There can be no bigger crime in business than upsetting your customers through poor service. You've got to be selling something pretty rare for people to buy from you once you've lost their trust.
Online computer and consumer electronics retailer Jungle.com did this big style. It is approaching Christmas 2002 with the painful memories of last year, when it severely knocked customer confidence by cancelling 2,500 Christmas orders. This was because its upgraded back-end systems failed to communicate and lost vital customer information.
Its new system cost £5m, and Jungle chief executive officer David Oldroyd estimates the damage done to his company through the order foul up was £10m in lost sales and the vaporisation of 10% of his customer base.
But in a remarkable turn-around, Jungle is now looking forward to Christmas. Its IT systems now do everything wanted of them. The relationship between Jungle and its supplier Retek is harmonious. The Web site, delayed from Christmas 2001 because of the back-end issues, is running smoothly. And Retek is on track to provide systems for Jungle's parent company, Argos Retail Group.
This happy state of affairs has come about because, in spite of the pain, Jungle has got what it specified, and it works. So what went wrong?
Like many problems with IT projects, time constraints played a large part. Initially, the system upgrades had been pushed through because Jungle did not think it could cope with the volume of Christmas business. Oldroyd says, "Our difficulty was balancing the risk of home-grown systems being unable to cope with the projected Christmas volumes against the risk of implementing a completely new system. In an ideal world, we would have wanted more time, but we felt the risks had been identified and were being managed."
A year earlier, Jungle had struggled, and in 1999, its first year of trading, founder Steve Bennett was hauled onto the BBC's consumer TV programme Watchdog, where presenter Anne Robinson told him he was the weakest link in computer retailing.
Jungle customers had been complaining about late delivery and slow or non-existent responses to phone calls and e-mails. Jungle had been a classic entrepreneurial dotcom business until it was bought by Great Universal Stores in September 2000 for £37m and folded into the catalogue giant's Argos subsidiary.
The online retailer had grown quickly and haphazardly and so had its systems. Ahead of the acquisition, in May 2000, Jungle started the plan to improve its IT. It knew it wasn't coping. "The computer system was held together with bits of string," and "the old Web site was written like spaghetti," Oldroyd comments. "The Web site didn't work because of the way it was architected; the back-office system was the same," he says.
The system overhaul was carried out alongside major company re-engineering. Oldroyd, who had joined Jungle as a consultant during Bennett's reign, was brought in by Argos to run Jungle full-time. His brief: to resolve the IT problems, cut the cost base, slash its headcount and bring in experienced staff. "The environment was like Beirut," Oldroyd says.
Systems supplier Retek got the job because Argos also wanted to use the company, and wanted to get to the point where its stock is transparent to other parts of the group. Jungle had been planning to spend £2.5m on upgrading, but the Argos requirements pushed the bill up to £5m.
Formed in 1986 by three Australian retailers, Retek now claims to "lead the retail industry by providing a complete infrastructure for the new retail economy." Its customer list includes Tesco, Bhs, Selfridges, Brooks Brothers and The Home Shopping Network.
"We went through a formal selection process, based on functionality fit with our business just prior to the acquisition by Argos. Then we took input from Argos into this decision and decided that when looked at from a combined Jungle/Argos perspective, Retek was the best choice," says Oldroyd.
The system went live on 27 September 2001 after three months of testing. Jungle had selected three main Oracle-based modules from Retek to run on IBM S80 Unix servers: RCom, customer order management; RMS, merchandising; and RDM, distribution management.
According to Retek's Web site, RCom is intended to "capture, manage and fulfill customer orders . . . with accurate visibility to available-to-promise inventory and customer information; present customers with a consistent shopping experience; and maintain a single view of the customer lifecycle". RMS is designed to "support daily operations and provide the foundation . . . for decision support and predictive solutions". RDM "is at the heart of managing and optimising retail and consumer-direct supply chains. RDM streamlines the supply chain for multi-channel retailers".
Jungle had visited other Retek customers that were also using these modules. "Inevitably no one had precisely the same requirements for functionality within each module. Many clients had many combinations of modules and functionality but none were exactly mirroring our intended usage," Oldroyd says.
Unfortunately, the modules didn't work together for Jungle. Oldroyd says, "RCom was the least proven. There were not many examples of RCom working with RDM and RDS."
Customer orders got lost in the system, failed to make it through to the warehouse, and proved nearly impossible to recover. And this problem wasn't immediately apparent. The seriousness of issue was masked because of the expected backlog of orders caused by a gap of a few days while Jungle cut-over between systems.
"Our service slipped from the three- to five-day norms," says Oldroyd. "If it had been left unattended it would have stretched to 21 days." Then within three weeks of launch Jungle felt it was back in control of the system and Oldroyd says, "We were dealing with the noise - the customer irritation."
