Having grown up at the leading HP 3000 application vendor and in South Florida, Sharon Gardner knows about heat. The 33-year-old vice president of marketing for Smith-Gardner directs the voice of the company that created more new 3000 customers than any other vendor last year, and Gardner has a complex challenge if she is to repeat that kind of performance. She must tell the world how her company’s solution succeeds without relying on the legend of the keystone of its success, the HP 3000.
The company became a public one early in 1999, one whose financial fortunes seemingly rose on the Internet economic boom of last year. Smith-Gardner became a promising light on the e-commerce horizon, selling software that let retailers without stores — catalog and dot-com firms — reach for profits as economic opportunity shone brightly on the Internet. More than 300 companies use the application, and Gardner said HP told her that S-G was responsible for more than 60 new HP 3000 installs in the last year.

But in the past few months, Smith-Gardner has had to embrace a larger view of retailing than e-commerce and revise its sales targets. Instead of pure e-commerce like Outpost.com or traditional brick and mortar, the future of retailing is evolving to click and mortar, where big outlets with stores get online-shopping savvy. Nordstrom is S-G’s most prominent success in click and mortar, in a client base that has household names like M&M/Mars, Barnes and Noble, World Championship Wrestling and Hickory Farms. Smith-Gardner’s application, launched twelve years ago by Gardner’s father Allan and co-founder Will Smith, is being expanded to climb beyond its catalog business roots to the larger world of retail. It’s a world where selling the e3000 is more of a liability than an asset, Gardner says, in some measure because Hewlett-Packard’s mentions of the platform’s brand are faint and few.

In the weeks surrounding the Smith-Gardner Expo 2000 and our interviews, the height of the hurdles which Gardner and S-G management must clear to maintain the company’s growth became more apparent. The company announced that a major deal with a dot-com they’d sold would be a no-show, a receivable that couldn’t be collected because the dot-com had gone bust. Weeks later the company reported it would experience its first red ink since going public in its second quarter of fiscal 2000: Sales were down because its new click and mortar prospects were taking longer to close. Its competitors — it has no rivals in the 3000 market, but several from IBM’s space — try to cast doubts on the 3000’s scalability and performance. So the company is offering a multiple-server NT/Unix/Oracle front end in reply, but must maintain its all-3000 solution at the same time.
Gardner’s roots are in the 3000 customer base, starting with her time consulting at computer catalog Microwarehouse in the summers while she was getting her math degree from Rutgers (she minored in computer science). She spent her first years helping companies set up their fulfillment divisions to take orders through MACS, the product that is evolving into Ecometry this year. Since she helped establish S-G’s first efforts to market beyond the relatively small catalog industry, the Smith-Gardner customer base has more than tripled in the last three years. Gardner understands her company is one of HP’s best prospects for selling 3000s to brand new sites. And S-G is doing yeoman work to unseat IBM installations and bring them into the HP 3000 fold. We asked her what S-G needs from HP to keep succeeding, and how her company can build on its catalog customer foundation into the more abundant bricks of the retail world.

Your background wasn’t typical of someone in marketing, starting in the operations with Smith-Gardner’s HP 3000 sites. How did the experience evolve into marketing?

I began my career at BSA Fulfillment for five years, starting as an account manager for the Disney Catalog, managing the IS functions we were supplying to them. I loved it. But I went right out of college not necessarily wanting to work in the same business that my father and his partner had been in. I was the third employee for the fulfillment division of BSA, a full turnkey fulfillment house. I had a lot of exposure to the telemarketing and warehousing aspects of the business. When you got backorder item in two weeks before Christmas, everybody in the firm got out into receiving, getting the item picked, packed and shipped out the door. I started out with a lot of operations experience as a result. For my first seven years at Smith-Gardner I headed up client support services, training and installations.

I wanted to get into something new, and we had grown to the point where we needed a marketing department. Prior to that we were just marketing our company and products to the catalog industry. It’s a small industry; at most there’s 20,000 catalog companies in the US today. When you take the share of them where our solution fits — those shipping more than $5 million a year in products — it’s even smaller, like 5,000 companies. If anybody was looking for a catalog management system, we were always on the list.
We needed to formalize a product management function within the company, a business alliance program. Since we were thinking of going public, we needed to formulate a marketing plan and start targeting new markets. With the growth of e-commerce, it’s opened up our marketplace tremendously. Marketing is a critical function for us.

