We had a really good session last week with an analyst who covers our industry exceptionally well — and we had a really interesting debate about what multi-tenancy is, and whether it was import for SaaS (or any of the growing number of other “aaS’s” sprouting up…).  For the record, I have a pretty simple definition of multi-tenancy, and I think true multi-tenancy is ultimately required for successful SaaS platforms.  If you are deploying a new stack/instance/virtual machine/OS for every new client, you are not multi-tenant.

When it comes to assessing whether or not a service provider is multi-tenant, I think of the landscape as:

• Sub-divisions - single-tenant
• Townhouses/condominiums - virtualized multi-tenant (meaning, in my opinion, not multi-tenant)
• Hotels - true multi-tenant

Sub-divisions:

If someone is buying hardware, installing an OS, and then populating it with software for you, this is not SaaS, it is hosting!  They may “position” (aka, spin) it as SaaS for purposes of enticing venture capital, but it is not.  If you even know what kind of hardware you are running on within your service provider, you may be in trouble.  If a service provider “consults/notifies/alerts” you when they are doing a memory upgrade — you live in a sub-division.  There is nothing wrong with this, hosting is a very mature business; but you are receiving only operational economies of scale (assuming the provider can operate a data center better than you can…).

So who cares?  Well, you do, maybe.  If you want to be able to scale down as well as up (meaning start small and grow with activity), a suburban home is not a great idea.  I love my 5 bedroom, center-hall colonial, but surprisingly I paid a 5-bedroom mortgage even when only 3 bedrooms were occupied (now its 4, and we’ve decided to live with that 5th bedroom “underutilized”).  I also do not have much cost-efficiency with my neighbors beyond the roads (network).

Looking at it in IT terms, the server infrastructure, disk subsystem, LAN connections, etc are all dedicated.  The OS instance, software licenses, patches, upgrades, etc are being done expressly for me.  This is a great model in many cases, but it is not SaaS.  If you have a say in what version you are running, you are probably not in a true SaaS environment (if fact, here we talk about doing away with version numbers altogether…)

Townhouses/condominiums:

If you live or have-lived in a townhouse or condo, you know that this is really a hybrid model, with some shared infrastructure (typically building maintenance, lawns upkeep, etc), but still essentially a dedicated model once you are “inside”.  In the era of time-sharing this model was fantastic, because computer time was so expensive that the hardware was all we thought about, and software was just “there”.  Although you have some additional shared infrastructure with your neighbors, you still are on the hook for furniture, plumbing, electrical, HVAC, decorating, etc.  Most of us of course prefer it this way in our home life, but not necessarily so in the data center…

In the IT world, a common townhouse model is “virtualization” or “multi-instance”.  In this case, a dedicated software environment (typically from the OS up) is deployed for each customer, on shared hardware infrastructure.  This has a number of advantages over the “sub-division” model, but is still not (in my opinion) SaaS, for reasons we will come to in a moment.  Advantages include not only shared hardware, but efficiencies in hardware management, from server upgrades to back-up management.  This can be a highly efficient model when used for applications like web-hosting for instance (where the hardware cost to software cost is more favorable to hardware).

Under typical 21st century situations, however, this model is not SaaS because the dedicated capacity still includes — usually — an operating system, versioned technology stack, and potentially many customizations to the OS/networking environment that must be operated and maintained.  Look at just one example, OS security patches…  If the OS vendor (or open source development project) issues a patch, it must be checked and out and applied specifically to your environment.  Whoever is doing this may decide to forego this if you do not fund the work, or you may request that the vendor honor a “blackout” period and not apply it right away.  Meanwhile, other customers in the townhouse community may make different choices.  At the end of the day, everyone is “different”, which is actually worse than the “sub-division” because in addition to managing all of that, the operations team has to keep track of who did what when….

Hotel — true multi-tenant:

When you stay in a hotel, whether for an extended stay or overnight, you may worry about the location, the food available, shuttle service to/from the airport, and whether the internet access is fast enough — but I am willing to bet you will not worry about the air conditioning system.  The air conditioning, and a myriad of other details, belong to the proprietors of the establishment, and under normal circumstances you will not need to give them a second thought.  So it is with true SaaS.  SaaS is as much defined by what you don’t have to worry about as what you do:

• installation
• upgrades
• server rollouts/deployment
• backups
• versioning of any sort
• capacity

In its truest form, SaaS bears a striking similarity to the outstanding telecommunications infrastructure offered by the likes of Verizon, or the ubiquitous email connectivity of the BlackBerry (noticed very much recently because of a rare disruption in service).

