First Coffee for June 24, 2005

David Sims : First Coffee
David Sims
| CRM, ERP, Contact Center, Turkish Coffee and Astroichthiology:

First Coffee for June 24, 2005

By David Sims

The news as of the first coffee this morning, and the music is the 2001 compilation John Coltrane & Miles Davis, 1955 – 1961 from the Columbia Jazz series:

We have clarity on the Epiphany cash issue. It looks, like First CoffeeSM suspected, as if we have different definitions of “cash.”

Two days ago First CoffeeSM wrote about an article on Epiphany, which prompted a note from Gordon Evans, in Epiphany’s corporate communications department. Evans said that the ComputerWire article First CoffeeSM highlighted had grossly understated the cash Epiphany had on hand.

“Always known for being cash rich,” ComputerWire wrote and First CoffeeSM quoted, “in the second quarter 2004 the company had a $93.4 million cash pile, but by the fourth quarter 2004 this had dwindled to $18.1 million, and at the end of the first quarter 2005 it stood at $21.5 million.”

Evans wrote to say that actually, “we have more than $250 million in cash on hand as of our last earnings report Q105.”

Such a discrepancy is rarely a case of someone getting numbers wrong, it’s almost always a case of how you define the terms. Sure enough, a reader who knows a whole lot more about business accounting than First CoffeeSM does set the matter straight.

Looking at the Epiphany’s 1Q reported results, she writes, “you can see from the Balance Sheet at the bottom of the press release that Epiphany had ‘cash and cash equivalents’ of $21.5 million on March 31,” which is the number ComputerWire reported as their “cash” position.

“Based on a quick skim of the balance sheet, I’d hazard a guess that the $250 million figure (Epiphany CEO Karen) Richardson mentions is what you get if you add together all the current assets, which comes to $171 million, and the $84 million of long-term investments,” she says.

In other words, Evans and Richardson are wrapping up all the assets the company has that could be fairly easily liquidated into one big number that, arguably, gives the best picture of the company’s balance sheet health.

“Companies do this often,” First CoffeeSM’s reader wrote. “Personally, I can’t recall ever seeing ‘long term investments’ being referred to as ‘cash,’ but that’s just me. I’m not an accountant either.”

First CoffeeSM considers defining “long-term investments” as cash “on hand” a bit of a stretch as well.

The more First CoffeeSM considers Airframe Business Software’s idea to offer metered-use CRM the better it looks – although there are a couple possible drawbacks.

A couple days ago Airframe announced the 3.0 release of its immediate-use on-demand applications, using what Airframe calls “utility pricing” – in other words, pay-as-you-go, like in a metered taxi ride. It’s not a new idea, but this is the first instance First CoffeeSM’s seen of it applied in CRM or ERP offerings pitched at small business.

The package, Airframe Express, consists of three 100% web-hosted applications: CRM Express, HR Express, and Help Desk Express. Geared to small to mid-sized businesses (emphasis probably on the lower end), they’re intended to solve the usual issues around customer relationships, human resources, IT and asset management.

In an innovation for CRM on a par with’s introduction of the subscription model of software delivery, Airframe announced a pure utility-style pricing for all its products. Customers pay not per seat per month, but only for their actual usage of the system, with subscription fees calculated daily and billed monthly. The current subscription price is $39 per user, but that’s promotional, it’ll go up soon.

Zaki Farhat, president of Airframe customer Cetec, which provides “comprehensive Workforce Management Systems to a customer base of Fortune 500 companies,” according to Farhat, reported using Airframe is “10 percent of the cost and complexity of traditional enterprise software.”

It’s a great model for businesses with lots of seasonal workers. “If you plan a big marketing push for July and August and will be using summer interns recruited from school, you’ll be able to add 10 or 50 seats, not just for those months, but only for the actual days the interns work,” Olivier Delerm, vice president of product marketing tells Marshall Lager, an industry observer who never hears any beer jokes.

It’s also a good way to test-drive products without locking in to long-term contracts. The downside is that since it is so minutely priced, company bean-counters will inevitably get persnickety about who’s racking up the most charges. It’s the nature of the beast.

When it’s one price for all you can use, the system gets used more and, presumably, companies extract more benefit. When it costs depending on use, the subtle – or not so subtle – vibes from cost-conscious management are naturally going to be to use it as little as possible, which would defeat much of the point of having the system in the first place.

First CoffeeSM’s also impressed with what New Zealand Post’s done this past week, deploying core networking infrastructure and Internet Protocol Communications technology from Cisco to “improve the efficiency of its growing mail operations, to reduce costs and to help enable the growth of its banking business.”

NZ Post is a substantial operation, employing over 9,000 staff and turning over $1 billion ($700 million U.S.) in 2003/2004. The primary challenge was that much of New Zealand Post's infrastructure, such as its aging private branch exchanges needed to be replaced because they were out of date and no longer capable of meeting the organization's needs.

So Post, Cisco and Datacom developed a solution based on the replacement of separate voice and data networks with one IP-based network, which is capable of delivering voice, video and data. It’s expected to generate at least $2 million ($1.4 million U.S.) in operational savings over the next five years, partly by reducing the costs of managing moves, additions and changes within the company.

Self-confidence on display at Wimbledon from 18-year old Scottish player Andrew Murray: “I'll lose my next match.”

Wrapping up the week, First CoffeeSM needs to note that Roger Nunley, managing director of the Customer Care Institute, which issues the Global Contact Centre Benchmarking Report says he believes that U.S. benchmarking alone is no longer enough.

“In this global economy, it’s no longer sufficient for U.S. companies to benchmark their contact centers only against other U.S. companies. With today’s ever-evolving technology and the move by some companies to outsource offshore, best practices contact centers can be found in a growing number of countries around the world.”

Kind of like how great basketball players can be found in a growing number of countries around the world these days as well. A casual watching of the NBA playoffs this year showed key players from Argentina, the Virgin Islands, Germany, China, Canada (yes, it’s a foreign country) and others.

“To ensure best practices, contact centers must benchmark globally,” Nunley argues. The 2006 study is now underway. Contact center managers can register for participation and receive a free copy of the report.

Reading this past week’s issue of The Economist, First CoffeeSM noticed an article on a company practicing vertical integration, just-in-time production, delivery and sales. It contacts retail outlets daily to find out what the best-selling items are, produces in small quantities to avoid oversupply and create “scarcity value” and replaces product lines quickly and unpredictably, thereby encouraging impulse purchasing.

The product cycle is five weeks from design to delivery – much faster than the industry norms, and updates of existing product takes two weeks. The company launches 11,000 new items a year, compared to their industry competitors’ 2,000 – 4,000.

Big deal, you say. Lots of companies are doing that these days. Maybe, but how many in fashion? That’s right, it’s Zara, an arm of the Spanish holding firm Inditex which through crafty uses of IT and CRM is changing the way fashion’s created and sold.

Markdowns are rare and advertising’s done sparingly. Retail outlets use point-of-sale terminals to report directly to headquarters. Store managers check their PDAs daily for new product designs and order what they think will sell to their customers. Zara’s technology is simple, even a bit “old-fashioned,” Economist says, but Zara spends one-fifth to one-tenth less on IT than its rivals, and three to four times less on ads.

Most strikingly Zara does not hire star designers or set trends on catwalks, but studies what’s popular among its customers and gives them what they want – “fast fashion.” How fast? When Madonna gave a series of concerts in Spain, by the final show girls in the audience were wearing the star’s outfit from her first show.

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