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It's tough being an Internet pioneer in Ridgeland, Miss., a place where the computers come from Wal-Mart, high tech means WorldCom and only WorldCom, and the local claim to fame is being at ground zero for the West Nile virus. But Bill Scott, programmer and former rock drummer, is an Internet pioneer of the best sort. He has proven, world-beating technology; a wide-open $283-billion market to serve; and ecstatic customers -- everything but success. If this guy lived in Silicon Valley, he might be a zillionaire today. But he lives in Ridgeland, and his company, ScotSystems Inc., is struggling. Scott needs a partner.
ScotSystems runs StoreReport.com, an application service provider (ASP) for gas-station and convenience-store businesses. Bill Scott wants to put your Slurpee machine on the Internet.
To get a sense of what StoreReport does for its customers, think of it in terms of a similar but slightly larger initiative announced in November by Sam Palmisano, CEO of IBM. IBM's plan, which Palmisano referred to as "computing on demand," involves spending $10 billion to build the capability to provide any computing services that a business might need, all to be run on computers owned by IBM and accessed over the Internet from PCs. IBM makes that sound like a new idea, but it's what Bill Scott has been doing for the past three years for the convenience-store industry with StoreReport.com and before that as a purveyor of convenience-store software. ASPs were a big deal a couple of years ago during the Internet boom, when they were going to pay our bills, do our taxes, and monitor our exercise programs. Many of those ASPs are still quietly in business, but for no really good reason they've fallen out of favor. I think ASPs are still a good idea.
Convenience stores are not exactly on the bleeding edge of information technology, and having lots of locations can really be a problem for keeping track of the figures. Imagine someone who owns a number of stores and is rarely at any given store more than once in a while. Under the current system it takes days for such an owner to find out what's going on at a particular store. If the operation is bigger than that, managers collect daily transactions and then send them to the head office using modems. There the numbers are viewed and sent to the main computer for processing. If something is found to be wrong, it may be days before someone can communicate back to the store to correct the mess.
StoreReport can save store owners a lot of time and money up front and also keep down ongoing labor costs. If owners are going to use automation at all (and many don't), pulling the convenience-store business out of the technical Dark Ages requires either spending about $30,000 per store for a computer network and PC-based software or committing $200 a month per store for StoreReport plus the cost of a not-fancy PC and a DSL hookup. The PCs act as Web terminals, and the data are all held on IBM AS/400 minicomputers running in California, which is another advantage. "I tell potential customers that if their building burns to the ground, they will be down only as long as it takes to visit Wal-Mart, buy a $699 PC, and plug it into a phone line," says Scott. "They don't need a network, they don't need an IT person, and if a PC breaks, you just throw it away and buy a new one."
Scott estimates that StoreReport can save a typical store more than 60% in back-office labor costs. "I found out that it costs a typical convenience store approximately $8.25 to handle a daily store report internally," says Scott. "Then I ran another calculation and found that the same transaction could be done with StoreReport for about $1.05." If it costs $30,000 just to set up to generate that $8.25 report, why would any convenience store not outsource that part of its business? It makes no sense to me at all.
StoreReport offers advantages beyond just saving money. Training is simple, since everything is done through a standard Web-browser application. PCs can run almost any operating system as long as it supports a standard browser. Presumably, even a Web-enabled mobile phone would allow the store owner to take a look at the books while lying on a beach in Hawaii.
Data are centralized and standardized, since every store in a chain is treated exactly like all the others. All the stores report their data at the same time and with the same frequency because doing so is automatic. And the result is something that is apparently pretty rare in the convenience-store business -- owners can actually know how their stores are doing in real time without having to wait days or weeks for the numbers to trickle in. So problems with revenue, inventory, and staffing can be identified and solved sooner, saving even more money. Heck of a deal.
But if StoreReport is so great, then why isn't it being used by more than a few companies? In some cases potential customers are paranoid. They're reluctant to allow an outsourcing company like StoreReport to know exactly how many Baby Ruth candy bars they sold last month. You can understand the impulse, but as a technical matter it makes no sense. By making data acquisition automatic and keeping employees out of the data flow, Scott argues, StoreReport keeps corporate information more secure than it would be on individual PCs sitting next to the floor safe in the back room of all those Circle Ks.
Another part of the problem for StoreReport is competition from similar stand-alone applications running on those PCs. Microsoft and Dell and Intel and Apple have been phenomenally successful at telling the world that personal computers can do almost anything in business, when the truth is that they sometimes can't. Much of what we do with PCs in small businesses today was done a decade ago in larger businesses using minicomputers. And it was often done better because the applications were refined over a couple of decades and the hardware was reliable and professionally maintained. But who would even consider buying a minicomputer today? This is the age of the PC, right? That can be too bad for the minicomputer guys who spent decades tuning their algorithms, only to be put out of work by a spreadsheet. Ironically, mighty Microsoft runs its business -- the money part -- on banks of IBM AS/400s. They leave that news out of the Windows ads.
So what's the problem? Why, after more than 20 years in business, does Bill Scott still have only two full-time employees? "Oh, I have a lot of excuses available for me to choose from," says Scott. "I live in Mississippi. There is no investment money in Mississippi -- everybody knows that. The stock market collapsed for dot-coms, we're in a recession, VCs are looking for bigger investments -- I could probably come up with a dozen more if I thought about it. But the real problem is that I am a programmer, not a businessman. You know, I am not afraid of failing. I am afraid that no one will remember how hard I tried. But I will not give up. They may put 'Dumb, Dumber, and Dumbest' on my tombstone, but you will not find the word 'Quitter' there. We're profitable at our current size, so I'll just keep going for as long as it takes."
What Scott needs is a partner with real operational experience -- someone who can raise capital and handle the business side of the business while Scott handles the technology. He seeks $2 million to expand and market the company and to integrate Web-enabled cash registers, the final step in convenience-store automation. (When Scott adds Web registers to his system, he'll be on his way to handling the front of the store as well as the back.) His business plan is there for the whole world to read at www.StoreReport.com.
Though StoreReport is aimed primarily at gas stations and convenience stores, it is actually an integration of a powerful wholesale, distribution, and retail system that has gone through 22 years of development. The system has been used to run a fastener company, a Pepsi distributor, bookkeeping services, heating-oil companies, propane distributors, ice dealers, even fast-food outlets. Scott claims to have identified 62 industries in which StoreReport could be used pretty much as is. So the market potential is huge.
But the greatest potential of all may lie with a few StoreReport nodes that are operating today in Siberia. Yes, Siberia.
Scott has a programmer in Siberia working to convert all StoreReport screens to Cyrillic, the Russian alphabet, a process that is nearly complete. There is a reason to hurry: Russia is aiming to convert all its financial systems to western accounting standards by 2004. An enormous market is about to open up, one for which little or no software is available. And to Scott's mind, the fact that StoreReport operates as an ASP offers a unique advantage to former Soviet customers. "In the Russian Federation, when the government wants to audit your books, they do it by confiscating your computers," he says. "This not only makes it hard to continue in business, it makes it hard to have any privacy, too. With StoreReport, the data is all in California with nothing in Russia. A California court order would be required to retrieve the data, and that is very difficult for foreigners to get, so the Russian officials can never get to your books."
Now, there's a unique marketing angle.
Contributing editor Robert X. Cringely is a writer, broadcaster, and entrepreneur specializing in high technology. Contact him at email@example.com.
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