But what does this have to do with multi-tenancy?  Multi-tenancy is the ultimate discipline, forcing providers to build highly scalable systems because they have no choice.  A typical node of GXS’s B2B outsourcing service might perform work for a dozen clients — which prevents us from doing anything special to the core stack for any one of them.  As a result, if needed, a client may be moved to another node or spread across several, with no change on their part.  We do this not because to operate at scale we must operate a multi-tenant environment (full disclosure, we do operate some dedicated environments to meet data privacy or regulatory requirements, but they are more costly both to us and to the customer).

If there is no multi-tenancy, customer specific configurations will become the norm, assuming the provider is customer oriented.  Over time environments will all become “exceptions” to the standard.  Initially happy customers will become dissatisfied as the promise of SaaS is unrealized, because they have bought space in a data center, not a true service offering. 

Thought leaders from across GXS bring you what we have seen in the industry during 2007 and what we can expect to see in 2008 based on the research, news, trends, industry discussions and our observations. Here is a list of our top predictions for B2B e-commerce in 2008…  

B2B Strategies  

1)     SaaS Platforms will ignite Global Innovation  

Prediction by GXS’s Chief Technology Strategist, John Radko  

The barriers to entry for providing services to a global audience are on the verge of collapsing completely from an infrastructure perspective. As the costs of infrastructure software has fallen due to both economies of scale and open-source initiatives, the last barrier has always been the cost of setting up and operating an infrastructure to handle the computing, networks and storage—and now that infrastructure will be available in a service format. Not only are several very innovative infrastructure services now available, but a fiercely competitive market appears to be forming, centered around Amazon (S3, SQS, EC2), Microsoft (Live Services) and Google.  

But even beyond base capabilities like storage, platforms offered as services are sprouting up in many additional places like SalesForce.com, Facebook, GXS Trading Grid^®, etc. The next generation of business software and services will be building on these platforms, which will enable them to offer new products faster and at much greater scale. Small companies will be distributed through these channels in much the same way that musicians and performers are channeled through music companies. Beyond just infrastructure, platform companies will provide provisioning, billing, authorization, etc. The best platform companies are already offering the ability for partners that build on them to integrate not only with infrastructure services but also other services built on the same platform—the natural evolution of the current mash up craze, but taken beyond the web.  

The freedom to build services on pre-existing infrastructures offered as a service and priced as utilities will dramatically lower the barriers to entry for innovators, and that will unleash the next wave of innovation.  

2)     BPO for B2B Goes Mainstream  

Prediction by GXS Industry and Product Marketing Manager, Ryan Kraudel  

The past two decades have seen a fundamental shift in business models driven by the modularization of the functions of a company and emphasizing focus on the core business functions and differentiators that create value for customers. This has lead to an explosion in outsourcing of business functions that are critical to the business operations, but do not differentiate the business from its competitors. This includes functions such as manufacturing, HR/payroll, logistics and some IT functions. The primary drivers of these outsourcing arrangements have historically been focused on cost-takeout and eliminating depreciating assets. However, we are now seeing new areas of outsourcing driving key top-line revenue and business efficiencies that are shifting the outsourcing focus from cost-elimination to business benefit.  

One example of this is B2B outsourcing, the outsourcing of the people, processes and technologies required to operate and maintain a global B2B e-commerce program. A recent study by the Stanford Global Supply Chain Management Forum has identified key business value from B2B outsourcing that led to an average of 245 percent ROI for B2B outsourcing. These include benefits such as automating more trading partners faster and more effectively with global B2B capabilities and supporting a broad range of B2B technologies, which has a direct impact on customer satisfaction. In fact, the Stanford study showed companies using B2B outsourcing showed an average of 62 percent improvement in customer satisfaction, which directly contributes to top-line benefits such as revenue generation, customer loyalty and customer longevity. These are just a few of the results and benefits that demonstrate why the rapid growth in B2B outsourcing around the world is expected to continue through the foreseeable future.  

