PIMs anyone?

As manufacturers and retailers struggle with information overload, what promise does PIM, the industry label applied to the group of business processes that aggregate product content, really hold? By Jessica Twentyman

Companies that supply products to the world’s largest retailers had better be prepared – it’s only a matter of time before those retailers insist not only that their suppliers provide them with information about those products in electronic format, but also dictate the standards to which that data must conform. And meeting these rigorous demands will simply become, for many suppliers, a necessary cost of securing valuable contracts with high street names.

That move is already underway, with companies such as Wal-Mart in the US and Tesco, Carrefour and Ahold in Europe leading the charge. But the vast majority of suppliers have enough problems keeping product information accurate and up to date inside their own organisations, let alone being able to deal with this added level of complexity.

According to management consultants at AT Kearney, around 30 per cent of item data held in electronic databases and catalogues at retailers and manufacturers for the purposes of replenishing stock is inaccurate. And each inaccuracy costs between $60 and $80 to put right. These inefficiencies, they say, translate directly into unnecessary costs to handle data errors and exceptions, slower time-to-market for new products, and weaker market penetration – in short, lost revenue and excessive cost.

Brian Morgan, European director of retail business at integration tools company GXS, sees these problems all the time. He estimates that, in Europe, somewhere in the region of b5bn is lost each year through inefficiencies in product data. “At most sites we visit, there is a problem with up to 50 per cent of product data records,” he says. “Many turn out to be records of products that are no longer in production, some turn out to be duplicates and significantly more contain data errors,” he says.

Realising what is at stake, many companies are beginning to take a hard look at how they manage product information – and some are investing in specialist systems to help them do just that. “At Pfizer, we focus on selling our products, not error corrections,” says Clare Knight, director of information systems at the pharmaceutical giant. For that reason, the company has invested in a specialist product-information-management (PIM) system from GXS. “Using this system, our new product information goes to a retailer in one day, rather than in six weeks when done manually,” says Knight.

That is an attractive proposition and is creating great interest in a class of applications known variously as product-information management (PIM), product-content management, product-data management and, sometimes, catalogue-management systems. “Whatever the name, they all aspire to the same goal: to be your one authoritative master source of product information for the enterprise,” says Jim Murphy, an analyst with IT market research company AMR Research.

Early PIM vendors have tended to be very industry specific, subsisting on a large percentage of services revenue versus software. But that is changing as larger software vendors have recognised the huge opportunity that PIM offers and have rushed to acquire smaller PIM specialists.

In March 2004, for example, IBM bought Trigo Technologies, a specialist in PIM products for the consumer products and retail sectors. And in July, SAP bought PIM specialist A2i in order to bolster its fledgling Master Data Manager product.

PIM software helps suppliers as well as buyers create a repository of clean, up-to-date product information. A PIM suite will typically include functions such as data extraction and transformation tools for cleansing and classifying product data; output to multiple media such as printed and CD-ROM catalogues, external web sites, e-procurement systems and company intranets; content syndication and synchronisation functions; and tools such as search, workflow and business-process management, promotion management, and auditing/reporting.

Most importantly, these systems are geared specifically to the complexity of product information. “Different categories of products require different fields of information to be associated with them,” says Paul Weinberg at SAP (formerly president of A2i before it was acquired). “For shampoo, that might be a field relating to colour or scent. For ball bearings, you need fields that provide information about the inner and outer diameters of the bearings. A data record on a particular make of screw will need to include information about thread size and head type,” says Weinberg. Traditional databases were designed with single record types, such as airline reservations, in mind and tend to perform badly when it comes to handling large results sets with multiple parameters.

Not only that, but the product information managed by a PIM system must include more than simple transactional data – such as the part number, a basic description and price - about each product from the ERP or product master file. It may also include detailed parametric data on product specifications, merchandising text, high-resolution images, drawings, diagrams, and PDFs for marketing and publishing requirements.

Finally, most companies will need a classification scheme for organising the products into a searchable taxonomy of categories and subcategories. Each of these must include information about category-specific attributes, product relationships that will flag potential up-sells, cross-sells and accessory purchases to both salespeople and prospective buyers, and structural relationships (such as assemblies, kits, and bundles).

That does not come cheap, says Erica Rugullies, an analyst with IT market research company Forrester Research. According to Rugullies, software licence costs for PIM products vary from about $250,000 to more than $1m, with the average deal size hovering around $500,000. “Most vendors charge customers by a combination of the following criteria: size of catalogue (that is, number of stock keeping units or SKUs); number of software modules purchased, and number of business units using the software,” says Rugullies. Annual maintenance is typically 18 per cent to 20 per cent of these costs per annum. But, she adds, pricing is often highly negotiable.

The costs may be high then, but for many organisations, the benefits are appealing: product-information management will enable them to reduce product information redundancy, increase accuracy and eliminate many of the costs associated with managing product information. And in the long run, it will enable them to synchronise the exchange of product information with key trading partners (see box, Synchronised selling). And, in the end, it may be a step they have to take in order to hang on to some of their most lucrative accounts.