We’ve heard of several of your customers here who’ve moved their operations to the 3000 from IBM platforms. Who’s the competition in the AS/400 market?

Our biggest competitor in the catalog business is a company called Commercialware. They’re about half our size, though, in terms of client companies, revenues. They’ve got some good accounts, though, some marquee accounts. (Ed. Note: most notable are Saks Fifth Avenue, Brooks Brothers and the Smithsonian.)

How do those marquee firms work for you in selling to prospects? How much weight do they carry?

It’s big. It helps build that trust factor. Nordstrom runs on us, and they know Nordstrom as a traditional IBM shop — but they’re running their entire catalog division and dot-com on HP 3000s.

Nordstrom.com was identified as a dot-com with a good future by analysts, who haven’t been kind to dot-com ventures recently. The difference seems to be its brick and mortar backing. Is that what’s behind your recent focus on traditional retailers as prospects?

That’s absolutely our whole theme. Customers want convenience, and they want to be able to shop from the channel of their choice at the moment. It’s based on what they need and their time factors. The retailers need to be able to customize and personalize equally from all three channels: catalog, online and retail.

Why did you decide to go to retail, beyond your heartland customers who don’t have brick and mortar?

Every retailer is forced into online direct marketing with e-commerce. Every single retailer is in our business now. We’ve struggled with what we call what we do. Is it indirect sales, encompassing both catalog and e-commerce? Our investment bankers told us when we went public to refer to it as “non-store,” concerned that if we called it direct marketing we’d be pigeonholed into the catalog and direct marketing arena. They wanted to position us as not only that — it was 95 percent of our revenues at the time. Since then we’ve adopted direct commerce and direct sales

We’re positioning ourselves as a multichannel infrastructure solution. E-commerce is absolutely a big focus, because we believe that cataloging will change. There may not be every single product in the book in the future.

In Coldwater Creek’s business, they’ve seen 20 percent shifted to the Web. To be able to empower customers to take their own orders is a huge cost savings. They’re definitely a forerunner for us, especially in the apparel industry.

So Coldwater Creek represents your first kind of customer, catalog and direct marketing, and then there’s dot-coms, where S-G was posting a lot of new sales over the past year. The traditional retailing companies are next?

They’re getting into direct sales for the first time through the Web. The dot-coms will be less of a priority in our target markets, in terms of the e-commerce marketplace. We’re absolutely continuing to continue to market to the traditional catalogers and direct marketers. But Wall Street is most interested in our e-commerce opportunities, and from that view it’s the major retailers we’re going after.

I’m tempted to believe these larger retail sites are asking if their back-end engine can run on something other than an HP 3000. True?

Sometimes we run into that issue. But now, because our product is available on Unix, we’ll always be invited to participate in the demonstration. Once we get in there and sell the software, we sell them on why it’s better to run it on the HP 3000.

But your new architecture relies on Unix or NT boxes running Oracle to front-end the HP 3000 commerce engine. Why the change?

We have not had performance or scalability issues with any client to date on the 3000. The large clients, for whatever reason, don’t feel comfortable tapping the HP 3000. Theoretically [the new architecture] is faster if all the product information is accessible from a Unix or NT box, but we’re just talking about the product information. What we’ve done is ported product information, pricing information, taxes, to that NT or Unix box in an Oracle database. These are the pieces that don’t require heavy online transaction processing.

Some of our larger customers want more flexibility, and their Web site developers know nothing of the HP 3000. The Web developers are not happy that everything they need to get to is in an HP 3000 database. It’s the bigger customers that have the problem with it. Our small- to medium-size customers have no issue. [The 3000] is easy to maintain.

The Smith-Gardner IT managers we’ve talked with seem to need more HP 3000 tools. Since you’re drawing all this new business to the platform, are you being flooded with offers to partner with third-party tool providers?

We are. I get three to six calls a day, looking at our client base and really excited about putting something together. But a very small percentage of those calls are specific to the HP 3000, because we’re an enterprise-wide system.