3)     File Sizes to Multiply in B2B     

Prediction by GXS Vice President of Industry Marketing, Steve Keifer  

There is an increasing trend in B2B towards business partners sharing higher volumes of data packaged into much larger files. Historically, the typical B2B transaction exchanged between companies was on the order of kilobytes. The most commonly exchanged transactions are invoices and purchase orders which are only a few kilobytes in size. However, over the past 24 months, there has been a substantial increase in the exchange of larger files—megabytes and gigabytes in size. The phenomenon is occurring in nearly every industry sector. Examples include product images in retail, check image files in banking, call detail records in telecommunications, satellite images in logistics and CAD diagrams in manufacturing.  

The trend towards larger file transmission really should not be very surprising given the growth in file sizes that we have seen in the consumer segment. For over five years now consumers have been downloading and sharing large audio and video files for home entertainment. With the dramatic decreases in the cost of storage and networking, it is only logical that this trend would extend to business communications as well. In fact, demand for large file transfer in the workplace has increased steadily in recent years. Do you give a second thought to sending a 5MB email attachment to a colleague at one of your business partners?  

Unfortunately, all of the popular IP standards used for B2B lack the features such as compression or checkpoint/restart necessary to support high volumes of large file transfer. As a result, many companies are forced to license expensive, proprietary “managed file transfer” software to support their needs. It is too early to predict what will occur in 2008. But one thing is for sure, with customer demand rising quickly, large file transfer is becoming a mainstream B2B function need rather than a niche technology.  

Supply Chain Strategies  

4)    Global Trade, Local Trade-offs  

Prediction by GXS Director of Product Management, Pradheep Sampath  

In recent years, supply chains have been constructed and modified to become nimble, agile, demand-driven and of course global in response to the proliferation of global trade. Global trade will become so mainstream that consumers and organizations will no longer subject themselves to local supply chain trade-offs just because products happen to be sourced a dozen time zones away. Retailers who historically have carried separate sets of inventory to fulfill demand from brick-and-mortar, web and catalog channels will drive to further optimize and unify stock. Manufacturers who have traditionally shipped ocean containers or multi-case lots to automated distribution centers will pledge to streamline their direct-to-consumer shipment of “eaches” to suburbia.  

Manufacturers and retailers alike have for some time evaluated B2B integration platforms that help obliterate the divide between transactions and trade. In 2008, these platforms will no longer be perceived as bleeding edge, but as mandatory tools that oil the global trade engine. Speaking of oil–$100+ a barrel will mandate levels of supply chain efficiency that even academicians have only evangelized behind closed doors. Consolidators, contract manufacturers, customs brokers and suppliers will all strive to exchange logistics transactions that are accurate and actionable. Simple on-demand applications will serve as “windows into global trade” and will enjoy mass adoption, shielding both multi-national corporations as well as four-person factories from complexities of the transactions that define trade.  

5)    Physical and Financial Supply Chain Convergence Will Show Early Wins Among Early Adopters  

Prediction by GXS SVP Marketing and CMO, Bobby Patrick  

Leading supply chains will seek opportunities to inject working capital into their supply chains and optimize business performance for themselves and their trading partners. The convergence of the information flows in the physical and financials supply chains will enable financial institutions and logistics providers with new ammunition to benefit their customers and solve real business problems, such as dramatically increasing days payable outstanding (DPOs) for buyers and reducing days sales outstanding (DSOs) for suppliers.  

6)    It’s Time. The Greening of B2B  

Prediction by GXS Industry Marketing Director, Bryan Larkin  

In 2008, companies will look at B2B as a way to address their corporate responsibility with respect to green initiatives. Corporate Social Responsibility (CSR) and Environmental Health and Safety initiatives have started to include B2B in their scope, but in 2008 this will become a significant issue for companies. Companies that have not fully automated their supply chain will see that doing so will not only make their business more effective, it will also play a significant part in meeting their Corporate Social Responsibility initiatives.  

Best Practices for Success  

7)     Supply Chain Intelligence Is the Next BI  

Prediction by GXS Vice President of Product Management, Andrea Brody  

The demand to make sense out of the B2B transactions that move across the Internet and VPNs will increase 20 percent year over year. Since the movement of supply chain data via EDI and other formats has become mainstream, corporations now want to obtain valuable information from that data by correlating and providing business rules in order to effectively manage their supply chain to improve financial performance and exceed customer expectations. In today’s world of globalization, outsourcing and vertical disintegration, over 80 percent of the events that matter to a business will come from outside of the business. Investments in business intelligence and business activity monitoring software will require operational signals that transcend geographies, integrate widely diverse technology and break the barriers of standards and languages.  

