Battery-Biz: Small Companies, Big Returns
David F. Carr
What a difference one person can make.
Battery-Biz CEO Ophir Marish expects company revenue to more than double this year, to $25 million from $11 million, thanks, in part, to a gamble he took on an enterprise system initially developed by a lone programmer in his spare time.
The “business operating system,” or BOS, Marish purchased from Keller Systems International has the scope of an enterprise resource planning system, encompassing customer management, inventory management, distribution and replenishment, and accounting. In the time since deploying the BOS, Battery-Biz’s order processing has quadrupled, sales have tripled, and inventory turns have increased from seven to 11 times a year.
The battery distributor has seen a 402% return on its software investment, as measured by Nucleus Research, a consultancy dedicated to determining the quantifiable results of corporate technology deployments. And Marish believes the software is sufficiently robust to continue growing with his business—although it hasn’t been tested yet on the scale of a $1 billion company or even one half that size.
The BOS is largely the work of Richard Keller, who created it using Sybase’s Powerbuilder rapid application development tool and Microsoft’s SQL Server database. Most of Keller’s other customers are private firms, none with more than about $100 million in revenue.
While the system hasn’t been put to the test at a large corporation, Keller says most of his customers have complicated businesses that use his system to handle manufacturing as well as distribution. His main reference customer, K&N Engineering, runs the software at multiple sites, including one in the U.K. He maintains the software is solid, although he says he may have to rewrite it using Microsoft programming tools as Powerbuilder’s market presence declines.
In any case, Marish says none of the big ERP vendors offered products Battery-Biz could afford, and he was not so sure he would buy them even if he could. He doesn’t understand why many big companies with large information technology staffs so readily accept packaged software, even when it requires them to change the way they do business.
“Look what Rich Keller did—I mean, just one smart guy,” Marish says. “From what I can see, the big companies suffer tremendously from the big software packages from SAP and PeopleSoft. Why do they bend their businesses to meet what these packages can do? That’s the part that’s not clear to me.”
Marish, 31, came of age in the business his family created in 1988 after moving to the United States from Israel. His father, Alex, saw an opportunity in the proliferation of batteries for laptops and other devices and organized Battery-Biz as a replacement battery distributor to computer and electronics stores. Ophir became CEO of the Newbury Park, Calif., firm shortly after graduating from law school in 1999.
The business was growing at about 30% per year, Marish says, until it reached a sticking point in the late 1990s. The company started experiencing systems problems whenever sales topped about 200 orders per day or when more than two customer service representatives tried to enter an order at once. The company was running DACEasy small business accounting software published by Best Software Inc. But it kept crashing, Marish says. It was not necessarily that there was anything fundamentally wrong with the software, he says, but “we had simply outgrown it.” Best Software did not respond to Baseline’s request to comment.
Battery-Biz went shopping for a replacement system. In 1997, it selected distribution software from Prophet21 of Yardley, Pa., an established vendor that today has about 2,000 customers.
This was before Battery-Biz hired someone who could double as a network and database administrator. Even today, the information technology staff is lean, accounting for just three of the company’s 45 employees. At the time, Marish was the company’s computer expert—as a boy of about 10, Marish had learned BASIC programming on a 1 kilobyte Sinclair PC and he remained a technophile.
Prophet21 had built its reputation around Unix software. Marish says Battery-Biz probably made a mistake by signing on for one of its first Windows release. At the time, Marish was at law school and unable to provide much supervision.
According to Marish, a Prophet21 consultant got as far as importing inventory data from DACEasy, but that data abruptly vanished during testing. Prophet21 placed the blame on the version of SQL Server that Battery-Biz had purchased as part of a Microsoft Back Office suite, says Marish. But Marish felt the vendor hadn’t done enough to warn of incompatibility issues. In any case, the incident and the fact that the reason for the glitch could not be conclusively identified made Marish nervous. Battery-Biz canceled the project and refused to pay the related consulting fees. Prophet21 disputes Marish’s account of the effort, but would not comment on the record.
Battery-Biz went back to its old way of doing business, but by 2000 the company was processing 250 orders per day on a regular basis and system crashes were a frequent nuisance.
That’s when Marish was introduced to Keller, who markets his software mostly through a loose system of agents who get paid for referrals. One of those agents was also a Battery-Biz sales representative.
While working for warehouse management software vendor Scarlett Development Group between 1993 and 1996, Keller had spent his spare time writing a Power-builder application that handled several related shipping functions.
He hadn’t intended to create a full ERP system. But in 1996 he took a corporate programming job with K&N Engineering, which makes air filters for cars, boats, and most anything else with an engine. A friend in K&N’s information technology department had introduced Keller to the chief financial officer, and K&N hired him to expand on the shipping application. In 1998, he exchanged a salary for a software vendor relationship with K&N and began adding other customers, such as medical textiles maker CustomFab and wine distributor Bellavino.
