Microsoft Business Network (MBN)--Coming of Age?
Part Three: Challenges and Competition
the end of March, during its annual conference for North American customers,
Convergence 2004, Microsoft Corporation's
(NASDAQ: MSFT) Microsoft Business Solutions (MBS)
division previewed upcoming versions of its enterprise resource planning
(ERP) and customer relationship management (CRM) solutions: MBS
Axapta, MBS Great Plains, MBS Navision,
MBS Solomon, Microsoft CRM, and related services.
The main takeaway was that MBS continues to invest in its current offerings
to provide customers with the enriched functionality they need to remain competitive
in today's evolving marketplace and exploit their existing information technology
(IT) investments by streamlining business processes, and by more easily accessing
the information that they need to make educated business decisions.
the immense ongoing development undertaking which began at MBS, even before
its strategy was espoused in 2002 (see Microsoft
Lays Enforced-Concrete Foundation for Its Business Solutions), the
incremental approach towards building a more complete enterprise applications
portfolio seems logical, if not the only possible option. MBS hereby strives
to not only retain the existing install base within the maturing ERP product
lines, but also to stimulate the acceptance of recent ERP-adjacent product extensions,
some of which are featuring parts of the latest Web services-based technology,
and drive sales or upgrades of high-volume products like Microsoft Office
2003 within the MBS' large install base that is nearing the 300,000
one should not be surprised by MBS' recent more upbeat results which were generated,
in a great part, from up-selling so-called "surrounding" applications like Microsoft
Business Network (MBN), Microsoft Demand Planner,
or Microsoft Business Portal to its existing ERP users (see
Keeps on Rounding Up Its Business Solutions). Namely, late in 2003,
to enhance its current line of ERP business solutions and service offerings
that help its small, mid-market segment and even some large corporate customers
improve the effectiveness of current ERP investments, MBS announced the general
availability of MBN, and an upcoming delivery of two demand planning modules.
all, while it is the likes of Wal-Mart, Home Depot,
or Target that are driving these electronic data interchange
(EDI) requests, it is the middle-market distributors and manufacturers that
fill their shelves. After serving as spokes within an EDI hub, some of these
same, mid-market companies might be looking to achieve further efficiencies,
and a more substantial payback on their initial EDI investment by, in turn,
promoting electronic document exchange within their own, lower-tier supplier
base. What is "good for the goose" should be "good for the gander", and, thus,
many smaller suppliers realize that if EDI saves x
percent or so in costs for the likes of Wal-Mart, why should not it save them
some percentage of costs as well?
is Part Three of a four-part note.
One detailed recent events.
Two covered the market impact.
Four will continue discussing challenges and make user recommendations.
The Promise of XML
In theory, extensible markup language (XML) shows many advantages, since unlike EDI, it was specifically designed to use the Internet as the data transfer mechanism. Also, while organizations in an EDI network have to set up direct "point-to-point" connections between each participating system, XML's "extensibility" means that any number of participating companies which have agreed on a data format for transactions, can supposedly freely exchange data electronically. In short, XML has initially not only promised to ease the technical pain of integrating the flow of data between systems, applications and people, but also to reduce the cost of this process through faster transactions throughput, improved trading partners' data quality, elimination of manual processes, and other potential cost saving benefits.
Nevertheless, while at the surface there are few economic or strategic reasons for organizations to persist with EDI, many seem reluctant to adopt the alternative at this stage. In fact, there has been almost negligible growth in the number of organizations replacing their EDI-based systems with XML. The key reason for this is that the number of organizations using XML has not yet reached the "critical mass" of at least a double-digit percentage of overall B2B data flow, while the estimated number of large and mid-sized organizations using EDI is estimated between 250,000 and 350,000 worldwide.
For the time being, the wealth of businesses that have invested significant resources in EDI still use the technology for B2B communications, and many see EDI as the best choice for secure, reliable transactions, given it is a mature, standardized, and trusted medium. Namely, the leading EDI standards, such as the X12 and EDIFACT, continue to meet the ever-evolving needs of more than a dozen industries, as opposed to the ongoing evolution of a myriad of industry-specific extensions (dialects) to the base XML standard, many of which are non-interoperable and still a work in progress. Eventually, the XML traffic will inevitably exceed EDI X12 protocol traffic, but it will not necessarily be a replacement. X12 is still the dominant format for things like purchase orders and invoices, whereas for newer things, like collaborative forecasting and planning, there are no widely used X12 documents so far, which might motivate users to exchange these data in XML.
MBS needs to build and nurture its own community of independent service
providers (ISVs) willing to add their products and services on top of MBN.
Also, it is only logical that EDI value-added networks (VANs) and other
providers of integration as a service would seek to reinvigorate their business
value proposition by adding applications to their "plumbing" portfolios to offer
more of an application-like, vertical solutions-oriented approach to trading
community integration requirements.
an example, vendors that have eyed delivering packaged data synchronization
software and transaction delivery services would be e-commerce network services
vendor Transora and product information management
(PIM) software maker Trigo Technologies. Both recently announced
plans to work together on a joint offering that combines the two companies'
products. Further examples would be Inovis and Sterling
Commerce, which partnered to fill in key functional gaps in PIM and
data synchronization areas. Moreover, the direct acquisition of HAHT
Commerce by Global eXchange Services (GXS)
shows its commitment to the retail sector (see GXS
Acquires HAHT Commerce for More Synchronized Retail B2B Data). MBS
would certainly benefit from signing one of these large, highly visible public
trading exchanges, such as GXS, Transora or Elemica,
which could, in turn, benefit from providing tens of thousands of their participants
and trading partners with lower-cost access to their networks.
brings us to the fact that the MBS' competition has not been sitting still either.
