Shaklee was green before green was cool. Now the company is applying that forward-thinking philosophy to SAAS.
Shaklee, based in Pleasanton, Calif., has been around for more than 50 years. What started with a vitamin formulation developed by Dr. Forrest Shaklee has evolved into a broad spectrum of all-natural cleaning, nutritional and skin-care products that have recently won accolades from no less than Oprah Winfrey and nods in Time, Woman’s Day and In Style, among many other magazines.
This is something of a resurgence for the company, which was taken private almost four years ago by Roger Barnett (now the company’s chairman and CEO) and private equity organizations. In 1982, Shaklee was a Fortune 500 company, but between then and 2004, when the company was acquired, Shaklee had been shrinking, according to the company’s CIO, Ken Harris.
Shaklee’s new owners brought in a management team to turn the company around, including Harris, who was formerly CIO of companies such as Gap, Nike and PepsiCo.
One key objective for the company’s new management was to make Shaklee relevant to a new generation of consumers, as well as to a new generation of independent sales representatives-the major channel through which Shaklee products are sold.
“When the new management came on, they really were looking to turn the company around in a number of different ways,” Harris said. “I would say one of the most important things was to appeal to a younger demographic-to reach out to a younger demographic-in addition to the demo they had, which is an older generation. What we were looking to do was make sure that the current generation was joining on as reps as well as our existing reps. That meant, frankly, investing in a lot of new technologies.”
The challenge was that Shaklee had under-invested for a number of years in its infrastructure. “Most of the systems were COBOL- or mainframe-based or client/server technologies coming out of the ’80s,” Harris said. “The technology here was very, very dated.”
In addition, Shaklee is significantly smaller than other companies Harris has worked for. This meant Harris’ budget was relatively smaller, but the breadth of applications he needed to implement wasn’t.
“[At Shaklee,] we had the basic ERP [enterprise resource planning], finance systems, supply chain systems and HR [human resources] systems that we needed to support,” he said. “We had a very active Web community that we needed to support. We had e-commerce. We had the full expanse. We didn’t have maybe the same number of transactions, but the same kind of breadth.”
Harris needed to set some priorities and find a way to be more efficient in his spend of IT tech dollars.
The first thing he did was build a map of the company, aligning business activities with the technologies underlying them.
“I created a picture of the business, using English words or business terms-not a lot of tech-speak,” Harris said. “I used it to talk with the businesspeople about the key things we do to run this business. And then I mapped the techs we have that supported these business activities and color-coded them red, yellow or green for the state, or the condition, of the technologies.”
Anything that was red, for example, had a higher priority than any technologies that were green.
This document gave Shaklee’s IT department a good understanding of the business and its priorities, and it communicated to the business side in a clear manner what the state of each technology was.
“[The document] enabled us then to put forth a road map for the rest of the business-where we needed to make investments, how and when,” Harris said. “It was kind of that process that we used to get alignment.”
At the same time, Harris came up with a number of technology architecture principles. One of them was that, wherever possible, the company would leverage new technologies that enabled faster time to market, a reduction in the amount of infrastructure that needed to be built and maintained, and a reduction in costs.
Fortuitously, Harris said, at the same time, software-as-a-service technologies and the SAAS marketplace were starting to take off.
Harris had worked with SAAS applications, including Salesforce.com, before he came to Shaklee. He was hopeful that leveraging the SAAS model would help him update aging applications quickly and relatively inexpensively.
“We had our map of the entire business spectrum, and what we said was that every application that we need to look at replacing, we’re going to try to replace with a SAAS-based solution, including strategic applications,” Harris said. “We look at all the potential apps, but it’s usually the case that a SAAS vendor can deliver faster, cheaper and better than a traditional vendor.”
SAAS Model Gains Steam
The SAAS model is gaining steam. In a July 2007 survey conducted by eWeek sister publication CIO Insight, 27 percent of respondents said their companies’ IT architectures were fundamentally based on SAAS, while 73 percent said they planned to expand their use of SAAS applications.
While Harris and his team were aware of SAAS’ benefits, they were not without initial trepidation.
“I clearly had a number of concerns, and my business partners had additional concerns-or the same concerns more intensely,” Harris said. “In my experience, the economics of SAAS are better than the economics of buying technology, implementing it yourself, hosting it yourself, etc., but you can’t just walk willy-nilly into SAAS and expect that it’s going to work, because it won’t.”
Service levels and security were two major concerns, he said.
“If I have some other company running key technologies of mine, if there’s a problem in the middle of the night, are they going to respond to it the same way we would? … What if they have access to all my data? Or, if my data is on their systems, what if somebody else accesses it? Does it expand the data risk, the security risk?”
Other concerns included business viability and integration.
“What if they go out of business tomorrow? What if they start running into economic problems and they shortchange their service as a result? … How easy is it going to be to get third parties to integrate all of our systems?”
In the end, Harris determined that three of those four main concerns-service levels, business viability and integration-could be taken care of with good contractual arrangements. The fourth-security-could be resolved through technology, such as encryption. Harris added that any vendor must demonstrate that its offerings can enable Shaklee to adhere to PCI (Payment Card Industry) and other regulations, further ensuring that security standards are being met.
