Take-up of the application service provision (ASP) model has been slow, but with an increasing number of high-profile blue-chip names signing lucrative ASP contracts, it may be that the tide is beginning to turn.
At the start of October, Tricon Global Restaurants, which owns KFC, Pizza Hut and Taco Bell, signed an ASP deal worth an estimated $50m (£32.5m) with Radiant Systems.
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As the world’s largest restaurant owner, Tricon plans to deploy Radiant’s hosted suite of Web-based operational management applications - known as Wave - across all of its 6,545 restaurants in over 100 countries gave the ASP business model a much-needed vote of confidence.
Designed for the retail and fast food sectors, the application suite works as a management support system covering everything from labour and inventory management to product cost analysis and management reporting. Built on Microsoft Windows DNA, in a SQL 7 database environment, Wave will focus on three key operational areas: labour management; supply chain, inventory and purchasing; and business intelligence.
On a basic level, the technology can prompt kitchen staff to make more pepperoni pizzas or automatically order stock when supplies run low. A video played on the till can even prompt staff to ask, “Would you like fries with that?”
Accessible over the Internet, the Wave application will allow all of Tricon’s 6,545 company-owned outlets to communicate directly with company headquarters or with suppliers via the Web.
Fast-food outlets will be able to use the services through any Internet-enabled terminal, cutting out the need for investing in new hardware. But, more importantly, the system also eliminates the need for large-scale investment in back-office systems, which is particularly relevant for KFC, Pizza Hut and Taco Bell, as each brand currently uses different back-of-house operating systems.
One of the main aims in implementing the system was to standardise best industry practices and to supply restaurant managers with the tools and information to improve efficiency and increase customer satisfaction, Tricon said. Ultimately, the company expects the software to improve profit margins, lower inventory requirements and administration costs, and improve management of the supply chain. Danny Chinery, European IT support manager at Tricon UK, said it was a change of strategy that led to the decision to invest in the Radiant system. “We wanted something that was off-the-shelf from a reputable supplier, that we could develop ourselves and which could be used worldwide across the three concepts - KFC, Pizza Hut and Taco Bell - and across all the different aspects of the business,” he said.
Previously, Tricon had been using an in-house system called Triumph - a client-server application based on Windows NT - but the project was abandoned in favour of Wave. Working with two or three different systems across the three brands, communication and interaction between the outlets was not a streamlined process. Now, Wave will provide an enterprise-wide platform which will act as a single point of access for all the retail business applications across the company’s restaurants.
Adam Naide, director of marketing at Radiant, said the deal was a breakthrough for the fast-food industry. “This really revolutionises the way restaurants will be run because they will be using Web-based software to manage their business. Tricon has never had a single platform on which to manage all its operations, but Wave will provide a consistent platform for all brands and all sites,” he said. “It is highly significant because one of the major operators has stepped forward to say ‘we’re using a Web-based solution to run out business’.”
The challenge now is to get all the stores connected and online, said Chinery. “Some of the hardware only runs Dos at the moment, so we are going to have to increase the communication infrastructure and move people onto Windows. Some of them have never even used a mouse, so support and training will be a big issue.”
The company said it was likely the network would run over a secure external intranet, rather than over the Internet, and each restaurant would probably use a single pipe, carrying a minimum of 28.8kbps. “We’re looking at ADSL in countries where it is available and ISDN or satellite link in other places. There will probably be just a single pipe into each outlet because there won’t be massive quantities of data going down it, and it doesn’t have to be a permanent connection, although ideally it will be,” Chinery said.
Many of the details have not yet been determined, but Radiant said a phased roll out over the next three to six months is likely. The project is scheduled for completion in 2003. Radiant will provide Tricon with consultancy, systems integration and Web site hosting services.
Access to the Wave application will also be offered to the company’s 24,000 franchised outlets, which would be able to subscribe to the Web-based services for an unspecified monthly amount, the company said.
Bloor Research analyst Mat Hanrahan said vertical service provision would have a huge impact on the restaurant industry. “Doing it over IP makes a lot of sense in this market and we have been expecting this kind of vertical service provision deal for some time. A deal of this size is going to give Tricon a lot of cost savings, and if it doesn’t work, the company can just walk away without all the overheads of a client/server set-up,” he said.
“Outsourcing is not new to the corporate world, but using a Web-based system is infinitely cheaper. You get the bill for systems and services down to a single monthly fee, so you can predict what your costs are going to be, which gives you much tighter cost controls,” Hanrahan said. The other highly profitable angle is that the application allows the company to mine and cross-compare the data, he added.
The deal highlights a growing acceptance of the ASP model, particularly among larger business users. Last week, British American Tobacco signed a $4m (£2.6m) renewal contract for ASP services provided by Interliant. Housing the company’s servers in its recently-opened London datacentre, Interliant is to provide hosting and management services for the company’s Internet and third-party e-mail gateway.
David Yuile, managing director of Interliant, said the deal was evidence of an increasing move toward ASP, particularly among larger business users. “This contract is very significant, especially as ASP is still in a reasonably early adoption phase. A lot of analysts believe the ASP model is only being taken up by small to medium-sized enterprises but we’re seeing this from a lot of blue chip names,” he said.