Agfa HealthCare, a subsidiary of Mortsel, Belgium-based Agfa-Gevaert Group, specializes in analog and digital imaging solutions, as well as a variety of diagnostic and communications systems. With its U.S. headquarters located in Greenville, South Carolina, Agfa HealthCare supplies computer-based radiography and digital networks for hospitals. The company's equipment, consumables, and services are targeted to different hospital departments and comprise comprehensive information systems tailored to the needs of the hospital.
Christine Vincent is Agfa HealthCare's global e-business director. Prior to joining the company, Vincent was global IT director for Sterling Diagnostic Imaging, a manufacturer of medical imaging film, film processing equipment, and electronic imaging systems and services. Vincent arrived at Agfa HealthCare after Sterling was acquired by Agfa in June 1999.
Agfa HealthCare began looking into Web services technology when its largest customers started asking the company to participate in a B2B Internet exchange.
We decided to answer the expectation of our main customers. They wanted us to participate in an exchange marketplace, so we looked at the software packages that would ease the integration of the collaboration between our ERP system, which is SAP, and the exchange marketplace, which, at that time, was Medibuy.
Medibuy has since been acquired by Global Healthcare Exchange (located in Westminster, Colorado), and we are now in the process of transitioning from Medibuy to GHX. This has created some delays and slowed the adoption rate for all the parties involved. We are far from reaching the critical mass we are aiming for, unfortunately, but the volume growth is steady and significant.
So far, we're working with about fifty customers. Our goal is a few hundred within two years. The number of dealers, distributors, and OEMs we're connected with is four. We ultimately plan to connect with fifteen. Sales handled through the exchange are currently less than one percent of our overall revenue, but the figure is growing exponentially each month.
Group purchasing organizations (hospitals that have joined into a purchasing alliance), OEMs, and larger distributors also require us to do our business electronically. They want us to be ready for the next e-commerce wave. The unique aspect the health-care model presents is that a lot of GPOs put pressure on their suppliers to participate in an exchange marketplace, so they can have better visibility of what's being purchased by their member hospitals.
Vincent turned to Comergent Technologies to supply the Web tools Agfa HealthCare needed to participate in the exchange.
Comergent was picked as the result of my research into other industries, such as high-tech and telecom. I looked at Cisco as the model, and Cisco used Comergent. So I talked to Cisco about the functions they use and discovered that it would be easy to adapt them to the health-care market.
Agfa HealthCare is using the Comergent E-Business System (specifically, a subset of applications formerly marketed under the name "Private Marketplace Suite'') and Comergent Network Service, including these following modules:
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C3 Profile Manager
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C3 Product Manager
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C3 MarketLink
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C3 Partner.com
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C3 Advisor
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C3 Analyzer
The main Web service we provide is a continuous flow from the purchase acquisition at a hospital through an exchange marketplace to a distributor, a dealer, or an OEM partner, not losing the direct ownership of the transaction, as well as the visibility of the transaction having real-time, online information, based on whatever is transacting between the hospital and the distributor, the dealer, or OEM. We have a closed-loop process in place, fully tested from requisition to purchase order, followed by order acknowledgment, then physical delivery, and electronic invoicing with the possibility of electronic fund transfer for payment.
Here's a basic view, in five steps, of how Agfa HealthCare's system works:
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A purchase order is sent from the hospital or GPO via the exchange to an Agfa Healthcare dealer, distributor, or OEM. The dealer, distributor, or OEM is chosen based on the stated preference of the purchasing hospital or GPO. An electronic copy of the purchase order is sent to Agfa Healthcare.
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The dealer, distributor, or OEM responds by sending an order acknowledgement back to the hospital, validating the product's pricing and availability. An electronic copy of the order acknowledgment is sent to Agfa Healthcare.
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The order is shipped.
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An invoice is generated. If the order involves a large dealer, distributor, or OEM, the seller creates an invoice in its own back-office system and then links into the Comergent platform to send electronic copies, via the exchange, to both Agfa HealthCare and the hospital or GPO that made the purchase. If the order involves a small dealer, distributor, or OEM, the seller creates an invoice using the Partner.com module. This allows the company to access the Comergent system via a standard Web browser without the more complex integration to a back-end system. The selling company then uses the Comergent platform to electronically send, via the exchange, the invoice to both Agfa HealthCare and the hospital or GPO that made the purchase. The small dealer, distributor, or OEM then manually enters the invoice into its own accounts receivable system.
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Payments are made via electronic funds transfer (EFT).