8)    B2B Master Data Management: It’s the Data Stupid.  

Prediction by GXS Senior Global Product Manager, Melanie Ligons  

2008 will be the year when companies finally understand that the real challenge holding them back in the automated supply chain is lack of data quality. Information integrity issues associated with products and transactions reduce the ability of an organization to make appropriate short and long term decisions. Corporations have been hording data for years while analysts and consultants told them to do something with it. Now that business intelligence solutions are taking a primary place in the spotlight, companies are realizing that the data they’ve been hording is flawed—and so is the data they are using to run their business on a day to day basis.  

For years the retail and CPG space have struggled with new ways to share product data, only to be dismayed by the exorbitant costs and miniscule returns. High-tech manufacturers scoff at the idea of trying to adopt the Global Data Synchronization Network because they see it for what it is: just another way, using another technology, to share data. Sharing data isn’t the issue. Making sure companies have complete and accurate data, and then keeping it that way, is the real challenge.  

Leading companies will step up to the plate in 2008 and address the data quality issues by taking the first steps towards implementing solid B2B Data Management programs. They will follow in the steps of a few groundbreakers that have already paved the way. These data governance initiatives will need to address cultural, process and technical roadblocks that keep companies from successful supply chain execution. Most important will be changing the cultural aspect, as data accuracy will need to become part of the fabric of the business. The processes can be defined and supported by technology, but adherence and commitment will be the key to eliminating data quality problems.  

While numerous tools have been introduced to address information management over the past several years, the focus of the tools themselves, those selling the tools and the analysts covering them have been primarily on utilizing the tools to provide workflow for managing the flow of a subset of data within an enterprise (think Product Information Management in the B2B Data Management space). Now we are starting to see (Gartner 30 November 2007 - Methodologies: Blueprints for Success With Data Quality Improvement) the focus of analysts shift to actually addressing data quality. Smart executives will listen because this is something they can get their hands around. If the decisions they are making are based on flawed data, if the financial statements they are signing are based on inaccurate numbers, if the deals they are agreeing too might not be what they think they are, then they and their companies are in trouble.  

9)    e-Invoicing Adoption Continues to Skyrocket  

Prediction by GXS Senior Marketing Manager, Rochelle Cohen  

2008 will see a veritable explosion in the adoption of e-invoicing to help businesses automate their accounting processes. Businesses are increasingly applying technology to automate their procure-to-pay process and gain the dramatic business benefits that have been documented in numerous case studies and benchmarks. When e-invoicing is integrated with automated workflow and e-payments—which over 90 percent of large enterprises are doing or planning to implement—it enables companies to not only reap significant hard dollar cost savings from reduced operational costs associated with handling paper, but also to take advantage of discounts that can add millions of dollars to the company’s bottom line. Furthermore, more companies are taking advantage of the opportunity brought about by this “perfect storm” of automation to gain even greater savings by leveraging prorated discount structures or discounts negotiated once invoices are ready to be paid.  

Further fueling the adoption of e-invoicing are electronic invoicing legislation, such as the EU Council Directive 2001/115/EC which allows the electronic invoice to serve as the legal invoice in the European Union, and the availability of third party service providers that now offer a broad range of translation, protocol mediation and regulatory compliance services. These services enable companies to overcome the barriers that have prevented 100 percent trading partner participation in the past. For example, now even small trading partners can participate in e-invoicing programs without changing their current processes. And, suppliers are beginning to welcome the opportunity because they recognize the benefits they too will receive; this is particularly true when buyers promise faster payments in return for electronic invoicing. Furthermore, buyers who do business with international suppliers can rely on the third party service provider to ensure that varying local government regulations are satisfied. 2008 will be a breakthrough year for e-invoicing. The business case is clear, technology options providing seamless integration with in-house are readily available and the e-invoicing adoption rate has been growing steeply and steadily.  