It slowly became apparent that management data wasn't getting through and, at the beginning of November, finally faced with some raw trading information, Oldroyd realised that parts of the computer system hadn't been swapping information. New orders were being processed, but older orders remained stuck in systems hell.
"Retek was mortified - it had built a reputation on 'what we do works'," Oldroyd says.
An army of system engineers were flown in from the US by Retek and arrived at Jungle within 24 hours of a call from Oldroyd. Within 11 days they had rewritten the module interfaces and "we were back in control, going forward", he recalls. But there was no hope for the stuck, older orders.
Helen Vaughan, European director of services at Retek, says, "Any dramatic business growth, or change of business processes to support that growth, takes some time to establish. Implementing systems which in essence, enforce controls within a growing organisation is challenging, equally for the supplier as for the organisation.
"As soon as Jungle experienced problems, the on-site Retek team mobilised the additional response required to successfully identify and resolve the problem together with Jungle. The software issues were resolved quickly and Retek remained on-site to help Jungle resolve the business issues," she adds.
On 6 December 2001 Jungle.com made the difficult decision to cancel 2,500 orders because it believed it could not fulfill them before Christmas. The reasons for cancelling the orders fell in a number of categories: the customer order data was incorrect; the products ordered were out of stock; manufacturers no longer made what the customer wanted; it would have taken longer than the Christmas cut-off date to source and supply the order.
If Jungle had still been an independent company it would have been finished. "In private hands it would have sunk us," says Oldroyd. "It's probably cost us a year in the development of Jungle." For a start, all the company's marketing was halted.
Jungle is not the only company to suffer through software development. In March 2001, Nike said its supply chain management system, being developed by i2, led to excess inventory and order delays that in turn partly caused a profit shortfall. Other enterprise software clients including Hershey Foods, Whirlpool and WL Gore & Associates, the maker of Gore-Tex, have also pointed the blame at their software suppliers for their economic pains.
Despite the problems, Oldroyd can see the positive aspects. The way his staff handled a stressful situation is one, and Retek's quick response to the trouble prompts him to say, "I thought what we did was remarkable."
He admits that Jungle and Retek have "had some heavy conversations" and "they have given us some money" - although he refused to says how much - and "bent over backwards in terms of incremental training" but he doesn't lay all the blame at Retek's door. "It was wrong-footed. There was no time," Oldroyd says. He also concedes some Jungle management indecision had an impact, but doesn't regret going ahead with the implementation in the time Jungle had.
After Christmas the online retailer continued to rework its Web site. The situation could be likened to that of the back-end overhaul. The old site was badly written. Jungle went for another "Rolls-Royce" solution, as Oldroyd calls it: IBM's Java-based Websphere Commerce Suite technology. "An expensive choice, but a good choice," he says. "We delayed the launch until February - a soft launch - and it went like clockwork. We've had virtually no downtime."
The original site was only designed to handle 10,000 products. It now carries 120,000 lines, and features 500,000 music clips.
Argos Retail Group has set Jungle a sales target of £60m for this financial year. Jungle under Bennett had achieved sales of £75m but £15m of this was loss-making deals which have now been scrapped, and, of course, the company has lost that £10m in business through the Christmas 2001 fiasco.
Is Oldroyd confident? "No, I'm not confident we'll do it," he says. "But it won't be for want of trying. I've never failed at anything and I don't intend to start now."
Would he do things differently, if he had his time again? "We wouldn't change much. Perhaps we would have spent additional time and money on strengthening the old, home-grown systems to give a more acceptable contingency plan, but this would have been extremely difficult and costly to do, given our reliance on a few very key people around at that time," Oldroyd says.
And would he choose Retek again? "Retek worked extremely proactively with us to identify and solve any problems we encountered. Taking into account our strategic relationship with Retek, yes, we would choose them again."
Always demand proof of concept before project roll-out
Tony Lock, senior analyst at Bloor Research, believes Jungle's experience with Retek sounds like a classic case of not really working out the basics.
"You've got to identify the business issues you have to address. Ask yourself: which suppliers can meet my needs? How do I get from the bits of string and sticky tape situation to the Rolls-Royce solution? Will it work for me?" he says.
"On a project of this scale you should have a comprehensive proof of concept. Just because a supplier tells you it can be done doesn't mean it can. You want to see it works for a live customer, or see all the bits working so you can track things through and test it for yourself," Lock adds.
Risk analysis is essential. "You've always got to take the risk into account. Evaluate the risk of doing something and not doing something. If you cut some corners, ask what the consequences will be."
And finally, "There's nothing new to be learned in IT projects - you have to test, test, test. When you work out your requirements test the size, scale and put it under stress. Make sure you know how it will affect you and your customers," Lock concludes.