Agfa HealthCare hasn't yet started using the EFT feature, says Vincent, although it soon may.
Payments are not enforced yet, because the Medibuy exchange didn't offer this capability. Now, with GHX, we have the possibility of offering electronic funds transfers.
Vincent is also looking forward to adding other features provided by the Comergent platform, such as inventory management.
The inventory management functionality hasn't yet been tested by us. The system consists of an XML-based architecture; therefore, the integration with other systems is done through sending and receiving real-time messages. The customer is picked first, based on volume and readiness, then the customer specifies the dealer/distributor of choice, then we connect the dealer/distributor to our hub and test the full transaction loop. In terms of messaging, the links are mainly ebXML or xCBL—they are the standards used in this industry.
We are investigating all business processes in order to reduce, or eliminate, manual tasks. We continue deploying and utilizing the Comergent platform, and do not expect to add another software provider outside of SAP, which is our strategic backbone.
Contract management, price, and availability capabilities are also waiting in the wings, says Vincent.
These functions are a prime objective of our implementation. They're already available from Comergent, but the exchange and our partners weren't ready to use it. Now, with GHX and bigger dealers/ distributors connected to our hub, we will start testing those functionalities.
Plans for a lead generation capability are in the works, but have not yet solidified, says Vincent.
The next step, which we are already investigating with Comergent, is lead generation. We want to enable lead management across different partners and different regions. The business case has been completed, and has been sent to our Belgium headquarters for approval. It has not been given top priority, however, since another corporate project, focusing on CRM technology, threatens to overlap the lead generation project.
The exchange environment gives Agfa HealthCare and its customers and partners a fine degree of control over their information, as well as the ability to view information from an array of perspectives, says Vincent.
The exchange provides a high degree of visibility to whatever is transacting across the marketplace from different views. The GPO, for example, has access to all GPO-related information; the buying side has access to everything it needs to buy; the selling side has access to everything it must sell; and the various manufacturers have access to whatever services and products they put online. So, you can have multiple partners, multiple roles, and everybody has real-time online access to the same type of information. As a result, we don't have reconciliation issues, and we don't have discrepancies between the different players.
Vincent began developing its Web services strategy in late 1999.
Agfa has a complex and lengthy approval process that slowed us down considerably. I presented the strategy in early 2000 to Agfa's board. We got the go-ahead in mid-2000. We then investigated the different available software packages and selected Comergent in late 2000. We started implementing the proof of concept in early 2001. After the proof of concept was accepted by our leadership, and understood by various management heads, we started deploying pilots. The system became operational in early 2003.
Although Vincent believes the exchange will eventually become her organization's primary business data conduit, the company still relies on a variety of older technologies.
We do not work only through the exchange. The majority of our current electronic volume is still transmitted through a conventional EDI VAN directly to our SAP system. We also have lots of manual entries; too many, really. We allow phone, fax, and e-mail orders that our customer services personnel has to process manually into our SAP system.
Vincent says Web services' modular foundation makes it easy to add new customers.
As long as the customer connects within the exchange's standard requirements, we can reuse the same map already tested with other customers. However, sometimes the customer doesn't want to be connected to the exchange; he wants to do business directly with us. Then, we have to handle the cross-mapping and routing of the information sent back and forth between its materials management system and our hub. The same thing is relative to the dealers; they can choose between a browser connectivity and a full integration. The browser doesn't generate any additional work, the full integration does, but we also need to work very closely with the dealer's IT team to make sure its ERP can receive and process our messages, and vice versa.
Prior to switching to Web services, Agfa HealthCare had very little control over the information it was sharing with customers and partners.
It was a very unstructured and fragmented process. Everyone had different sets of data; everyone used incompatible formats and systems. Without Web services, none of these technologies were able to talk to each other.
The value proposition we brought into play with Comergent and Web services was that this system allowed any technology, with any of five formats, to talk to each other. Therefore, we have a central hub between partners, customers, and manufacturers, allowing data sharing and collaboration. We have a flexible platform that can accept conventional EDI, flat file transfers, e-mail with attachments, SAP, IDOC, and, of course, XML. As a result, we don't require our partners or customers to modify their programs.
I'm very convinced that we're bringing significant benefits to all of the parties involved. In order to really bank these benefits, however, you have to have critical mass. This process, unfortunately, is very slow. There's a lot of testing, mapping, training, and convincing that has to be accomplished. All of these factors slow down the implementation process. In health care, however, the goal is not to be revolutionary, or ahead of other industries.
Vincent says she's become a firm Web services supporter.
