It's the heat of the holiday shopping season. As the registers in your stores ring up a flurry of sales, you, everybody's favorite IT guy, are praying nothing goes wrong. You're about to say "Amen" when your cell phone, your pager, your office phone, and your e-mail go berserk. The effect is like the day after Thanksgiving at FAO Schwartz: lights flashing, bells ringing, and buzzers sounding. You reluctantly pick up the phone and cower at the sound of the voice on the other end of the line. Stores in New York can't process their customers' electronic payments. Your eyes dart to your other phone. You hesitate, then pick it up. Florida stores are having similar problems, but they're on a different platform. Suddenly, it's like they're calling for cleanups in every aisle of 300 grocery stores, and you're the only man with a mop. It's time to panic.
This is the scenario Alan Williams, VP of applications development for retail operations at Ahold Information Services (Greenville, SC), gets paid to prevent. Ahold Information Services is the in-house operating support company for Ahold's 1,200 U.S. grocery stores. The brand names included under Ahold's $24 billion U.S. umbrella include Bi-Lo, Bruno's, Giant of Carlisle, Giant of Landover, Stop & Shop, and Tops Markets.
1,200 Stores, 1 Information Service Provider
Ahold's approach to IT service and support finds Williams in charge of overseeing the development and delivery of in-store applications to support all six of the U.S.-based operating companies. These include front of the house applications like POS, payment processing, and pharmacy dispensing, as well as back office programs like time and attendance, labor scheduling, and inventory. Williams' organization analyzes and purchases the solutions, then provides them to the operating companies for deployment. The companies he serves span the entire East Coast and employ more than 160,000.
When Williams became VP of applications development nearly three years ago, Ahold's operating companies were not running a common electronic payment processing platform. In an effort to avoid scenarios like the one alluded to earlier, Williams is charged with implementing common solutions across the companies he manages.
Williams and project leader Kathy Smith recently managed a consolidation project that moved almost all the stores in all six of its operating companies to a single processing switch. The heart of the switch is a Stratus (Maynard, MA) 619 processor, running S2 Systems' (Dallas) ON/2 transaction processing software. The switch is connected to the POS stations in each store via a WAN (wide area network). Chase Merchant Services (New York), an incumbent authorization provider in three of Ahold's U.S. operating companies, won the company's RFP (request for proposals) for authorization and settlement services.
The few exceptions to this setup are with the company's convenience store/gas station chains that are co-branded with a petroleum company, such as Exxon/Mobil, Sunoco, or Citgo. In these cases, the choice of electronic payment processing vendor is handled by the petroleum company.
Consolidated Systems Enable Consolidated Service
"Before the consolidation, we had five operating companies. Three of them used Chase Merchant Services, and the other two were with another provider for credit and debit authorization services," says Williams. Ahold added Bruno's, its sixth U.S. grocery chain (which used a completely different payment processing provider) in mid-2002. Transaction switches and routing software also varied widely from operating company to operating company. "When changes needed to be made, they had to be made in three or four different physical locations," he says. "For instance, when we launched a gift card program with ValueLink [Englewood, CO] in 2001, we had a single service provider for that program. Unfortunately, we had to integrate it in disparate electronic payment processing environments at each operating company." In other words, in order for the gift card program to work, the payment processing environments in each operating company needed to be altered in different ways to accommodate it. "Now, with all operating companies working off the same payment processing platform, service, upgrades, and add-ons like a gift card program can happen uniformly," Williams says.
The single transaction processing switch that now controls electronic payment processing for Ahold's U.S. operating companies is housed at the Ahold Information Services data center in Greenville, SC. Ahold owns the switch, which gathers transaction data directly from stores. Then, a predetermined set of business rules determines where the transactions get routed from there. Chase Merchant Services gets credit and debit transactions, ValueLink processes gift cards, while check authorization and EBT (electronic benefit transfer) are handled internally by Ahold. "A single, centralized platform means I can make one change and impact all six operating companies. This is a dramatic improvement in terms of our speed to market with add-ons like the gift card program," says Williams. As a matter of fact, he estimates the company has lowered its cost to process electronic payment transactions by well into six figures per year.
But beyond the efficiency of serving a common payment processing platform rather than disparate ones, Ahold is looking to leverage its size when making IT purchasing decisions. Consolidating its transaction volume with one vendor helps the company do that. "Electronic payment processing is a volume business," says Williams. "You have a lot of fixed infrastructure in terms of processing, communications, and staff. The more volume you can drive through that single fixed infrastructure, the lower the cost per transaction."
Conversion Is Seamless To Stores
According to Williams, the conversions necessary to switch debit and credit processing appear seamless to the front end, as do subsequent add-ons and upgrades. But what appeared easy to store managers required some effort on the part of the Ahold Information Services staff. "That's the role my office plays - to make sure those conversions occur without impacting the stores," says Williams. "Each operating company was in a different environment, so there was no single typical way to implement the changes." Since each operating company had its own processing platform, changes occurred much closer to the stores than they do now, thereby affecting operations at the store level. With a centralized system, "from a store's perspective, this conversion was all a back end upgrade," says Williams. "I can now switch back ends and add programs or service providers fairly easily, without impacting the stores."
With a consolidated payment processing system in place, IT personnel at Ahold Information Services can focus their prayers this holiday season on things holier than payment processing. Should a transaction problem arise with any of Ahold's U.S. holdings, Williams and staff are confident a single corrective action will fix the entire payment processing network.