Marketing  

10)   B2B Service Provider Blogs Become More Common and More Personal  

Prediction by GXS Global Product Manager, Justin Duewel-Zahniser  

Dialog with customers through blogs will increase, whereas using blogs as a medium for company promotional content will decline. Companies are increasing the use of blogs as an avenue for communicating with customers and the market, as evidenced by new supply chain vendor blogs started in 2007. Companies traditionally begin blogging externally in the Marketing organization since the focus there is naturally on external communication. In 2008, customers will continue to engage blogs as an avenue for dialog with their service providers and the value of provider blogs will become more evident in organizations outside of Marketing. Additionally, blogger voices from the user community will begin to increase and take on more authority in the space, consistent with what has been happening in politics, fashion and media.  

The past couple of weeks I have been busy helping with the roll-out of our new integration offering between the GXS Trading Grid and Microsoft BizTalk 2006 R2, a very exciting collaboration between GXS and Microsoft (and worthy of a blog entry of its own, very soon…).  Having wrapped up a couple of key activities, I started — as is my custom — to wade through a 10 inch stack of magazines (I checked!), and who knows how many emails…

Back in September, CIO Magazine started talking about the balance between outsourcing and innovation, referencing an innovation crisis (this is a blog entry, the print version of CIO had a longer and very interesting piece, but this gives you an idea).  This is the latest of a series of well-written articles on the dangers of leaving innovation to others (another I enjoyed, around manufacturing, back in 2005, is here).  R&D is a topic near and dear to my heart, as it is part of my role here at GXS, and the dangers as I see it fall into two categories:

1. Leaving R&D to outsourcing companies (traditional) may result in no innovation beyond cost-reduction
2. Too much dependence on even innovative partners can dull the innovative edge of your own team

I have a strong belief that every company needs to look for the opportunity to innovate in their core business, and one of the best ways to accomplish this is to free up resources in every other part of the business by partnering with companies who do that as their core business.  While this may address #2, it can put you in jeopardy of the first danger, which brings me to the knock-down, drag-out SaaS versus outsourcing.

What really got me thinking about this was a string of articles/blogs/etc along the lines of SaaS doesn’t matter, business value does…  On the surface this is really hard to argue with, as most generalizations are.  But like most generalizations, taken to extremes this is a dangerous idea.

In the CIO Magazine article, the problem surfaced was that most outsourcing contracts are based on the achievement of SLAs (service level agreements).  Traditional outsourcing companies have an enormous incentive to standardize and drive cost down, and pretty much nothing else.  This is the complete opposite end of the spectrum from commercial software vendors, who live and die by new license revenues, and have an enormous incentive to innovate.  Unfortunately, this innovation can only be realized through upgrades and installations, so customers receive benefits unevenly, only as the upgrade.

So how does this translate into SaaS out-innovating Outsourcing?  SaaS (software as a service), is a service based model like some traditional outsourcing, with the economic incentives of commercial software (if we don’t innovate, we quit winning new business…).  Unlike traditional outsourcers, who contain costs by limiting change in a given client (admittedly to preserve service levels), a SaaS based offering controls costs by applying its innovations to all customers.  If this sounds crazy — it’s not.  Change, in the form of innovation, is much less expensive than variation.  If I add new features and capabilities to my entire customer base, I have a better cost model than a software company supporting 3-5 different versions of their software (which is why most software companies “end-of-life” versions with depressing regularity).

This is the best answer to the conundrum posed in the CIO article about how to leverage the expertise of outside companies without risking loss of innovation — work with organizations that must innovate to survive.  SaaS is a marketplace with many of the cost efficiencies of outsourcing and an incredible pressure to innovate and invent (don’t believe me, look at Salesforce.com, Amazon’s web services, Microsoft’s Live Services, etc). 

And if people tell you that the business model doesn’t matter (SaaS, outsourcing, etc), tell them to talk to the music industry about iTunes, or the CRM industry about Salesforce.com.  Business models matter, they drive behavior and economics.  Innovation will always be strongest where companies need it to win, and that is the team I want to be on.

Something in one of my recent posts ( SOA versus ESB — conflict or collaboration ) struck a chord with Dan Foody over at Progress Software, and his post about understanding your organization before you architect has now gotten me thinking.

The Chief Architect of the GXS Trading Grid is a guy named Jeff Barton, and he has a favorite phrase on this, “architecture by org chart”.  This is somewhat different from Dan’s blog entry, as Jeff’s point is the tendency of development teams to be more Ptolemaic than Copernican (basically, teams make the rest of thew world revolve around themselves).  As I looked up the wikipedia entries on the Ptolemaic system, I realized just how apt this metaphor was — since it requires gigantic planets in space to spin, perform loops and rotate around Earth to make the math work!