I'm convinced about these standards: XML, SOAP, and all of the others. Since 1998, even before I moved to Agfa, I was already watching what was happening with Web services.
When I proposed Web services to the board, they looked at me as if I was coming from Mars. Now, I think they understand the need, because most of our main partners are moving in the same direction. I think the adoption rate is improving.
I have to admit, however, that it can be tough to convince high-level executives, particularly the leadership of big companies like Agfa, about the value of something like Web services. We're a 22,000-employee company, and the people that led this company in the past didn't always recognize the opportunities presented by electronic business, or any new technology. Because of the dot-com crash, they were very prudent and more than a little bit skeptical. Rather than make a massive upfront investment in something with a potentially limited immediate return, they wanted to implement new systems step-by-step.
Vincent notes that the Web services field, like many emerging technology markets, is flooded with vendors, offering a wide range of products. This can make it difficult for an organization to select the best products for specific Web services-related tasks.
I think there are too many vendors. If you go to Google and search for Web services, you'll never finish reading about all the companies. One has to be careful to select companies that have been around for some time and that have products that deliver the benefits and the results customers want.
Still, Vincent has no regrets about selecting Comergent for Agfa HealthCare's Web services project.
I would make the same choice, if I had to do it again; I would select Comergent right away. I think we picked the right vendor. But, if I were to repeat the selection process today, I would look at successful companies, see what types of packages they use, and then get references.
Despite some vendors' claims to the contrary, Vincent notes that Web services implementation isn't necessarily a snap.
Going with Web services isn't as easy as buying a package that has open standards. Still, there are a lot of routines and subroutines that can ease the implementation and speed up the return on investment.
But, most importantly, you have to fully understand your customers' expectations, your own issues, and know exactly the direction you want to move in to get the ROI you're looking for. All of this requires performing in-depth research and work.
Vincent feels that Web services give her better control over business processes.
The direct benefit is the ownership of the relationship between our customers and partners. This allows us to anticipate customer expectations, paving the way toward both revenue and loyalty gains. If you have to rely on dealers, distributors, and OEMs just to understand what's happening between your own customers and the product and services you're indirectly selling, you're losing valuable time.
Web services also exposes Agfa HealthCare to potential customers.
As soon as you display your electronic catalog to an exchange marketplace, this possibility exists. One can also use the technology to generate electronic leads and manage them better.
For Vincent, the adoption of Web services is an ongoing process that requires continuous fine-tuning.
The next step might be process engineering. We are setting team meetings to gather various functional leaders (owning part of the business processes to reengineering) to map the current processes, identify the disconnects, and propose alternatives to get rid of any issue. We prioritize the business processes, based on our knowledge of current issues, to resolve outstanding issues, as soon as possible. Once we have the specification and benefits of the recommended alternative, we will decide on the technology enabler.
But we have to test first with customers and partners and identify what their next expectations are. For the time being, their expectations can be handled without changing too much internally, but I am convinced that, as soon as we move to the paperless, continuous flow of transaction information, they would change their process. That's to be expected.
So far, we have automated the current business processes and gain benefits through the elimination of manual activities; however, every new expectation and significant benefit we uncover requires changes. We need to simplify the way we do business today, and it will impact our internal processes and systems, too.
In the meantime, Vincent wishes that Web services technology was more adaptable.
I would like to have Web services more able to handle different formats, fields, and validations. Coping with these items requires a lot of technical expertise and is very costly.
Vincent also wishes that Web services offered better format translation tools.
We have, for example, some unsophisticated partners that still use faxes. It would be nice to have a fax format recognition technology that would automatically convert fax documents into XML messages. This is something we currently have to do manually.
Vincent advises potential Web services adopters to start by building a solid e-business foundation.
You have to start by clarifying your own e-business model, making sure that every aspect of its functionality will directly and positively impact your customers and partners. Having things look nice just isn't enough. Many Web sites, for example, will toss in all kinds of fancy functionality that, in fact, don't bring any value to either the customer or partner. Sticking with priorities, and having a better understanding of your customers' and partners' expectations, is where one should start.
She also advises potential adopters to carefully research Web services technologies before committing to specific products.
You can't buy a package just because it has a good reputation and is backed by a large advertising budget. A large following alone doesn't mean that a product is good or right for your needs.
Finally, Vincent believes that Web services are ready for everyday use.
I've seen a lot of progress. Compared to where we started with our first implementation and where we are today, the speed, the functionality, and the quality of the data exchanges have all improved. Simply put, there are a lot of possibilities and a lot of opportunities for using Web services.
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