Behind FedEx's tech transformation

FedEx was one of the earliest big companies to adopt the Internet. The numbers tell the story. Almost 75 percent of the package delivery company's roughly $20 billion in annual volume these days gets booked online. That's why FedEx, which built up proprietary electronic systems over the last couple of decades, has rapidly embraced a browser-based network of Internet interconnections.

The upshot is that FedEx is close to reaching the point where paper air bills are rapidly becoming "a thing of the past for us," according to Denise Wood, vice president of customer service.

Wood sat down with CNET News.com on a recent visit to San Francisco to talk about the IT challenges in a company that delivers 5 million packages every day.

Q: Fedex has been very aggressive on the acquisition front the last four or five years. But you also have some 20 years of legacy code and the databases that have grown up around them. Does this pose any problems for customers, and have you had to make special efforts to make the different software interoperate?
A: Well, I think we have a compelling case on Fedex.com. You don't need anything more sophisticated than browser access to get the power of 20 years of legacy code.

We have about a $1.5 billion investment in IT every year, and there are 5,000 or 6,000 guys going to work to make these systems integrate. It is a massive undertaking. What we're trying to do is use Web technologies even before we get our systems integrated on the back end and integrate them for the customer.

It sounds like the chicken and the egg problem, that it's going to be there no matter how much work remains on the back end.
Right. We're adding this thin veneer to create the right experience for the customer while all of our smart guys do the heavy lifting in the background--and there's quite a bit of heavy lifting that's required.

So what's the biggest backroom challenge still facing FedEx?
I think the most difficult part about it is not the technology or the software; it's rationalizing the business rules so they make sense to the customer.

What do you mean?
When you have companies with different operating rules,

"Paper air bills are rapidly becoming a thing of the past for us."

how do you put an experience around that which keeps it intuitive for the customer? If they've been using the FedEx courier for 20 years, then they understand how we do business...We want to just rationalize those business rules and put them in front of customers so we're still easy to deal with.

How many packages do you deliver?
Eight million packages a day.

As far as effecting the digital transformation of the company, then, do you believe you're pretty far along in that process?
Paper air bills are rapidly becoming a thing of the past for us. Almost 75 percent of our volume gets booked online with FedEx, and 16 percent of that is booked online through the simplest way to interface with us--which is the browser. We focus very much on trying to drive the amount of online activity up. It's much cheaper to provide that service.

Do you find that there are a lot of large customers using the Net to conclude their shipping transactions via FedEx?
We're seeing a transition. Three or four years ago, we were putting in a lot of high-end Microsoft NT servers with a transaction processing software that was FedEx proprietary. And our customers would code to that. They did that for volume. You might see them ship 100,000 items in a single day out of a single site, generating 100,000 labels and 100,000 contracts uploaded to FedEx. But we're seeing more and more customers moving to interconnect with FedEx via the Net and not have those proprietary systems out there.

How do you support what sounds like a pretty large Web service?
We have our e-tools so you can interface to us via an API. We're just in beta now with an XML version so we will be able to go from the browser on up to a very high-speed direct connect.

Are you a big Linux shop?
I really have to tell you--we're a big everything shop. We have a fabulous relationship with Microsoft. Our customers who hit Fedex.com are overwhelmingly using Microsoft IE

"I don't think we have the inner DNA to wait and see."

browsers. That being said, there is certainly an interest in Linux and the value proposition of running it on Intel platforms. It's very attractive to us.

Are Web services on your radar as well, or are you taking a wait-and-see approach?
I don't think we have the inner DNA to wait and see. There's definitely a lot of activity going on in that area. I'm not a technology purist. I never know exactly what some of these things are other than great marketing campaigns, but we're definitely looking at Web services. Where Fedex is going to be--we're going to employ those technologies that allow us to most efficiently leverage our legacy systems.

So you're keeping all options open?
We're definitely dealing in a heterogeneous environment and definitely trying to pick the sweet spot in all that. We've gotten a tremendous advantage out of diving into Java, trying to merge to a J2EE standard, developing some fairly rigorous internal technology standards with Web Logic application servers. We've gotten a lot of leverage out of some of these grandiose technology shifts, and we're trying to maintain everything that we gained in velocity and reusability and continue to migrate along the Web services direction.

Are technology suppliers being nicer? That is, are they offering more than they did two or three years ago because of the softening in demand for their products?
There is absolutely no question...While we're scrutinizing the investments a lot more, we always felt we got good value out of our IT investment, but it's definitely been a tougher market.

And I suppose the amount of money you're going spend on IT this year hasn't moved substantially up either?
We've maintained a very stable investment the last three or four years. Before that, we certainly had a very significant increase in IT, but it wasn't out of proportion to our overall revenues. The last year was tough, and everyone's been tough-toeing the line on new investments.