The widespread implementation of SOA requires coordination across multiple teams, who must “do work” on current projects that is — in the short run — exclusively of benefit to other teams!  Over time, and not even that long in GXS’s experience, benefits boomerang as other teams do the same — but this is a leap of faith, and many IT people are not into leaping.  This same challenge is also faced by the proponents of RFID deployments (we’re for that, but that is another entry….).

This is where the influence of CTOs, Chief Architects, and senior developers is make or break. 

Dan references the very real challenges of balancing the power of IT/non-IT groups, but in my experience even balancing amongst different IT teams can be a monstrous challenge.  One technique I have seen work with some success is to deploy mandatory common infrastructure, with some degree of enforcement.  I have seen a few models of this:

1. preferred vendors:  one ESB, database, ERP, etc.  There might still be multiple instances (better be, in the case of databases!), but at least there is a single skillset and technical support connection.  You still have versioning issues, but at least you’re on the right track.  Easiest to enforce if you have centralized purchasing, as they can flag orders for anything “off the list”
2. common services:  you have to go to the “insert capability here” team (ESB, message queueing, database).  Much more amenable to a unified structure, but requires incredible commitment from the teams providing services, and lots of enforcement from above.  The first time a project misses because of an external dependency (”they wouldn’t configure the ESB for us!”), it starts to unravel.  Particularly challenging because the “core teams” are not directly connected to revenue, which can cause issues when budgets are allocated.  This is probably not an option for teams in organizations where IT is not in control — or at least on par — of resource allocation for IT projects
3. outside service providers:  Like #2 above, but using an outside service provider or SaaS vendor.  I admit this is somewhat self-serving, but the difference is that you do not have to deal with internal rivalries, and for-profit service providers tend to have more capacity when you go to them, which is really just a function of scale.  We have many managed services customers who require their divisions to use us for certain functions, and that achieve both standardization and integration (we are already integrated to their back ends).  Easier than #2, but only works for certain problem domains

I’m sure there are other models, and would love if people would add some comments about how it works in their shops.  As much as I would like to say there is a solution to “architecture by org chart”, I think the best we can do is get the architecture to reflect the view from higher up in the org chart (c-level), so that it ends up including the entire organization and its needs.

Catching up on email today, I came across a comment that an EDI professional posted about how frustrated she was with EDI!  In the well-written response to an ec-bp article, she shared her frustration:

“I have not been able to find a solution that would not be very costly to change to and would make life any easier than the way we currently do things. All customers want something different and it is getting more complex as time goes on.” 

In another section:

“Edi in my opinion did not standardize or uniform anything. For example you have hundreds of options on every document. You don’t have to have the same information on your advance ship notice as the other guys. You can request an 855 instead of a 997.”

Guilty as charged…

Like many industries, ours has focused so much on empowering users through advanced features and complete configurability/customization that it seems nothing is simple.  This is partially a consequence that the real drivers behind e-commerce are the PRACTITIONERS, who are often at the leading edge of supply chain practices, which sometimes get complicated.  As a service provider and a software vendor, we owe our customers powerful offerings that are as easy to use as possible.

But if we’re not there yet, we are trying — and you don’t have to take my word on it!  Many of our key initiatives over the past couple of years are targeted straight at the issues highlighted, including:

• Development of e-Commerce Accelerators to make it easier for small and medium businesses to connect into global e-commerce with the software packages that run their businesses
• Managed services that can accept most protocols and translate partner formats into whatever you want internally
• Integration to other software vendors’ products (like BizTalk R2, webMethods, etc) to give customers choices and allow them to use what they know
• Ever more flexible web forms solutions that leverage Web 2.0 technologies

Now, before you right this one off as a sales pitch, time to come clean — as I said, we’re not there yet (and neither is our competition), and here are some reasons why:

• Integration is still very tough.  Even with standard integration options, if customers have customized their own software, it can require professional services (ours or someone else’s) to get it all setup and working
• Mapping between standards, and customized usages of the same standard, is still hard.
• The world of e-commerce processes is still largely “un-standardized”.  There are no widely used methods of specifying the rules for which EDI documents a given partner uses, and in what order (RosettaNet PIPs were ground-breaking here, but many factors have limited adoption — including complexity)

So, is it hopeless?  Absolutely not.  More companies do e-commerce, and in particular EDI, than ever before — and at a lower unit cost than ever before!  Keep on going, and we will too, and keep voicing frustration and constructive criticism, because we’re not there yet…

I spend a lot of time talking to large enterprises with vast networks of suppliers and customers, most of whom should be enabled as Trading Partners in a B2B program.  Beyond that, companies, industry groups, standards bodies, and the e-commerce industry have spent decades developing a dizzying array of options and techniques for getting partners “connected”, the latest of which are supplier portals and AS2, with large scale use of web services clearly visible on the horizon.