The HP 3000 division refers to Smith-Gardner in nearly every presentation to their installed base as the leading source of new business for the platform. How does that make you feel?

We got a call from HP and they told us “Good news: You guys represented the Number One vendor for bringing new business to the HP 3000 in 1999.” We weren’t the first in revenue, but in individual new accounts. We were partly worried, because for the year it was only 60 or so. There’s no other VAR that’s selling more than that. It’s been a concern of ours that it’s going to survive. It’s a killer platform, and no other system can crank out more than 300,000 orders in a day and still have instantaneous response at the cost. Other systems would cost two to three times as much to handle that kind of input.

We have struggled a bit with HP, wanting to get them to more proactively position and market that product. To change the image in the marketplace. There’s definitely a perception in the marketplace that it’s old technology, not open and proprietary.

Do you want HP to give the HP 3000 a better profile, to ease your new customers’ concerns?

They think the application provider has to do the sale. The only issue is that we are too small to correct the perception. We’ll keep attacking the issue. But for HP to take a position on the 3000 to the general populace is going to do wonders for the perception in the marketplace. We can’t fight that battle on our own. That’s what we need help with, because there is a negative perception in the marketplace today for the HP 3000. Big issue. That’s one of the reasons we ported to Unix and NT, so we can put a check in the box. Then we’ll sell them the 3000 once we’re in there.

We’re losing more deals than we have traditionally because of this image. It’s the Web techies. Unless it’s Java running on an Oracle database on a Sun platform...

It sounds like there’s only so much that the 3000 division can do for you in this battle. True?

We wanted to get some attention from HP’s corporate level. We can’t get anywhere. Our phone calls and e-mails just go unreturned, from our business development manager to myself to our CEO. We’ve tried Carly Fiorina, and she has people staked out to help talk to everyone who tries to connect with her. If she said something, and understood what the combination of the 3000 and our product is doing for direct commerce —if she’d just give it a little juice, we’d get tremendous mileage out of that. We also have tried to make contact multiple times with the head of the e-commerce division within Hewlett-Packard.

How’s that e-services plan working out for you? Is it providing any opportunities yet, or is it mostly high concept?

High concept. We can’t envision getting our product to the point where a customer would be satisfied with just a canned implementation. There’s no money to be made, it’s costly to do it and the margins are so low, it’s just not worth our time and effort. We’ve tested it with some offers to prospects, but it’s just not attractive. I think certain applications just lend themselves to the ASP model, and ours does not. We have 1,500 switches in our software, and you need to understand how the system works, so you can see how the business should be run.

How does it feel to represent a new generation of blood for the HP 3000 community, working in a company your father helped found?

I interact with Allan and Will every other day, but we work very closely together. I’m pushing for “we need these bells and whistles” based on what the market’s asking for.

Do you feel like your requests get any more attention because of your last name?

[Laughing] Actually, it works against me. They’re real good to being open to some of that. They’ve been very adaptable to a lot of new stuff we’re doing. Things are changing: For example, people want to customize some promotions targeted to more affluent people based on their demographics, and lower-priced items to more average wage earners.

Your shirts at your conference all said Ecometry, rather than Smith-Gardner. How crucial is the new branding to your company’s future?

It’s absolutely helping us reposition what we do: an e-commerce solution. We want to brand Ecometry heavy right now. We’ll see if it could lead to us changing the name of the company. It’s a good time for us, because the evolution of e-commerce has played out far enough that people are identifying the value of having an integrated system. It’s not enough to have a Web site that can take orders. That Web site has to be fully integrated with a back office system built specially for direct sales. We compete with Oracle, not SAP, which has no idea what a Federal Trade Commission notice is for a back order.

What’s the major challenge for the company in the coming year?

Overcoming the negative perception about the technology we’re running on. Getting more support for the HP 3000 and what we’re doing. If we could change the perception and position the 3000 as the number one platform for order management, order fulfillment, direct sales, that would be dynamite.

I asked our HP reps, “Do you think that Carly knows that a Smith-Gardner, Ecometry, or MACS even exists?” They both said, “Probably not.” That’s a problem, and why we started to try to connect with her directly. The 3000 folks are great, but it would be great if we could get some corporate-level HP support.