Fujitsu Jacks Up Retail Voltage

By  Marc Millstein — July 27, 2006

 

When the now debunked Wall Street Journal report, based largely on a Visa alert, implicated retail point of sale systems in general and Fujitsu in particular as presenting a clear and present data security threat to consumers, the vendor took swift action to set the record straight. Before long, Visa issued a clarification exonerating Fujitsu. But the incident frustrated Fujitsu executives whose time and energy had to be diverted from their prime mission of serving retail and launching several new key initiatives, including promoting the concept of pervasive retailing, making several prominent new executive hires, launching new product lines and implementing a new go-to market alliance. In an interview shortly after the WSJ-Visa report, Austen Mulinder, President and CEO of Fujitsu Transaction Solutions, made time to speak with RIS about the data security episode and, much more important, he said, the company's expanding and exclusive focus on retail.      

RIS: I know you don't want to spend a lot of time rehashing the WSJ-Visa situation, but could you share quickly with us what happened and why?  Then we can move on to other matters.

Austen:  I think most retailers who looked at it understand the reality of the distinction between point of sale systems and tracing tools. The amount of time we spent managing fallout with customers and prospects was minimal.  Most of our customers thought the WSJ article was irrelevant. But we did have to spend an enormous amount of time dealing with all other media that picked up on the story. We tried to be patient and clarify that the WSJ interpretation was misleading. But the POS space is complex and people outside retailing really thought there was a story there.

RIS: What is a tracing tool?

Austen: Particularly in the early stages of a POS development, there are various things that can go wrong, and as a result, software engineers often are trying to understand really complex issues. One of the tools used across the industry to capture all the data around the POS system is a tracing tool, which is then used to analyze POS issues.  If used appropriately, such as in a lab environment, tracing tools do not capture any real pin block data and there is no [security] issue at all. Even in a live environment, there are standards to avoid security problems. We have spent an enormous amount of time with Visa discussing the complexities of POS and POS security, and as a result, they have issued a fresh alert that tries to clarify the message sent in the first alert. We appreciate the efforts Visa has made to help eliminate any misunderstandings.

RIS: Moving on to more pressing matters, it would seem, you have a lot going on at Fujitsu in the areas of pervasive retailing, high-profile hires, other key initiatives and the overall health of the company. Let's start with how Fujitsu is doing.

Austen:  We are just closing the books on Q4 which closed March 31 and it has absolutely been the biggest quarter in the history of the company any way you measure it.  It caps off another very solid year. At this point customer satisfaction remains high and our record of stability is extremely strong in the marketplace. We are adding many great retailers to our customer base who are quickly prepared to be references for us.

RIS:  Can you break out some of your momentum and sales figures in the retail vertical?

Austen: Fujitsu's corporate policy does not allow us to make public specific numbers. But our entire focus is on retailing. We have exited anything apart from the retail space.  I look at retail as a consumer transaction environment that uses technology to conduct business with its customers, so for us that is POS and kiosks, self service, etc. We are not trying to play in multiple markets. We have made strategic decisions to exit other markets so we can put the full weight of our capability into the retailing space.

RIS: Tell us about Pervasive Retailing and how that is going.

Austen:  The reaction from market influencers has been exceptionally positive. In addition to deployments in our customer base, we are in deep conversations with several Tier 1 retailers. They see opportunities to do business with us on the tool kit side. The big guys have heard the same things as everybody else, which is that Fujitsu has tremendous momentum. The opportunity is for us to help them surround existing systems with interoperability provided by the pervasive retailing tool kit.  I think we have hit a home run here.

RIS: Can you talk about some of your new hires, such as Scott Langdoc, formerly senior retail analyst with AMR, and Ed Soladay, former president of CRS?

Austen: Ed is our COO and has already had a significant impact on Fujitsu and is instrumental in our focus on software. Scott could have gone to work for any of the major vendors, yet he came to Fujitsu. Part of the reason is our culture and value set, but I think the key for Scott was the Pervasive RetailingTM vision and the one-stop shop retailers will need to realize the Pervasive Retailing future. We are relentless about delivering the message that the Pervasive Retailing future is one where retailers are prepared to cater to consumers who take charge of the shopping experience, who expect transparency across channels, who use and communicate with a variety of devices, and whose expectations are going to rise and rise. Our point to retailers is that if they are going to master that increasingly complex environment, they need access to retail focused software engineering know how, hardware engineering know how, mobile engineering know how, network engineering know how and multi-vendor service engineering know how. We have consciously built this set of competencies. Scott completely aligns himself with this vision. 

