Custom solutions dominate Internet-based electronic commerce arena

The Air Force and Hughes Data Systems Irvine Calif. have been working for six months to establish an electronic ordering system that allows federal buyers on the Desktop V contract to order products over the Internet.

Using the International Merchant Purchase Authorization Card (IMPAC) and a recently raised credit limit of $25 000 - up from $2 500 - Hughes and the Air Force hope to gain much broader acceptance of the Internet as a vehicle for electronic commerce (EC).

Meanwhile industry suppliers such as IBM Corp. GE Information Services Co. (GEIS) Sterling Commerce Inc. Hewlett-Packard Co. SAP America Inc. and others are trumpeting new products aimed at making EC over the Internet an "off-the-shelf" proposition.

But federal agencies and analysts say the vast majority of EC applications now in use are complex customized systems and only a small number have actually used the Internet to transport data.

"None of the major application software vendors or leading computer industry players is even close to providing comprehensive packaged applications for electronic commerce " said Barbara Reilly the research director for EC and extranet applications at the Gartner Group Stamford Conn.

Not a Trivial Matter

Internet-based EC is far from a trivial matter. Customization is needed to meet each agency's regulatory and "comfort-level requirements." And ever-vigilant security features are key to the success of any project.

So too is the need for outside guidance in planning and implementing such a system. For example Hughes Data Systems a subsidiary of Hughes Aircraft Co. reported that it took about 100 hours of meetings with Air Force officials to work out the details of the custom forms and programming needed to satisfy the Air Force that an Internet-based electronic ordering system would work.

Maj. Chuck Harris chief of the Air Force's Information Technology Products Division said Hughes provided the custom programming and systems integration services free of charge on this project.

And Pete Carrier deputy program manager for Desktop V at Hughes hopes to reuse Hughes' programming code on other contracts such as the National Institutes of Health's Electronic Computer Store contract and the company's own General Services Administration schedule in the near future.

But for now Hughes and the Air Force are quite pleased with the new ordering system's early success. In the first eight days after the system was put in service on Aug. 4 Hughes reported orders in excess of $500 000. And the time needed to complete an order dropped from several weeks to only three hours. "We can now promise delivery within eight days via the online ordering system " Carrier said.

And because more than 90 percent of Hughes' Desktop V business now comes from orders of less than $25 000 the higher credit limit dovetailed nicely with the availability of this new electronic ordering method.

Hughes officials stressed however that the company offers a number of methods including dedicated fax phone and e-mail in addition to a World Wide Web site at for those users with Internet access.

The Air Force and Hughes are hoping to book 15 percent of fiscal 1997 orders via the new electronic system.

COTS: Nowhere Close

However while agencies appear interested in such solutions suitable off-the-shelf packages are still elusive analysts said.

Robin Palmer the partner in charge of EC for KPMG Consulting New York said off-the-shelf technology is sorely needed. "It sure would help to be able to focus more of our energy on integrating software components instead of performing so much custom development to create the missing software components " she said.

In fact Gartner's Reilly predicted it will take a decade for turnkey single-vendor EC solutions to become readily available. In the meantime organizations that want to build competitive EC-enabled business systems will extensively use middleware and systems integration services to piece together solutions. That approach comes with a high risk because the EC vendor market is crowded with new entrants who have concentrated on developing narrowly focused stand-alone EC products she said.

Reilly maintains that organizations have one of three choices in the next five years: "Cobble together an EC solution using products from multiple sources hire a systems integrator to develop needed middleware for EC applications or outsource the entire EC effort."

One vendor working toward a comprehensive solution is Rockville Md.-based GEIS which offers the Trade Processing Network a Web-based procurement service that enables buyers and sellers of industrial materials to exchange requests for quotations and conduct structured negotiations over the Web.

Expected to reach $1 billion in transaction volume in 1997 and $4 billion by the end of 1998 a GEIS spokesperson said that while the company plans to go after federal business there are no major federal customers thus far and no strategy yet in place to accommodate the federal sector.

Other suppliers - including IBM AT&T Hewlett-Packard SAP America Intel Corp. and Oracle Corp. - have also announced new products and partnerships to offer a range of Web-based EC solutions aimed at assisting corporate and government entities in building complex EC systems. But all these vendors are currently in their earliest phases of development and testing.

Falling Obstacles

In the meantime other obstacles to EC over the Internet are starting to weaken. Security concerns for example have been the key reason why the Treasury Department is only now starting to test the handling of payments and collections over the Internet.

Under a closely scrutinized pilot test a select group of government and banking users will have restricted access using Mellon Bank MasterCard payment cards to buy U.S. savings bonds from the Treasury Department's Bureau of the Public Debt. They will also be able to access the Defense Reutilization and Marketing Service's (DRMS) Web page to purchase an array of government surplus merchandise. These transactions will be protected under the Secure Electronic Transaction (SET) protocol and will use GTE's CyberTrust digital certificates.