Keller made an impression on Marish by offering to get Battery-Biz up and running on the BOS before he would bill for anything. Marish figured the risk of dealing with a small operator was offset by the opportunity to have the software’s creator involved in the implementation.
In fact, Keller improved the product in the course of his work for Battery-Biz, starting in late 2000. He tightened integration with the Federal Express and United Parcel Service shipping systems, so shipments are scheduled and tracked in real time, and he added support for third-party billing, to support scenarios where the freight charge gets charged to someone other than the sender or recipient.
A more basic benefit was the BOS support for just-in-time replenishment, using inventory data and the rate of new orders to calculate when to reorder. It also wiped out the old limit of about 200 orders per day, which in turn gave Marish the confidence to add salespeople. E-commerce capabilities, such as the ability to accept and acknowledge orders transmitted in eXtensible Markup Language or Electronic Data Interchange formats, let Battery-Biz attract new customers who wanted to do business electronically. Now Battery-Biz regularly handles more than 1,000 orders per day, about 60% of which come in either as XML or EDI orders, or are placed over the Web at battery-biz.com. The remainder are phoned or faxed in, then entered by customer service representatives.
One-Man Wild Card
Battery-Biz doesn’t use the BOS for everything. For example, Marish says it’s still easier for his company to handle accounts payable with Intuit’s QuickBooks software. But the BOS is the backbone of his company’s order and inventory management systems. It’s used to procure and receive products, barcode-label boxes on the warehouse shelf, track customers and orders, generate pick lists of the products needed to fill an order, calculate the shipping cost, and print the UPS or FedEx shipping label.
In its ROI analysis, Nucleus Research pegged the system’s cost at $643,000 for the first three years. The company would have had to hire 15 more people to process the same order volume without the system, so the personnel savings equate to $360,000. Leaner inventory saved another $400,000, and increased orders attributable to the system were worth an estimated $280,000 in the first year and $680,000 every year since. The system paid for itself in five months, according to Nucleus. Baseline and Nucleus earlier this year recognized the company’s achievement with the Grand Prize in the 2003 Technology ROI Awards.
The wild card is Keller himself. When Baseline first tried to contact his company, all links to its Web site pointed to a home page that was offline, and phone numbers were inactive. The phone number of the business where we finally found him was answered “batterysavings.com,” the name of a site that resells Battery-Biz products.
Keller says the Keller Systems site was offline temporarily while he changed hosts. Because he gets most of his customers through referrals, he hasn’t put a high priority on Web marketing. He also acknowledges he is still trying to figure out how to compete in a space dominated by far larger vendors.
However, he has found he can make money by convincing customers such as Battery-Biz to let him create consumer Web sites linked to the BOS software. He has a similar arrangement with West Coast Trends, maker of Club Glove golf travel bags, to resell its product at LastBag.com. West Coast Trends also operates its own site, clubglove.com.
Marish says he thought twice before placing his systems in the hands of a vendor so dependent on one man. What if Keller gets hit by a bus or simply gets distracted by other opportunities? While Marish has not regretted the choice, he recently hired Shawn Usmani, a programmer who is capable of maintaining and enhancing the BOS software independently. Usmani has received some tutoring from Keller, but says he also finds the BOS easier to work with than other ERP products.
“It was designed for expansion, and it’s pretty straightforward because of that,” Usmani says. Where other programmers might have tended to embellish, he adds, Keller seems to have taken advantage of standard Powerbuilder programming techniques wherever possible.
“If you can do it, that’s the way to go in terms of responsiveness and capability,” Marish says.
Company: Battery-Biz
402%
The total ROI, over a three-year period, from the battery
distributor’s $643,000 investment in software to boost sales
processing and order fulfillment.
Business: Supplies computer and electronics stores with replacement batteries for laptops, camcorders, and other products, primarily imports from Asia.
Headquarters: Newbury Park, Calif.
Key Business Executive/Key Technology Manager: Ophir Marish, chief executive officer
Project: Implement a complete order processing, distribution, and inventory replenishment system.
Objectives: Eliminate barriers to growth by allowing Battery-Biz to handle more orders without a big increase in staff, while using just-in-time reordering to keep products in stock and reduce inventory cost. Marish says results have exceeded his expectations, with the new system allowing the company to quadruple the number of orders it takes a day; and save $400,000 a year on inventory.
Technology Used: Keller Systems’ BOS software, Powerbuilder rapid application development tools, Microsoft SQL Server database.
Lesson for Big Companies: One programmer, or a small developer team, may be able to achieve results that a large software company would be hard-pressed to match.
Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in Baseline.