Namely, Microsoft will provide built-in support for various
EDI standards and EDI data transports, partly by working on EDI and other areas
of connectivity extension and enhancement. This is in addition to working with
Inovis, with Covast (whose EDI Accelerator for BizTalk
automatically renders an XML representation of the EDI format) and vSync
(which markets EDI for MBS Great Plains that allows the user to send and receive
EDI documents from within the ERP package's sales order and purchase order modules)..
However, over last ten years, another MBS' EDI partner, eBridge,
has also established partnerships with many other leading mid-market ERP and
accounting software vendors, such as ACCPAC, Best Software,
Epicor Software, Exact Software, Intuit,
Open Systems, and Softline, which recently,
together with ACCPAC, were acquired by the MBS' archrival Best Software's parent
Sage Group (see Will
Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions?).
eBridge provides tools that allow mid-market ERP and accounting packages to
accommodate bi-directional data exchanges within an EDI (ANSI X12 and EDIFACT
for international deployments) or XML framework. The products include the flagship
eBridge EDI, Mapper (for reformatting e-business
documents), ASN, CRM Integration, and the
eBridge Software Development Kit.
also partners with ACOM, whose EZConnect engine
also allows trading partners to exchange documents in compliance with EDI, XML,
and other structured data formats. Furthermore, a small ERP vendor, IQMS,
which might occasionally compete with MBS Great Plains or Navision in certain
industries, has a native EDI module that supports ANSI X12, EDIFACT, and Odette
file formats. It is XML enabled and supports file transfer protocol
(FTP) transmission and receipt of files. The system generates and processes
virtually all commonly required transaction sets. For inbound transactions,
it supports remittance advice (820); planning/release schedule (830); purchase
orders (850); change orders (860); shipping schedule (862); order status report
(870); receiving advice (861); functional acknowledgement (997); cash application
(824); and text message (864) when it comes to X12 format, and DELFOR (a delivery
schedule message from a buyer to a supplier about product requirements) and
DELJIT (delivery just-in-time message which relays the precise delivery sequence
of a JIT schedule) EDIFACT transactions. On the outbound transactions side,
it supports invoicing (810); planning/release schedule (830); shipments (ASN)
(856); order acknowledgement (855); vendor shipping schedule (865); and functional
acknowledgement (997) for X12 and DESADV (dispatch advice message) for EDIFACT—a
message specifying details for goods dispatched or ready for dispatch under
due to the intrinsic integration with the rest of the EnterpriseIQ
ERP suite, outbound transactions are sent directly from the system, that also
includes template-mapping tools and eliminates the need for third-party translators,
which are a default for a vast majority of ERP systems that require third-party
EDI solutions. When it comes to industry savvy, the system is based on the Automotive
Industry Action Group (AIAG) supply chain business
practices, while a number of flexibility business rules generate exceptions,
such as to flag and report on dramatic quantity changes in EDI transactions
or to identify maximum allowed quantity increase or decrease based on the selected
day range and allowed percentage change (user defined limits). Logically, the
orders that comply with the rules are passed through to the sales module, while
the orders that do not comply, get flagged. Finally, the rules can be setup
either for each EDI transaction code number or each customer. Although IQMS
will not often compete with MBS or MBN, it is worth mentioning at least for
giving a flavor for what expertise is needed for an efficient deployment of
possibly the fiercest competition to MBN might come from ACCPAC Exchange,
the first EDI offering to integrate mid-market accounting applications with
IBM Business Exchange Services, aimed at delivering affordable
EDI transaction documents over the Internet. ACCPAC Exchange was designed to
enable small and mid-size businesses to overcome the significant cost and infrastructure
obstacles typically associated with traditional EDI VANs and to relatively easily
create inexpensive trading communities with their suppliers and customers. Utilizing
the Internet, the fairly new product supports established EDI (ANSI X12 and
EDIFACT) and emerging "EDI over the Internet" (AS1 and AS2) standards.
Exchange also integrates with the ACCPAC Advantage Series and
ACCPAC Pro Series accounting systems, and it consists of software
and services that should deliver affordable Internet-based EDI processing. Additional
integration exists between ACCPAC Exchange ASN and the ACCPAC Warehouse
Management System (WMS) module. Its components include
a translator, mapper, and application integrator. It uses Cyclone Activator
as its communication software, and IBM Business Exchange Services as the gateway
for EDI communication. To that end, businesses can use the ACCPAC Exchange
Transaction Manager to send and receive business transactions to other
businesses. These transactions include purchase orders destined for a supplier-via
an EDI data transfer service hosted at ACCPAC Online. IBM Business
Exchange Services would then act as a central data transfer manager for EDI
transactions, transmitting the data either exclusively through the Internet
or, when required, by accessing traditional EDI networks. This flexible transaction
delivery should insulate businesses from the complexities of dealing with multiple
EDI networks, while enabling them to electronically trade with not only traditional
EDI VANs, but also Internet-based trading communities.
Businesses can either use ACCPAC Exchange to adopt pure Internet-based EDI right away, or, as the market evolves, to gradually adopt Internet-based EDI while benefiting from a lower cost alternative to the traditional EDI fees they may already be paying. The system's connectivity with traditional EDI networks should ensure a smooth transition, while integration with the ACCPAC accounting solution should provide for rapid implementation and increased operating efficiencies. ACCPAC Exchange Transaction Manager carries a suggested retail price of less than $6,000 (USD), while options for advanced shipment notices (ASNs) and file mapping to match vendor or supplier standards are also available. Transaction fees for ACCPAC Exchange start at $100 (USD) per month, which would be a fraction of the cost of traditional EDI services.
concludes Part Three of a four-part note.
One detailed recent events.
Two covered the market impact.
Four will continue discussing challenges and make user recommendations.