Stranded Businesses Race to Replace Belly-Up ASPs

Adidas, eHobbies stress importance of getting contingency plans in place now

Faced with the sudden collapse of its e-commerce application service provider (ASP) last summer, Adidas America Inc. was ready to pull the plug on a budding initiative to sell its sporting goods via the Web.


Adidas America’s Web Initiative

The sporting goods retailer’s sites went live in late January.

Storefronts exchange data in electronic data interchange format with Adidas America’s distribution center system, which is operated by United Parcel Service Inc.’s Atlanta-based UPS Logistics Group.
Orders are executed by the UPS logistics system and confirmed with Cutsey’s FDM4 ERP applications.

Instead, Adidas raced to find a new ASP and ended up signing on with a company that was able to get up to speed quickly and customize a set of enterprise resource planning (ERP) applications for managing Adidas' warehouse and retail operations.

"This was a migration for survival. Without it, we would have had to shut down the operation and start from scratch," said Dieter Schoenegger, chief technology officer at Adidas America in Beaverton, Ore.

Adidas America, a subsidiary of Germany-based Adidas AG, was one of several companies forced to scramble to replace Sunnyvale, Calif.-based Pandesic LLC's services after it went out of business in August. Now, as the Nasdaq Stock Market continues to suffer and more high-tech firms close their doors, others are finding themselves in the same uncomfortable shoes as Adidas.

Any ASP—indeed, any high-tech start-up—is a likely candidate for rapid demise within its first five years, said Lew Hollerbach, an analyst at Boston-based Aberdeen Group Inc. "About 80% fail," he said. "It's still a young industry."

That's why it's always a good idea for companies to have contingency plans in case they need to migrate data or files from their ASPs to their own systems, he said. That could mean using a third-party storage company or safeguarding data on a local server.

Santa Monica, Calif.-based Inc., another Pandesic customer, decided to set up its own internal systems after briefly running a storefront on But the process was difficult for all involved, said Chief Operating Officer Brent Cohen.

"It was like driving a car 100 miles an hour and swapping out the engine while the car's still running," he said. "It was a disruption, no doubt about it, but we're doing OK now."

After Pandesic's collapse, Portland, Ore.-based eVineyard had to endure the time-consuming process—in the midst of the holiday season rush—of retraining its staff in new shipping and receiving systems that were running on externally hosted ERP applications from Epicor Software Corp. in Irvine, Calif.

"I wouldn't want to have do that in November again," said Michael Osborn, vice president of technology at eVineyard. "It wasn't so much the software but the operations—teaching the people in the logistics centers how to ship wines. That is something I don't wish on anyone, but we had no choice."

Changing Course

Executives at Adidas America were shocked when Pandesic bailed on the project just five months before its sites were due to go live, said Schoenegger. The project involved about 25,000 items across more than 25 product lines—a technological challenge that almost made Schoenegger throw in the towel.

Salvation came when the company found Cutsey Business Systems Ltd., a software vendor and ASP in North Bay, Ontario.

The firm's FDM4 wholesale distribution applications, built around an embedded database from Progress Software Corp. in Bedford, Mass., were able to manage the complex style, color and size processing requirements that Adidas faced, Schoenegger said. In fact, the Cutsey system cost less than the SAP-based Pandesic applications, and it processes transactions faster, he said.

The sites went live in late January, one month ahead of schedule and at a cost of less than $2 million.

The applications did require Cutsey to do extensive customization work before Adidas could use them, but prototyping helped the project move quickly, according to Schoenegger. Within three and a half months, Adidas had a consumer storefront and a business-to-business site, both aimed at soccer teams, that together receive 600,000 to 1.4 million hits each day.

The deal with Cutsey "made the difference between a kamikaze landing and a soft landing," he said. It was also "an order of magnitude cheaper" than rivals' offerings.

Computerworld editor Mark Hall contributed to this story.


Copyright © 2001 IDG Communications, Inc.

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