"B2B E-Business in the Supply Chain: New Services and Technologies Require Companies To Reevaluate Their Strategies"

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"B2B has become a critical lifeline for today’s businesses. The benefits of B2B in today’s ever changing business environment are well established and widely recognized. However, despite the recognized benefits and widespread adoption of B2B, the complexity that surrounds the onboarding and management of partners continues to inhibit organizations from realizing the full benefits that B2B can provide. "
Source: Sterling Commerce, an AT&T company

Resources Related to B2B E-Business in the Supply Chain: New Services and Technologies Require Companies To Reevaluate Their Strategies:

• Business-to-business (B2B) (Wikipedia)

B2B E-Business in the Supply Chain: New Services and Technologies Require Companies To Reevaluate Their Strategies

IT groups aspire to standardize on common integration platforms, but the pressure to integrate electronically with business partners as quickly as possible often forces companies to favor expediency over strategy. One manager AMR Research spoke with in our research said that B2B e-business "gets so complex, we will take help anywhere we can get it."

The need for quick and decisive action generally sends companies down multiple paths to achieve their integration objectives, often with a combination of licensed software and third-party services. Throw software as- a-service (SaaS) providers into the mix, whose offerings range from data translation and transformation to business applications, and it's easy to see how the B2B portfolio of a company can expand rapidly.

With the myriad technology choices available, it's important to understand the unique role each can play when building an overall B2B e-business strategy. The evaluation of vendors and service providers should be done taking four different perspectives :

• The approach to integration
• Options for deployment
• Variety of offerings
• Managed services provided

This article provides an overview of B2B e-business service and software products on the market, offering insight on how they can be used to build an overall B2B e-business strategy for the supply chain.

The expansion of trading-community integration drives B2B e-commerce

Long gone are the days when point-to-point integration between strategic partners, with the rest of the community depending on fax, phone, or e-mail to coordinate activities, suffices in managing the supply chain. Increasing the speed and efficiency of how goods and, ultimately, money move through the supply chain is in large part dependent on how quickly data is processed and communicated. Companies that already recognize this are much farther ahead in transforming to demand-driven supply networks (DDSN) because of their abilities to better orchestrate activities in a multitier, federated supply chain.

A combination of emerging technologies and the coming-of-age business models that were launched in the dot- com boom nearly 10 years ago are available today to meet the challenge of electronic communication in the trading community:

• Software as a service allows trading communities to interact and conduct commerce on a single, unified platform.
• Service-oriented architecture (SOA) provides new ways to access information and content as well as build workflows that support unique trading relationships between partners.
• The advent of managed services promises to relieve companies of the burden of connecting to and managing the communications with partners.
• The trading exchanges of the past have transformed into networks of companies working in mutual self- interest to achieve specific goals and objectives.

With the introduction and growing maturity of these new technologies and business models come heightened expectations from the user community, relentlessly pushing the industry toward pervasive electronic connectivity within and between enterprises (see "Performance-Driven Business Networks: Taking Competitive Capability to the Next Level"). The technologies, business practices, and communities that are developing now will form the foundation on which performance-driven business networks will be built.

The technology components

Even from our last review of B2B e-business in 2006, the market is changing rapidly (see "B2B E-Business: The Murky Evolution to Managed Services" for our earlier research). The building blocks for a B2B e-commerce strategy start at the transport layer and extend up the technology stack to workflow and business activity management as well as the business application itself.

The value-added network (VAN) still serves as an important component for many B2B strategies. Though more expensive than the virtually free Internet, it offers a level of security and integrity that many feel necessary for communication. VAN services still represent a significant revenue source for companies like EasyLink, GXS, Innovis, Sterling Commerce, and Descartes Systems Group, which is focused solely on the logistics industry. As an alternative, many companies are opting for managed file transfer services to move large blocks of data. Perceived as the least strategic of the B2B technology stack, this layer will grow in importance over concerns of data security and integrity.

Recognizing that point-to-point integration with partners is costly, time consuming, and extremely difficult to scale, many companies employ a layer of technology that translates and maps ingoing and outgoing transactions for internal and partner applications. It's a completely logical approach: one-to-many data translation and transformation versus the many-to-many model that point-to-point integration encourages.

The B2B gateway: simplifying e-business communications

Using B2B gateways has become a standard approach to simplifying the implementation and ongoing management of B2B e-business communications. Similar to enterprise application integration (EAI) software in concept, these B2B gateways differ in that they are built to manage electronic communications external to the enterprise. Translation of any data format to any data format is a requirement, with most providing the tools to manage workflow and control the processes that maintain the integrity and smooth flow of data. The use of SOA principles in building the platform is critical to facilitate integration and data management.