RIS: So Scott is going to assume an evangelical role for the vision?

Austen:  Scott is going to take the CTO role, but it will probably be a little different than most CTO roles. Scott will lead the evolution of our value proposition strategy while being our foremost customer advocate. He will be a key influencer of our technical strategy for our value proposition to the market, a key influence on in-house technical strategy for managing our business and the spiritual leader for our solution architects. We don't want Scott spending a lot of time managing operations. We already have good execution. We are looking for Scott to help identify and work with executives who are the right leaders in the various components of the Pervasive Retailin Framework and with the right companies and executives we need to bring into the alliance. 

RIS:  Did you just give us a scoop there and tell us that there will be a Pervasive Retailing Alliance?

Austen:  Yeah, I guess I did.  One of the things that we are in the process of building is such an alliance. We have hired IBM's top retailing partner executive, Derrick Hurley, to be the director of the Pervasive Retailing Alliance. It will be a Fujitsu alliance with founding members like Microsoft and Intel. There will be up to 30 players as part of the alliance. You saw the announcement we made about Reflexis, in our opinion, the best-of-breed player for retail enterprise execution that we will be integrating into the Pervasive Retailing Framework. I am personally excited about this relationship and about a partner we selected for RFID enabled contactless payment. We are looking to pick single players across the scope of the Pervasive Retailing network and build exclusive channel relationships with many of them. We see real potential to incubate best-of-breed innovators inside the Pervasive Retailing Alliance, and with our customer base, to help them grow much faster than they could have done on their own.  That creates a potential for some interesting financial arrangements between us and the members of the alliance.

RIS:  I know that the word exclusive seems obvious, but can you elaborate on that?

Austen:  I will give you an example. The agreement with Reflexis allows them to have their own channel with Fujitsu as the only third-party channel that will be selling their products in the retail market . 

RIS:  So in retail it is exclusive through you, but if they go outside of retail it is a different ball game?

Austen:  Reflexis has real potential in several other verticals and they can go after that independently of us. But in terms of the market where I think we've got a strong customer base, I am looking for exclusive channel rights. By the way, that does not mean to say that we will look for exclusive channel rights for every single solution or company in the framework.  We are going to be careful about how many things we choose to sell direct, but you can rest assured that if we see something as a strong differentiator, best of breed, with high pay back to retailers, we are going to be looking for that kind of a relationship.

RIS: Some of this is driven by your own vision of where Fujitsu needs to go and what the market is demanding right now.  Would it be fair to say some of this is a reflection of how the market is changing and the types of things Oracle is doing?

Austen:  I don't think this is a reaction to Oracle.  Oracle has a valid strategy and is building a broad retail enterprise application portfolio and we don't really bump into that. Our approach is going to be to persuade customers that Fujitsu's one-stop shop in-store solution is a better choice. In the event one of our customers wants to use the Oracle POS solution, however, we can still surround it with the pervasive retailing tool kit.  Our strategy is not all or nothing.  We've got an enormous number of high value components and two interesting umbrellas.  We've got the interoperability umbrella that says we can create interoperability in the retail environment and the second is multi-vendor lifecycle services. We can support any device in a retail store. If we get picked for any one component, our experience is almost 100% that it becomes the penetration point and the customer learns to enjoy our customer centricity and our execution capability and then they look to invest in more solutions from us.

RIS:  What have we not brought up that you want to mention?

Austen:  One of the things we have been doing is assembling business components towards the moment of truth when the existence of consumer facing devices during the shopping journey creates the opportunity for targeted real-time promotions at the point of purchase.  We have carefully assembled all of the pieces to get ready for that moment from the devices themselves to the software that delivers advertising, etc. We want to take the opportunity to grow our business, not just on the devices, but also on transaction basis in terms of what we can drive by doing promotions at the point of purchase.  It is not a new idea, but I think the time is coming fast and we are going to help realize a long-term vision. Watch this space. 

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