That said, Shaklee initially took SAAS baby steps: “When we elected to go with software as a service, we said, -We’re not going to jump in the water; we’re going to put our toe in first and make sure the water’s not freezing cold.'”
First SAAS Venture
Shaklee’s first SAAS venture was a simple address verification application from StrikeIron. The application was brought in to help Shaklee clean up the addresses in its database and was also intended as a SAAS proof of concept.
“We have over 750,000 members-people who buy our products, and we ship a lot of products,” Harris said. “We had a number of addresses in our database that were just, frankly, wrong, so things got shipped to the wrong places. So we implemented an address verification module for one of the things that we were doing, across all the systems that were collecting addresses.”
Harris said it took about 60 days-and very little cost-to implement the StrikeIron service.
That SAAS success led to relationships with two other SAAS vendors: RightNow and Visual Sciences.
Shaklee is using RightNow’s technology for all its customer interface applications, mass-mail marketing, call centers, telephone order entry and Web knowledge content capabilities. “Basically, the front-end picture to our customers,” Harris said.
The company is using the Visual Sciences service, now owned by Omniture, for all its Web analytics, Web search and, most recently, Web marketing presentations. “It’s a fully hosted service, so when you do Web search, you end up getting a page that looks just like Shaklee’s Web site; it just happens not to be Shaklee’s technology,” Harris said.
Shaklee then waded more deeply into the SAAS pool by betting its data on the model.
“At the core of any business map, in my opinion, is the data-the database and the data warehouse-because all the apps end up using and sharing the data,” said Harris.
Shaklee implemented a fully hosted data warehouse solution from PivotLink, so “at core, our architecture and infrastructure are on a SAAS platform,” he said.
It took less than 120 days to implement the PivotLink application, for “low six figures,” Harris said. On-premises data warehouses he’s implemented in the past have each taken up to two years-with seven-figure price tags-to implement. “[With PivotLink,] we didn’t have to buy any hardware; we didn’t have to buy any software. We had to negotiate certainly service levels, but we didn’t have to build up the expertise and the technology,” he said.
Shaklee is also using the Lenos Software on-demand solution for event and convention management, and Virtela’s management service for Shaklee’s global network. (“They not only provide the network, but they also manage it, down to the router,” Harris said.)
As for future projects in the cloud, Shaklee is evaluating the Workday service for its HR and payroll activities.
HR and CRM (customer relationship management) topped the list of enterprise applications licensed in the SAAS model, according to the CIO Insight research, with 36 percent of respondents saying they were using a hosted CRM solution and 36 percent saying they were using a hosted HR solution. Billing/
accounts payable, collaboration and e-commerce were next on the list, with 24, 22 and 21 percent of respondents, respectively, saying they were using such hosted solutions.
Different role for IT
Harris said SAAS really changes the job of IT.
For one thing, the model places a greater burden on getting vendor contracts right-having the right relationship and managing the relationship on an ongoing basis, he said.
“You go back to your businesspeople and say, -What are the requirements for a service-level agreement?’ You don’t always do that internally,” Harris said. “You put into the contract detailed service-level specs, and you put around them incentives and consequences. Usually the metrics need to be uptime, response time, severity Level 1 problem resolution and disaster recovery time.”
In addition, working with a SAAS provider shifts the burden of integration.
“If you work the relationship so that you don’t pay until you’re using the service, now the SAAS provider has an equal share-if not a greater share-in making sure that software gets up and running and works,” Harris said. “They don’t get any money until it does, and that means they have to be involved in solving the integration problem.”
Harris added that it’s important to build an exit strategy into the contract if the relationship with a vendor does not work out or if the vendor folds.
“We’ve had a couple of arrangements that didn’t work out as intended, so, as part of our negotiation process, we negotiate some kind of out in case it doesn’t work,” he said. “With one of our SAAS relationships, we negotiated the out to take over the technology and run it internally. And, in that particular situation, we ended up doing that.”
As with any vendor, Harris said, it’s important to conduct reference checks before beginning a relationship with a SAAS provider.
He added that not all vendors that have SAAS offerings can be good SAAS vendors.
“It’s not just about having a solution that can be applied or delivered over the Web; it also requires a major change in culture from what tech providers have done in the past,” he said. “To be a good SAAS vendor, you have to have a model that says, -I never walk away from my customers. I have to provide a service, and I have to provide a standard of performance.’ Not all companies understand that because it hasn’t been in their genetic makeup.”
So, with Shaklee’s heritage-including the distinction of being the first company in the world to totally offset its CO2 emissions and be certified as Climate Neutral-were SAAS’ power-
saving advantages any factor in the move to the cloud model?
In a way.
“It’s interesting,” Harris said. “Our first product, in the 1950s, was the first totally natural cleaning product, and all of our products since then have been all-natural. We didn’t go to SAAS because of green-I wish I could tell you otherwise-it only turned out that SAAS is more green because I’m not using nearly as much energy. I’m leveraging the capability of aggregation, which definitely has a positive impact.
“It happens to coincide with our original direction and mission, but it’s coincidental, not causal. But that’s part of the reason it was easier to sell.”