they need to assemble composite applications. Such apps can be made up of dozens of outside services coordinated by the company's homegrown, core business logic.
StrikeIron started out building Web services but quickly learned that its ability to publish, track, and bill for Web services was attracting business partners that lacked that infrastructure. It offers about 70 Web services, 25 of which it created itself, and business partners provide the rest. They include services for commerce, finance, sales, and human resource management, as well as services for vertical markets such as government. Among the offered commerce Web services are sales-tax calculation, credit card fraud detection, contractor bid communication, and multiple forms of address verification--all of which can be used by any business that's willing to pay a fee to assemble the services they need for an application.
StrikeIron also has teamed with Salesforce.com to offer Web services that can be added to Salesforce's on-demand apps for sales force automation via the CRM vendor's AppExchange service. For example, Salesforce customers can add data cleansing, address-verification, and business demographic information to their existing applications.
"We knew the concept of Web services or standard Web interfaces was coming," says Bob Brauer, StrikeIron's president and CEO. It quickly became apparent that the value in what the company was doing was in the services infrastructure, the ability to get services out to users, tracking transactions, and the company's billing mechanism, he says.
StrikeIron goes beyond Grand Central's plan, offering services directly to customers, with easy- to-use integration tools and partners like Bridgewerx, a supplier of a $17,000 appliance for Web service connectivity, to supply connectors and adapters inside the customer's firewall between StrikeIron services and specific mainframe and ERP systems. StrikeIron handles the billing and accounting chores for its partners that build Web services, including Dimple Softwares, FraudLabs, idExec, and Relevant Automation.
Not For Everyone
Web services aren't suitable for every business need. They tend to be most useful for occasional interactions between business partners and one-time interactions with an online customer, rather than high-volume, transaction-intense operations. And connecting to Web services can be a challenge, depending on how much of the infrastructure of the business adopting the Web service has been converted to a services architecture.
For new Web applications designed as services with their own Web interfaces, the connectivity problem is reduced, says Ken Harris, CIO at Shaklee, which provides nutrition supplements, household cleaning products, and cosmetics to its distributors and customers through its Web site, and uses StrikeIron's address-verification service. Shaklee uses the service "several thousand times a day," StrikeIron's Brauer says
"The technology piece of it is very simple," Harris says. But formulating the business rules and taking action when address discrepancies occur is more complicated. That requires in-house know-how of what steps to take and which systems to tap to resolve discrepancies.
Harris is considering using other StrikeIron services, even though he says the company tends to write its own code in-house. But many see the day coming when companies will first look to marketplaces of Web services rather than develop applications. "It's a very good economical proposition," he says.
At eDiets, Wicorek says StrikeIron's address-verification service was easy to use, and it has performed to the company's expectations. "It corrects the misspellings of a user's entry and verifies that the address really exists," he says. If a customer's entry has discrepancies with what the Web service can verify as a real address, eDiets takes the order anyway, then tries to resolve the differences through an overnight batch process that double-checks possible explanations for the problem. When all else fails, human troubleshooters intervene and call the customer for resolution.
The result, Wicorek says, is a successful delivery service that greatly expands the scope of eDiets' business. "The first two weeks of January are our highest volume days of the year," and the company got its food shipments off to a fast start by having items ready on its site in time for New Year's Eve, he says. Because of the address-verification service, eDiets' "shipment error rate is extremely low," Wicorek says. Like Shaklee, eDiets is considering other StrikeIron services.
EDiets found that low fee-per-use pricing reduced its cost of entry into the packaged meal business. StrikeIron's services vary in price: The global address-verification service starts at $19.95 for 200 hits per month. But Wicorek knows there will be a day of reckoning as his new line of business takes hold: "As my volume goes up, the cost goes up," and businesses must calculate the long-term impact of that fee-per-use expense on their margins. EDiets negotiated a set fee with StrikeIron, projecting how many times it would use its service in its first year. It will pay higher fees if it goes above the projected level.
Brauer jokingly characterizes StrikeIron as an "80-pound gorilla" because, while the company is small, it dominates a field with few competitors. If it succeeds, and Web service markets proliferate, companies like Shaklee and eDiets that are just trying out Web services may find one day they can't live without them.
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