Collaborative Sourcing Solution Vendor Leaves No Stone Unturned

Background

The year 2003 saw the birth of TradeStone Software, Inc. (www.TradeStoneSoftware.com), a provider of collaborative e-sourcing solutions for Global 2000 companies. But let us clarify something beforehand: TradeStone Software may appear to be a brand new vendor, but in fact its management team and offering are at least the third reincarnation (and improvement) of trailblazing products and companies that had all attempted to tackle the conundrum of imports and exports. Led by industry pioneer Sue Welch, TradeStone's executive team delivered such market firsts as personal computer (PC)-based import software in 1984, and Microsoft Windows-based sourcing software in 1994. TradeStone Software is thus another improved attempt by the (virtually intact) team to deliver on the vision of global trade that has been honed through over twenty years of hands-on experience, always leveraging the technology which was available at the time.

Part One of the series Collaborative Sourcing Solution Vendor Leaves No Stone Unturned.

Welch got her start in the early 1980s working as an import manager for Zayre, a large erstwhile apparel retailer, when she realized there was a real need to automate international trade processes. She learned on the fly that the profit margin for imported goods was far greater than for domestic goods, and she attempted a concerted effort to increase the number of imports. Being well ahead of the times—even heretical—she boldly suggested eliminating the buyers, thinking that with a heightened number of transactions supported by fewer humans, profits would increase even more. However, at the time, neither the technology, nor her superiors' approval, was available to support the endeavor.

For an extensive discussion of global retail sourcing, see The Gain and Pain of Global Retail Sourcing, The Intricacies of Global Retail Sourcing, and The Fashion and Apparel Retailers' Conundrum.

Disappointed, but neither discouraged nor dismayed, Welch started her first company in 1984, called IMC Systems Group, to provide PC-based import software technology solutions to the international market and to automate the import operations of global organizations. Teaming up with her long-standing business partner Jack Zakarian to form IMC, Welch took care of the conceptual product design, while he performed the software coding. It was the first import program delivered to the market, and was launched at a trade show, where the company managed to sell international trade automation to Spiegel and TJ Maxx. Disney and JC Penney bought the product later, but the weakling ahead-of-the-curve company struggled to break even.

It was the very first company with software for importing, at a time when companies did very little direct importing themselves. This meant a lot of proselytizing, and painstaking market awareness work. They raised venture capital (VC) in 1987, but was still not profitable by 1992, and the VC investors became impatient. Eventually, in 1994, the investors infused more money, and put themselves at the helm of IMC, which did not exactly correspond to Welch's vision.

Welch walked away with plans to found another company, and did just that (reportedly on the very day after being let go from IMC; other former co-workers at IMC joined soon after). She built on the foundation of IMC's import software, but with many improvements based on customer feedback and suggestions (along with the advent of Microsoft Windows). She named the business RockPort Trade Systems, and the Windows-based sourcing software RockBlocks. Microsoft Windows was a new technology (and a user interface [UI] metaphor) at the time, and there was also an opportunity for combining exporting and importing, which was an either-or proposition at the time.

RockPort Trade Systems became the number one global sourcing and supply software package in the world, with Global 2000 customers including Home Depot, JC Penney, Unisys Computer, Sears, Ames, Federated, Timberland, and UPS. The product was agnostic with respect to import, export, product, and country, and it lured all the old IMC customers to the new company. IMC never sold another software package, and eventually sank into oblivion.

In contrast to IMC, RockPort was profitable virtually from its inception, thanks to its lucrative and value-adding consulting practice, and thanks also to the early critical mass of customers signing up, which all helped the sustained development of the technology. As with Windows, when the Internet took off as another disruptive technology, the RockPort team excitedly tracked the evolution of web-based browser technology.

In the late 1990s, the company added an Internet-based front end to RockBlocks, enabling its customers and their suppliers to access relevant data, and to send responses using just a web browser. By 2000, the company was filling its entire Gloucester, Massachusetts (US) harbor headquarters building, supporting offices in London (UK) and Hong Kong (China), employing about one hundred, and serving the Who's Who of the global retail space. In 2000, amidst pressure to either go public, go for additional VC investment, or be acquired, Welch sold RockPort to California (US)-based QRS Corporation (now part of Inovis—see Inovis Delves into PIM by Snatching QRS) for over $100 million (USD).

Why QRS?

The acquisition by the former electronic cataloguer and trading connectivity (electronic data interchange [EDI] and value added network [VAN]) provider QRS was initially seen as a good match, with the thinking that its behind-the-scenes "plumbing infrastructure" profile would complement RockPort's customer-facing approach. However, hindsight was to show that this was just wishful thinking.

For its part, QRS remains a technology company that serves the retail trading community with collaborative commerce solutions by managing the flow of critical commerce information between companies, and also by leveraging its retail technology expertise to address fundamental industry challenges such as global data synchronization (GDS), compliance mandates, transaction outsourcing, product sourcing, store-level information gathering services, and product information management (PIM). It also offers solutions that help meet the diverse needs of members of the global retail trading community, regardless of company size, technology infrastructure, or retail segment (including general merchandise and apparel [GMA], consumer packaged goods [CPG], health and beauty, consumer electronics, hard lines, do-it-yourself [DIY], sporting goods, and grocery).

