Why " Real-Time" Business Takes Real Time

They have the technology: Using Internet-driven software, companies can now access up-to-the-minute sales and market data. Are they ready to flip the switch?

Imagine driving quickly along a curving road, peering through a specially doctored windshield that updates your view only once a minute. Sounds horrifying, doesn't it? Isn't it much better to see reality unfold moment by moment, so that you can respond immediately to each twist and turn?

Expressed that way, the choice is obvious: No sane person would choose the time-delayed windshield. But in business, it's another story. Until recently, existing technology left companies with no choice when it came to finding out where they were and where they might be going. Since the 1960s, they have largely relied on slow batch-processing systems to keep track of internal corporate data -- sales, orders, and the rest. Using such systems, company leaders have had to wait days, weeks, or even months to get a clear outlook on the financial road ahead.

Today, though, companies have a choice. As the Net becomes more and more integral to the way business gets done, Internet technology brings a host of opportunities for gathering data, aggregating it in meaningful ways, and distributing it to key decision makers -- all in practically real time. In other words, just as a windshield lets a driver see and respond to a change in road conditions as soon as his vehicle encounters it, so this technology lets a company leader discover and react instantly to, say, a sudden spike or drop in consumer demand.

At least a dozen young software outfits are now trying to get companies to overhaul older, slower systems and to embrace what industry visionaries call the "real-time Internet." Each of these vendors has developed Web-based software that promises to deliver up-to-the-minute access to essential enterprise data.

One typical newcomer is Closedloop Solutions, a Redwood City, California-based company founded by Chandran Sankaran, 39, a former McKinsey & Co. consultant. Sankaran first saw the need for real-time access to company data in the mid-1990s, when he found himself working on one corporate-turnaround project after another for McKinsey. "We'd go into these companies that had hit a wall," he recalls. "They almost never had a financial plan. Or, if they did, it was nine months out of date, and no one was taking it seriously. At first, I thought that they had a stupidity problem. But then I realized: This was an information-flow problem."

Everyone agrees: The real-time Internet will eventually form the basis of how businesses manage their internal data. But pay close attention to that sneaky little word "eventually." The weakened economy of 2001 has led to sharp cutbacks in IT investment. At a time when the real-time Internet is arguably coming into its own as a transformative business tool, many big companies are choosing to defer or even halt their initiatives on this front.

That's irksome to pioneers like Vivek Ranadive, 43, chairman and CEO of Tibco Software, in Palo Alto, California. In the 1990s, Tibco (along with a predecessor business) grew by selling real-time Internet technology to financial institutions. More recently, it has expanded its customer base to encompass such industries as energy, retailing, and transportation.

But this year, Tibco's expansion has stalled. In March, the company announced that revenue growth would not meet Wall Street expectations. In April, it laid off 200 people, or 15% of its workforce. And over the course of the spring, its stock-market value -- which had peaked last summer at an eye-popping $30 billion -- slumped to a still-strong but far-from-dazzling $2 billion.

"Using software like ours should be part of a company's basic mission," argues Ranadive. "We've got 1,000 customers, including the likes of Chevron, Enron, and Yahoo. Some 60% to 70% of the world's semiconductor manufacturing is done at companies that use our systems. But we're seeing some stretch-outs on orders."

Consider Tim Plzak. He's leading an advanced-technology initiative for the Limited Co. and its sister retailer, Intimate Brands Inc. The two companies, both based in Columbus, Ohio, became Tibco customers last December and are now integrating Tibco software into their existing IT structures. Plzak, 39, remains a big believer in the real-time Internet. "Right now, only about 20% of what we do is real-time, and the rest is batch," he says. "Over the next several years, I'd like to see us go to 50% real-time."

Plzak is especially excited about the chance to track the Limited's best customers as they travel from store to store. "Say that someone buys something at one of our Bath & Body Works outlets," he says. "If we knew right away that this customer had recently bought something from Victoria's Secret -- or from any of our other stores -- we could give her a special offer for that store when she made her purchase at Bath & Body Works."

Equally alluring to Plzak is the prospect of charting how a special promotion is faring hour by hour. That way, if a new item made no impression at 10 stores, even as it sold briskly at 20 other outlets, managers could instantly take steps to figure out whether, say, a shipping glitch was to blame. Right now, it takes about a day for point-of-sale data to get back to headquarters, and even a daylong wait can impose a serious handicap on decision making -- especially during a peak holiday selling season.

But Plzak warns that real-time data mastery probably won't be at hand for his company until sometime after 2002. While he praises the adaptability of the Tibco software, he notes that it functions mainly as an overlay on the Limited's existing systems for monitoring sales, inventory, and so forth. Building seamless connections between old and new software will mean months of work for the Limited's computing department, and a rollout isn't likely to begin until this year's holiday selling season has come and gone.

In other cases, customers are opting for more serious delays in their plans to implement real-time Internet technology. Allegiance Telecom Inc., based in Dallas, had been moving to adopt technology that would help the company track how its repair teams process jobs in the field. Its software vendor -- Vitria Technology Inc., of Sunnyvale, California -- had even posted an Allegiance case study on its Web site. Nice idea; nasty timing. "That project has been put on hold," says Steve Taff, 41, director of operational-systems support at Allegiance. "We've got other priorities right now. We'll probably still do it, but it's likely to be next year before we go ahead."

At companies that have made the transition to real-time Internet technology, leaders report that this move has been well worth any hassles associated with it. Ashok Chandran, for example, has been using Closedloop's Web-based software for nearly a year to handle spending and P&L forecasts for his division at JDS Uniphase, in San Jose. "We used to do all of that on basic spreadsheets," says Chandran, 41, controller for the amplified-components division. "That approach was just barely manageable when we were in 3 buildings and had about 400 people. But now that we're in 10 buildings worldwide and have more than 3,000 people, we need something different."

Real-time data access is already paying off, Chandran says. It's helping his division adjust not only to sudden zigzags in demand but also to fast-changing business requirements. If there's a sudden need to alter spending patterns in R&D, for example, the division can now set a goal and then translate that goal almost instantly into targets for each department.

To Chandran's delight, managers in his division are actually welcoming the new technology. "I've never seen that before," he says. "Usually, they hate new financial systems. They call them bean-counter exercises. But that's not happening here."

Boosters of real-time Internet technology caution that faster data management will not, on its own, ensure better corporate performance. "Just because you can see something doesn't mean that you can manage it," warns Sankaran, of Closedloop Solutions. "If you encounter a sharp hairpin turn at 70 MPH -- which is what's happened to a lot of technology companies -- better visibility may only give you a brief chance to apply the brakes before you crash anyway."

Still, in a business world that moves at such speeds, information today beats information tomorrow. "We think we can give companies an extra 30 days to react to sudden changes," says Sankaran. "At the end of the day, you still need to make managerial judgments. But we can update you as much as possible, so that you can make those judgments without having your own data systems slow you down."

George Anders (ganders@fastcompany.com), a Fast Company senior editor, is based in Silicon Valley.

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