Millipore Corp. Struggles With Online SalesBy John Moore | Posted 2005-07-08 Email Print
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The biotech equipment maker wanted to expand business in Japan. But faxing in hand-written orders was faster than using its online catalog. Something had to click.
Millipore Corp., which sells equipment to drugmakers for purifying and analyzing fluids, sought the best of both worlds: build online sales in Japan faster than rivals, and simultaneously keep Web infrastructure costs in check.
At first, the strategy appeared to be doomed and potentially threatened Millipore's ability to maintain and expand sales in Japan, a key territory. Japan, after all, is the third largest market for pharmaceutical sales after North America and the European Union, according to IMS Health, a market research firm.
For customers in Japan who tried to use Millipore's online product catalog in 2001 during a pilot project, "it took longer to go through the Web checkout process than it did for them to hand-write a quotation" and then fax in the order, recalls Jeff O'Halloran, manager of Internet services at Millipore.
How slow was it? Some Web pages took more than 14 seconds to load; Millipore had initially set 7 seconds as the maximum acceptable time. On top of that, transactions took about 4 minutes to complete.
"We realized that this was going to be a huge impediment to getting e-commerce accepted," O'Halloran says. Especially since faster transaction time was supposed to be a key selling point for the new ordering system.
Customers who have problems placing an online orderwhether through site errors, unclear instructions or poor performancemay choose an alternative vendor, he acknowledges.
Experts agree: Slow performance has dire consequences for Web sites. Jakob Nielsen, usability expert and principal of Nielsen Norman Group, says people begin to abandon Web sites as load times approach 10 seconds. Beyond that mark, according to Nielsen, about half of a Web site's customers head elsewhere. "People's attention starts to wander off," he says. "We can't keep them focused on the transaction."
In Millipore's case, poor Web performance could have affected a significant slice of the company's business. About 20% of the company's 2004 sales of $883 million came through its online store and "regionally focused distributors," according to its annual report.
Millipore's problems in expanding its geographical reach online are not unique.
Application performance issues continue to crop up as organizations push beyond their accustomed geographic boundaries, says Eric Peterson, senior analyst at Jupiter Research. "As companies expand into completely new markets, it is pretty common that they'll run into this," he says.
Without major headaches, Millipore in 1999 introduced a Web-based catalog of some 5,000 products for its North American customers. A European venture subsequently launched with no great setbacks.
Then came Japan. There, Millipore sells to hundreds of pharmaceutical equipment distributors. These distributors had been filling out order sheets and sending them via fax. At Millipore, order entry workers, sitting at a computer, would then input the data into an Oracle enterprise resource planning (ERP) system that runs on an Oracle database.
In making the switch to a Web-based product catalog, Millipore executives had hoped to expedite this ordering process. When the online ordering trials in Japan flopped, Millipore cast about for options to speed up the service.
O'Halloran says his group considered network caching services, but "they didn't seem to be a very good fit for what we were trying to do." In caching, a service provider maintains copies of a company's Web site content in a network of distributed servers. Users requesting Web pages are diverted to the nearest server for faster response.
That approach works well for static content, O'Halloran says. But Millipore's online service involved extracting financial data from its ERP system and generating a screen for each customer. Since content changes from customer to customer, caching could provide only limited value.
"Caching would have saved some time on some of the static content around the edge of the page, but each page was unique," O'Halloran explains.
Another option was to establish a Web hosting facility in Millipore's Tokyo data center. Such a move would require an investment in a Web server and firewall. Staffing costs also loomed large. "We had no I.T. expertise over there to manage that kind of infrastructure," O'Halloran says. "We would have incurred additional costs that we didn't count on."
Even the existence of a local Web presence would fall short of solving the problems with speeding up transaction times.
"We still would have centralized ERP in Bedford [Mass.], and the transaction time between the front-end Web server and the back-end system would have been, itself, subjected to the network delays," O'Halloran explains.
Dissatisfied with other options, Millipore's Internet group met with Netli executives to discuss that company's network service. Netli, based in Palo Alto, Calif., offers what the company terms an Application Delivery Network, which aims to reduce the time lag associated with Web-based transactions occurring over long distances.
Brian de Haaff, senior director of product management for Netli, says Millipore's problems in Japan are common to those experienced by other organizations seeking an international Web presence. Inefficiencies in the Transmission Control Protocol (TCP) present a key obstacle, according to de Haaff. TCP governs the transmission of data in packets over the Internet.
When a user requests a Web page, its components flow over the Internet as a series of packets. TCP sends a packet and waits for a return packet to confirm receipt. The time lag associated with this round-trip grows as geographic distance increases. The round-trip between a Web server on the East Coast of the U.S. and a user in Japan takes about 200 milliseconds, according to Netli (a millisecond equals a thousandth of a second). A Web page usually requires 30 to 50 such round-trips as it is transmitted, the company says.
"The issue is that when you need to make that trip 31 times, as an example, you now have a 6.2-second response time," de Haaff explains.
Netli maintains that it circumvents this problem through a proprietary protocol that accelerates traffic between two nodes in its delivery network. The first node is a Virtual Data Center that serves as the entry point for users seeking to reach a company's Web site. Netli operates several such data centers in co-location facilities around the world, including one in the Far East that provides Millipore's distributor customers with a local on-ramp.
The other node, called an Application Access Point, consists of a rack-mountable server that resides in the customer's data center; Web server traffic flows to and from the Netli network through this appliance.
Netli's transport protocol moves packets across the long-haul segment of the Internet between the virtual data center and the access point. The protocol reduces the number of round-trips involved in a page download, accelerating the load time and, therefore, speeding transactions.