These products and services are typically used with customers' existing enterprise systems in order to deliver greater benefits and efficiencies. Prior to the merger, QRS had even broadened its customer base across other segments of the retail industry (through QRS Retail Intelligence Services, it had penetrated the grocery and mass merchant segments). QRS had more than 10,000 customers in the retail industry, including the top 10 retailers in the US (for instance, Lowe's, Sears, Best Buy, The Home Depot, and so on), 5 of the top 7 retailers worldwide, the top 10 apparel and footwear companies worldwide (Adidas America, Reebok International, American Eagle Outfitters, and the like), 10 of the top 12 department stores in the US (JC Penney, Neiman Marcus, Nordstrom, Saks, and so on), and 9 of the top 10 supermarkets in the US (such as Ahold, Albertsons, and Kroger).

Given this possible synergy, at first Welch and her team turned their attention to consulting with these organizations to help them implement global sourcing strategies. But the two merged corporate cultures would not mesh well. The QRS approach to delivering cash-cow, low-maintenance (meaning that when something works well, it's nearly invisible) communications and trading platforms did not have much enthusiasm for continually extending RockBlocks (subsequently renamed QRS Sourcing), which remains a software solution with a very active presence inside customer's organizations.

Despite the importance of sourcing in GMA, this acquisition never really worked for QRS, perhaps because of bad execution, or perhaps because sourcing was a product before its time. This is especially strange given that the value of business-to-business (B2B) integration should be fully realized by providing enhanced visibility of products flowing through the supply chain via business applications such as business activity monitoring (BAM), supplier enablement, and collaborative planning. With declining margins and competitive pressures in EDI and VAN services, one would have expected QRS to attempt tightly coupling supply chain data with value-added business applications for better visibility and collaborative process, so as to also help its bottom line.

In any event, with a sort of sense of dj vu, Welch again walked away, and after some natural initial thoughts about retiring, traveling, writing memoirs, and so on, the undying entrepreneurial spirit again caught fire. She had some ideas about an e-sourcing software further improved over the one she had sold to QRS. For the first year of her two-year non-compete severance agreement, Welch and Zakarian traveled, in order to better understand from third world leaders the other, supply side of imports and exports to RockPort's Global 2000 clients. They also met with key organizations, including the World Trade Organization (WTO), the International Monetary Fund (IMF), and the International Trade Center (ITC), and visited less-developed countries to determine how to best approach the building of a collaborative global commerce community. They also met with government officials and trade organizations in countries such as Costa Rica, to discuss how to help them reach out to Global 2000 organizations in North America and Europe.

TradeStone Approach

With this concern, the team has been focusing on ways to further harness the Internet to ease sourcing and procurement among international trading partners. They spent two years researching the marketplace and exploring new technologies that could serve as a catalyst for yet another iteration of the international sourcing and procurement application. Finally, in 2003, Welch once again tackled the acute problem of sourcing: the headache caused by separate (and "autistic") systems for domestic and international buying, and the inability of smaller companies to leverage global buying platforms. Partly owing to the market epiphany of standardized buying practices, and partly owing to the latest service-oriented architecture (SOA) developments, more and more user organizations are seeking to bridge "global gaps" in their sourcing infrastructure by unifying their international and domestic business practices, and tying them together on a single technology platform.

Thus, this time around, Welch has tied the unifying solutions (processes across systems, organizations, and geographies) to the Internet, whereby the system layers into, enhances, and expands existing IT functionality, with the model-based "data anywhere" Web services architecture that eliminates database replication and reduces integration. This also embeds much more intelligence and process management for ease of use (in other words, no shoehorning the system), whereby the solution deployment cycles can further be shortened with a step-based approach and retail-industry best-practices to "fill in the global functionality gaps"; training can be improved (if not completely obviated); and international links can be enhanced. By accomplishing these principles, one can also establish true collaboration, and close the loop with a single way to do business, achieving the coveted "one version of the truth."

The year 2003 marked the founding of TradeStone, gathering the executive management team (which happens to consist of much of the former core RockPort team), and also marked a large customer win with Rhode Island (US)-based Ocean State Job Lot. With Welch as chief executive officer (CEO) and president, and Zackarian as chief research officer (CRO), TradeStone has rounded out its management team with Ann Diamante (chief product officer, including consulting, product design, custom modification, and integration services), Kamal Anand (chief technology officer), Robert Kaufman (vice-president [VP] of professional services), Jeanene Bettner (VP of sales), and Holly Allison (VP of marketing). Diamante is also part of the executive team involved in the development of the company's international finance reconciliation software.

With the concept of delivering a deployable and functionally rich collaborative e-sourcing technology to the global sourcing market in hand, TradeStone signed up Ocean State Job Lot as its development partner in May 2003. By October 2003, having proven that it was possible to layer across an organization's current infrastructure and build a sourcing system requiring hardly any training, the worldwide opportunistic buyer's technology was up and running. Users anywhere could sign on and have the system handle all the intricacies of international trade, without having to experience its complexities themselves.