OPEN TO OPEN SYSTEMS

KIM ANN ZIMMERMANN

Retailers have become increasingly outspoken about the need for more open systems, especially in crucial areas such as the point-of-sale and database marketing.

In short, retailers want to be able to run software on a variety of hardware platforms, and they want to be able to exchange data easily among a variety of applications being used within the organization as well as those applications being used by suppliers.

As the Internet plays a more crucial role in retailing -- as a method of communicating with customers as well as vendors -- open systems will become increasingly important.

While many retailers feel that huge strides have been made, they tell SN there is still a way to go before complete interoperability can be achieved.

"We've seen a lot of progress, particularly in in-store systems, but we still have a ways to go. There are still a lot of interoperability issues, particularly when you are talking about the exchange of data between retailers, wholesalers and suppliers," said Richard Lester, vice president of information systems for Associated Grocers, the Seattle-based wholesaler.

Retailers tell SN they also want more flexibility in terms of hardware platforms. They want systems that will provide users with the same appearance and functions regardless of the hardware being used.

In addition, as hardware ages, retailers want to be able to replace the hardware in the stores as necessary without having to completely replace the POS and other store-level software. Since many retailers end up with a mix of older and newer hardware as they replace aging POS terminals and other systems, they need software that can run on the newer technology while still functioning on the older hardware that is not yet ready for replacement.

"It is not often that any retailer changes all their point-of-sale hardware at once," said Scott Gilmour, vice president and chief information officer for United Supermarkets, Lubbock, Texas. "Generally, you change hardware as needed. That means the software needs to be backward- and forward-compatible to run with the hardware you've been using, the hardware you are in the process of installing, as well as the hardware you will install in the future," Gilmour said. "A lot of retailers out there are supporting legacy systems while investing in new technology."

As more and more retailers offer frequent-shopper cards, data needs to flow easily between the marketing database and the POS system in order to target promotions to specific consumers and measure the effect of these offers on item, category and store sales.

"We specifically chose our point-of-sale system because it is open. We feel open systems provide us with the flexibility and the easy exchange of data we need to remain competitive," Gilmour said.

The issue of open systems is becoming even more critical as retailers seek closer working relationships with wholesalers, suppliers and third-party companies.

Retailers and suppliers are digging deeper into point-of-sale data to determine the effectiveness of promotion and price reductions, which is spurring the need for open systems, according to retailers.

"The data can't stay trapped in the point-of-sale if it is going to be useful," said Bob Melcher, chief financial officer for Prescott's Supermarkets, West Bend, Wis. "Right now, if you had a five-rung ladder, we're at about the first or second rung on systems interoperability," he said. "But we're building systems with common communication and protocols, which will make it easier to exchange information as we make it up that ladder," he said.

Internet-based delivery of information is also providing an incentive for open systems, Melcher noted.

"We're going to be connecting to our customers as well as our suppliers over the Web more and more as we move forward. This will spark the need for systems interoperability. For example, our point-of-sale system will need to be able to take orders from our Internet customers, and have those orders ready if the customer chooses to come in and pick up their order and add a few items," he said.

As other retailer-supplier initiatives such as cooperative planning, forecasting and replenishment and scan-based trading become more prevalent, open systems will become even more crucial to effective information-systems management.

Lester said one of the problems is that hardware manufacturers want to gain a competitive advantage, reducing the incentive for cooperation. "Understandably, they want you to continue to buy their hardware and they are looking for an edge in the marketplace. But there is still too much competitive pressure and not enough cooperation among hardware vendors," he said.

Initiatives such as CPFR and scan-based trading will be the driving force behind standards in the future, Lester said. "With something such as scan-based trading, you need so many systems working together seamlessly. We're extremely committed to standards."

However, there are retailers unwilling to part with their closed systems, which they perceive as having richer features and functions than their more open counterparts. Retailers with closed systems tend to be larger organizations that have programming staffs to modify software to suit their business requirements.

However, there are also some smaller retailers, such as Brodbeck Enterprises, Platteville, Wis., operator of eight Dick's Supermarkets, which use closed systems. Steve Dittmer, Brodbeck's director of retail systems, said the closed systems provide the retailer with increased functionality and reliability compared with systems based on open standards.

"As we sit today, we have been able to do what we need to do with relatively non-open systems," Dittmer said. "As we proceed into the future, there will be a greater need to have sharing of data among systems. I'm confident that our system will accommodate future needs for interoperability without sacrificing reliability," he said.

While he admits that more open systems make it easier to plug data into a standard spreadsheet, for example, he said that need must be weighed against what he feels are more reliable and robust systems.

"If someone needs to look at data in a different way, they can make the business case for our programmers to do the work to provide the data in the format they need. But to have an open system simply to be able to take the information and use it in a spreadsheet doesn't make sense for our business needs," he said.