Why Bonhams Built Its Systems In-House

Bonhams' management team wanted a user-friendly trading system that would provide accurate sales, stock and customer information and would make the production of catalogues easier.

Whitehead decided to build the system in-house because, having worked with packaged applications like SAP, which Sotheby's uses, and Siebel, which Christie's uses, he didn't think they were flexible enough. He knew those packages would require heavy customization, and with that customization would come increased maintenance fees, which Bonhams couldn't afford. Given Whitehead's training as a naval architect and product designer and the half-decade he spent from 1986 to 1992 using computers to develop World Cup racing yachts, he felt he had the know-how to develop a lower-cost system that would be more targeted to the auction industry than shrink-wrapped software.

"The cost of tailoring such [enterprise software] packages is so high. If you have the right mind-set, the right skills and the right tools, you can develop a solution at a fraction of the price [of the packaged applications] that is significantly better, and that is what we've done," says Whitehead.

Bonhams' IT director also wanted to build a single system that encompassed as many activities and business processes in which the auction house engages as possible so that he wouldn't have to patch together a bunch of disparate systems. So the system he built also includes functions for print production, managing and valuing the properties that Bonhams puts up for sale, and customer relationship management.

Whitehead, who has hired IT staff from Sotheby's and Christie's, notes that his competitors have to integrate a bunch of systems to get the functionality they need because one packaged system doesn't do it all. In fact, Sotheby's expenses grew so high by 2003 that the company outsourced the management and maintenance of its mainframe systems and laid off six IT workers as part of its cost-cutting effort, according to a report from Wedbush Morgan Securities. By contrast, Bonhams' IT costs have dropped from $3.5 million in 2001 to approximately $1.6 million today because it's running fewer systems and using open source. Whitehead says his Linux servers are so reliable that he needs only two systems analysts to support them.

Whitehead's decision to build Bonhams' core trading system in-house flies in the face of conventional IT wisdom. "The default best practice across the industry is, it's better to buy than build," says Randy Heffner, an analyst with Forrester Research. Heffner says most companies choose to implement packaged software because they don't want to spend time and money on an activity that isn't a core competency. Bonhams chose to swim against that tide.

The Open Source Stack

Whitehead and two developers began building the system, dubbed A3, in May 2001, well before Brooks' acquisition spree was complete. The IT director first had to decide which database software would form the core of A3. He opted for software and development tools from vendor Progress for two reasons: They were less expensive than Oracle at the high end of the market, and more scalable and reliable than Microsoft at the low end. He also liked the software because it provided a single programming language for three separate activities - coding the database, programming the business logic and writing the programs that deliver content to the Web. "That means less [for developers] to learn, fewer errors and less time spent debugging code," says Whitehead.

Whitehead originally wanted to deploy Progress on a distributed computing architecture using Sun's Solaris operating system; running A3 on a bunch of small servers rather than one large server would prevent it from crashing if the system was hit with a barrage of transactions. But Whitehead discovered that the cost of licensing technology from Sun for that kind of distributed computing architecture was prohibitive. So instead he chose to go with Linux. And IBM, eager to enter the Linux market, made Whitehead an offer he couldn't refuse on its X series servers. Whitehead also uses Apache Web servers, Tomcat, the open source version of the Java servlet, FOP, an open source typesetting system, and many other open source applications.

Whitehead is a strong proponent of open source because, he says, it's such a reliable operating system. "The cost benefits of deploying on Linux are dramatic," Whitehead notes, adding that running A3 on Linux costs less than half of what it would cost to run it on Solaris.

With the architecture in place, Whitehead and his programmers began developing a framework for storing and displaying information in A3. The framework establishes the user interface for A3 and manages all the business rules that dictate how A3 works. The application has programming logic for all manner of activities, from authenticating users to tracking properties, mining customer information and producing reports on sales activity. The application interface is stored in a database so that developers can reuse it quickly and easily when working on enhancements to A3.

Whitehead originally planned to launch A3 in the summer of 2002, but the pace of acquisitions and the need to build the acquired companies' processes into A3 slowed down the project. A3 went live six months after originally planned, in January 2003. Whitehead has said that A3 cost approximately $800,000 to develop.