Most VAN operators have built gateways and translation software to enhance their network offerings. Widely used in a variety of industries, they have a long track record of success, but are not the only alternatives on the market. Axway, Extol, iWay, SEEBURGER, TIE Commerce, and True Commerce are among the companies that offer software that has successfully helped companies scale their B2B e-commerce initiatives cost effectively. There's good news for midmarket companies too: the relative ease of use and price points of these vendor products make them an attractive option (see "Midsize Companies Can Achieve B2B Parity With Larger Competitors").

EAI vendors are also expanding out past the four walls of the enterprise to operate in the trading community. Informatica is about to announce a B2B gateway that will allow companies to use the technology footprint they already have with the vendor.

Fast and reliable onboarding of partners along with the ongoing monitoring of network performance are essential ingredients to a B2B e-commerce strategy. They're also qualities your company should look for in this vendor category. Providers of translation and transformation software are moving aggressively up the technology stack, building in business event and activity monitoring, analytics, and business process management (BPM) to allow users to manage the onboarding process by exception as well as control the flow of data to support specific processes.

It was inevitable that vendors in the B2B integration market would take the leap of adding applications to their technology stacks to enhance their appeal to the market. A strong integration platform along with highly functional applications makes for a compelling value proposition (see "Sterling Commerce Attacks Multichannel Woes of Manufacturers and Retailers"). Descartes and Sterling Commerce are the most highly evolved examples in this category, but many other vendors are following.

Each vendor offering VAN, translation, and application products and services sell them either individually or bundled. Enterprises would be wise to independently evaluate each layer of the technology stack, but not ignore the potential value an integrated set of technologies and services can bring.

Third-party service providers play an important role

No B2B e-business roadmap can be drawn without considering the use of third-party portals, integration hubs, and application services. In fact, this can be the most expedient way to create connectivity with business partners. It's quite often used by companies to augment an existing B2B e-business infrastructure with application functionality and integration options not already in the portfolio.

Almost without exception, third-party services are deployed using the SaaS model, although in many cases not in the strictest definition of the term: multiple companies sharing the same application. Other deployment options include a company-dedicated application or database hosted by a third party and, in some cases, installations of software behind a company firewall with the option to have the third party administer and maintain it.

Regardless of what type of deployment chosen, pricing is almost always subscription based. Technology companies involved in B2B e-business rarely have only one model of deployment or pricing, though. The state of the software industry is such that most go to market with multiple choices to fit prospect requirements.

Value found in the strength of third-party service providers networks

What do third-party service providers bring to the table for companies that either have a well-established B2B e- business strategy or are in the early stages of forming one? The answer is the network. While a single company's B2B strategy is shaped to support many different and disparate functions, third-party providers in general train their sights on forming communities in a particular discipline, function, and even industry.

Very few companies can boast they are as well connected electronically to a community as third-party service providers. While a single enterprise might count its electronically integrated partners in the hundreds, integration to third-party services can provide access to tens of thousands of individual firms (see "The LeanLogistics Acquisition: What Is the Value of SaaS in Transportation Management?"). Service providers can also scale their integration services, offering portal and even electronic fax services in lieu of data integration.

The vendor landscape

The narrow and deep focus of third-party providers has led to the creation of innovative services, ranging from integration of data and content delivery to application functionality and document management. These services are sophisticated, well beyond what individual companies could afford to design and build.

Consider the following:

• GCommerce targets distribution industries, with deep penetration of the automotive aftermarket, to provide EDI services and document exchange among its network of customers.
• Hubspan offers B2B gateway management, along with secure managed file transfer that is offered as SaaS across industries such as retail, A&D, high tech, and biotechnology.
• Powerway provides services to connect multiple tiers within the automotive industry.
• Elemica, a self described network for the chemical industry, has tackled the thorny question of how best to meet the European Union's regulatory invoicing mandates as well as providing supply chain services.
• Exostar, delivering supply chain services for A&D, has built a unique security layer that meets the strict criteria laid down by the United States government and those of other nations.
• Datalliance focuses specifically on supporting vendor-managed inventory (VMI) initiatives between trading partners.
• SupplyScape offers e-pedigree and anti-counterfeiting services to the pharmaceutical industry. (Given the complexities, scope, and size of the retail supply chain, it's natural to find an abundance of service providers here.)
• SPS Commerce provides integration services between B2B buyers and sellers, offering multiple connectivity options and data synchronization.
• ecVision supplies application functionality to support product lifecycle management (PLM), supplier management, and supply chain visibility.
• In the business-to-consumer (B2C) environment, Edgenet combines product, supply chain, and marketing data to provide a guided selling experience for end consumers.
• iCongo offers a complete suite of services that range from catalog management and procurement to consumer storefront.

Companies that looked for transportation and global trade management (GTM) services, including integration, data management, and content management, were very early adopters of the SaaS model. TradeBeam and QuestaWeb deliver GTM functionality entirely on a SaaS platform, while Management Dynamics and Integration Point offer services that provide trade content, such as denied-party screening and licensing on demand to a variety of applications.