But in spite of this, as with the invention of ever more powerful processors, smaller and denser storage, or more efficient power generation, it is a task that will never be done, and for much the same reason — our very success creates new demand.

Now I am not talking about classic demand generation, which is about price.  In economics there is a moderately famous curve that shows demand increasing as price decreases, and that has certainly been a factor in B2B — but it has not been the major factor.  There is another demand pattern that is harder to quantify, but we’ve all seen it.  When a restaurant opens and attracts lots of people, other restaurants usually open across the street or parking lot.  But far from reducing waiting times or prices, the multiple restaurants usually attract more people and increase the demand for food. 

So what does this have to do with B2B?  There was a time when B2B was about eliminating the paper in the ordering process, but that goal is now one of many, and not even the primary goal anymore.  Once all that order information was digitized, we took a crack at shipping information, which created all sorts of interesting possibilities — which led to the first major transaction that did not have a paper opposite, the ASN (advanced ship notice).  ASNs helped make possible tremendous innovations in industries like cross-dock distribution centers (impossible without advanced knowledge of inbound shipments, and — of course — barcodes).

My point is that no one knew ASNs would be needed until they got the POs flowing (in truth, many organizations are not even using ASNs and barcodes effectively to this day).  Now we have new physical technologies like RFID, new approaches to managing information flows (BPM applied to B2B), and new business needs enabled by technology (BAM, business activity monitoring).

The good news is we are getting more information faster, and we are able to substitute “information for inventory”, but the bad news is that B2B is looking increasingly like internal IT — one continuous upgrade process.  Once we have orders automated, we want to manage the order process.  To make this happen we tie the physical supply chain (using barcodes or RFID tags) to the information supply chain — traditional documents and logistics documents.  At this point we want to start tracking performance over time and sharing the data with our partners . . . and on and on.

But unlike internal IT, which is an upgrade of one infrastructure, a new B2B capability needs to span an entire trading community, anywhere from 600 to 17000 companies (and that is only DIRECT relationships).  And that is why enablement is never done….

Managed Services and Outsourcing are a big topic in B2B these days, but people interpret these phrases in different ways, particularly “outsourcing”.  Outsourcing’s traditional meaning — paying someone else to do something for you (like ADP in payroll) — has morphed to include other meanings, including:

• Paying someone else to “employ” your staff
• Paying someone else in another country to “employ” their staff as your staff

That’s too bad, because these are not the same things at all…

Real “outsourcing” is about taking advantage of another organizations skills, scale and technology to more efficiently accomplish some task — freeing capital up for some other use, NOT finding a way to do it yourself for less money.  Many technology outsourcing firms are actually outsourcing HR, not technology.  This has gotten so confusing I tend to call our B2B outsourcing business “managed services” so that people do not think we are selling bodies. Read the rest of this entry »

I don’t intend to shamelessly plug popular business authors this year, but I am a big fan of Geoffrey A. Moore.  He is probably most famous for his book Crossing the Chasm, but lately I’ve been reading his latest, Dealing with Darwin.  Where Crossing the Chasm dealt in a compelling way with introducing new technology that could define whole new markets, Darwin deals with evolution strategies for all kinds of companies, even ones with existing markets.

What I find particularly interesting is the notion of innovating in mature markets.  Mature markets are not “cash cows”, or markets the sun is setting on — they are simply established markets where competition is fierce, buyers are savvy, and the broad requirements have been met.  For the record, Moore defines the telephone market as mature, and it is definitely not a dull place!  Specifically, Moore suggests a mantra for this world:

Add value on the surface; extract resources from the base.

This struck me as interesting, because it helped me better explain why so many companies that are good with technology are embracing the software as a service model for many core IT functions… Read the rest of this entry »