SET is an open industry-standard protocol that details how payment card transactions on the Internet can be secured using encryption and digital identification. Digital certificates such as GTE's CyberTrust provide a means of identifying merchants and credit card holders that cannot be forged or altered. By protecting payment card numbers and providing a verifiable means of identifying users SET brings a new level of security to financial institutions merchants and consumers who want access to EC.

The Treasury pilot is expected to be opened to a larger number of Mellon Bank MasterCard holders this fall once the National Security Agency completes its own vulnerability assessment of the SET protocol to ensure its secure transmission features.

Gary Grippo program manager for electronic money in Treasury's Financial Management Service said many federal agencies have approached FMS over the last two years about wanting to accept credit card payments over the Internet. "But we have consistently told them to wait until the Treasury Department can implement SET " he said.

FMS is the federal government's cash manager handling all the government's payments collections and central accounting except for military payments. That translates to more than 850 million payments on behalf of non-Defense agencies annually and more than $1 trillion in collections revenue. If all goes well Grippo said there are at least a dozen agencies that will follow suit with similar plans in the next six months.

"We are ahead of the curve in using this technology " he said. "And there is a strong incentive for many agencies that sell goods and collect fines and fees. Without congressional appropriations they need to sell or collect funds to survive. They also need cheaper distribution methods to reach more constituents without the additional expense of a large marketing budget."

Federal agencies such as DRMS and the National Technical Information Service which sells scientific data and information see the Internet as offering their best avenue to behave as a commercial entity and to sell more within their regulatory bounds.

The only drawback in Treasury's pilot test is that users must access Mellon's Web page to verify their account information and to download a digital certificate to load in their electronic wallets. "It remains to be seen how willing and able most users are to complete that process " he said. Grippo is hopeful that within a year many people will use this system to buy bonds and surplus government goods.

Another obstacle the relative newness of using the Internet for EC applications is also waning vendors and analysts maintain.

The Environmental Protection Agency is an old hand at electronic data interchange (EDI) but the agency has yet to make the jump to Internet-based EC. The EPA has deployed its own EDI and EC applications since 1995 according to Jeff Wang manager of technical support for Lockheed Martin Client Services a lead contractor for the EPA.

"The goal was to automate the transmission of data for industrial reporting meet environmental regulations and reduce paper to meet federal paperwork-reduction guidelines " Wang said.

The EPA currently has an IBM MVS mainframe used for industrial reporting and a Unix server for contract management and small procurements. The mainframe is connected to AT&T's EasyLink value-added network to provide EDI functionality to trading partners including corporations and other agencies that have EDI capabilities. For instance the EPA has a pilot under way to test the sending of hazardous-waste manifests to six industrial partners.

Meanwhile the Unix server uses Dallas-based Sterling Commerce's Gentran Server connected to the Federal Acquisition Computer Network to provide EC functions.

Wang said the Unix server houses a variety of in-house-developed business applications including an integrated contract management system a small-purchase EDI application the Contract Delivery Ordering Tracking System and the Counter Payment System.

However not all contracts are being managed via the EPA's EDI system. "We can't force our trading partners into using EDI. All we can do is show that it can reduce paperwork and turnaround times " Wang said.

After installing the Gentran Server in April 1996 the EPA increased EDI transactions by 25 percent in one year and now has 1 300 trading partners who can use that system. The EPA is exploring the use of Web-based EC software. But in order for EC to work every trading partner must also use the same software. Wang also has security concerns. The EPA is evaluating encryption and decryption products to test the feasibility of using such tools in EC applications.

Web Is the Future

More and more agencies will explore Internet-based EC in the next few years fueled by a desire to re-engineer procurement and payment processes using a relatively inexpensive and widespread technology said Kim Devooght the general manager of government service delivery for IBM Global Government Industry.

It is clear the effort involved in such re-engineering won't lend itself well to packaged EC solutions for some time to come analysts said. Gartner's Reilly maintains that organizations must first decide what they want to achieve via EC and then implement a plan that may differ from the procedures currently in place.

That will take a huge change in mindset. "The federal government is in the process of going from reactive to proactive thinking when it comes to incorporating the Internet to improve the way federal agencies do business " said Kimba Vasquez manager of government markets for Sterling Commerce.

But for now the challenge is education Vasquez added. "It's our job to show what these tools can do and how they can be applied to build new EC solutions."-- DePompa Reimers is a writer and editor based in Germantown Md.

* * * * *

At A Glance

Status: Agencies are choosing custom solutions not off-the-shelf packages for Internet-based electronic commerce.

Issues: COTS packages do not provide comprehensive enough solutions to meet agencies' requirements.

Outlook: Uncertain. Many vendors are developing EC packages but complete solutions appear years away.


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