LeanLogistics, Transplace, One Network, and BestTransport have established themselves as leaders in North American freight management. GT Nexus, along with Freightgate and Descartes, offer global, multimodal transportation management over the web.

Procurement and sourcing also enjoys the same advantages from a SaaS model that its logistics peers do. Ariba and SupplyOn, an exchange with roots in the European auto industry, both have created significant communities that share data, workflow, and applications.

Finally, there are at least two companies that have aspirations of becoming web-based supply chain application suites. E2open has already introduced a wide variety of services in high tech (see "E2open Delivers the Goods in Value Chain Collaboration"), and Mitrix has had successful implementations in steel and computer peripherals.

Subscription-based services are also being adopted by companies that traditionally sold through a software license model. The following are all examples of how the SaaS model is permeating the business models of most enterprise technology companies:

• Axway for pharmaceutical and supply chain compliance
• i2 Technologies, Infor, Manhattan Associates, Red Prairie, and Sterling Commerce in transportation, event management, and global trade management
• Inovis for procurement performance management

EAI vendors are also expanding out past the four walls of the enterprise to operate in the trading community.

With most service providers typically focused on a particular business process and community, one question begs to be asked: Will there ever be a service deployed using the SaaS model that could become the B2B e- business hub for an entire enterprise? Crossgate, which lays claim to 3,000 customers and a network of 34,000 partners, is ready to take the challenge on. With a strong partnership with SAP, the company is launching an aggressive expansion into North America and the rest of world to demonstrate the effectiveness of using web- based services for integration.

SaaS is an alternative to, not a replacement for, the traditional technology deployment model

As attractive as the SaaS model appears, it's not the panacea in all instances for B2B e-business. The acid test is in identifying the network that's more valuable: the company's or the third party's?

Companies create their own networks to fill in the white spaces of B2B, connecting to partners that aren't served by communities organized by external services. Many companies also feel the networks they create give them a leg up on responding to customer requests quickly and maintaining a close relationship to strategic partners.

At the same time, the breadth of connectivity a third party provides could be far greater than what an individual company can onboard and support. Relationship and direct control versus a large community of already integrated partners are the tradeoffs and the basis on which to decide whether to keep integration activities in house or build a dependency on third parties.

Managed services: Does it make sense to outsource network operations?

Managed services transferring some or all of the operational responsibility for maintaining a B2B e-business infrastructure and related applications to an outside party is steadily growing in adoption. By definition, any technology delivered through SaaS is a managed service. Companies that own the software license of a B2B gateway and related products but have neither the desire nor capacity to manage a network are turning to their vendors and service providers for onboarding of partners, including mapping, testing, training, and ongoing management of the network. Virtually every vendor and service provider in this article provides managed service offerings, regardless of where the technology sits.

A recent study by the Stanford University Global Supply Chain Forum found that about half of the companies interviewed use or would consider using managed services from their technology vendors. In our own research, we have found that large companies with extensive networks, both physical and informational, are the most likely users, particularly if they were predisposed toward outsourced, non-strategic activities in general.

Ironically, midsize companies are the most likely to resist the offer of managed services, with many feeling they can be more productive and cost-effective using their own personnel. The Stanford study found that, on the whole, users of managed services were satisfied. Forty percent of respondents agreed, and ten percent strongly agreed that outsourcing management of B2B has allowed them to gain new capabilities that allowed competitive differentiation.

Managed services also take other forms than just implementation and ongoing operations. Content delivery, document management, and providing domain expertise to help customers actualize the value of their technologies are common service deliveries. AMR Research is seeing widespread usage in the onboarding of partners, particularly across a multinational supply network. For this reason, presence of managed services providers in local geographies is a competitive differentiator. The ability to provide 24-7 support with local customer service representatives is a much sought-after capability by customers.

The choices are many it's time for an honest appraisal of your B2B capabilities Most companies recognize the value and strive to connect a much larger portion of trading partners electronically, but the building and ongoing management of a broader network often falls to a very low level of prioritization. ERP vendors that support the enterprise also fall far short in providing tools to grow B2B connectivity, instead concentrating on integration of internal applications.

It's not by happenstance this occurs. Building the network for B2B e-business is a tedious, complex, and costly undertaking. In today's enterprise environment, if technology can't deliver quantitative value in less than a year, the initiatives they support at best lose momentum and at worst are scaled back or ended.

Unfortunately, many B2B projects fall victim to this phenomena. Time to value is critical, so the use of software and services has to be made a consideration for enterprises that don't have the skills, patience, or focus to implement and manage a B2B e-business network in the supply chain.

I look forward to hearing your experiences and feedback-jfontanella@amrresearch.com.

Tuesday, May 27, 2008

John Fontanella