Yesterday we had a team-building event that culminated with a visit to a local winery in Virginia, Chrysalis Vineyards. After the tasting, we were led by the enthusiastic winemaker Curtis into the area where the wine is actually “made”, and he spoke to us at some length about the process (August is apparently an ideal time to visit, as the winery is cleaning and getting ready, so he had the time — come the fall they would be going all out to transform the first harvest into wine).

Chrysalis is an interesting vineyard, as 40 of their 50 acres are planted with a native North American grape called the Norton (most famous varietals are European). Beyond that though, I was fascinated by Curtis’ offhand remark that given the right conditions, wine would practically make itself. “Throw some grapes in a bucket, stomp the juice out, and kick the bucket to the curb for a week and you’ll get wine . . . IF, you have perfect fruit, temperature, humidity, … Winemaking is the art and science of closing the distance between the real world and that perfect world — which means Curtis and his colleagues have a lot to do. Within the areas where the wine is made and stored, advanced technology is used to control temperature and humidity. In addition to the amount of science and planning, it was interesting that the entire process was constantly “managed”. When asked when the wine is tasted to see how it is doing, the response was “constantly” (this got a pretty good laugh, followed by several applications for employment — but winemaking requires advanced training . . . ).

The parallels to the E-Commerce Services world were not lost on me, and given the head start that winemaking has, I guess it is going to be a long time before we will be on auto-pilot. In a perfect world, data would stream from business to business over the internet, and everyone would structure data the same way, eliminating the need for translation. There would be a single communications protocol that used unbreakable encryption whose certificates never expired. But that is not the world of E-Commerce today, and is not likely to ever be — so, like the winemaker, our job is to close the gaps.

But the most striking similarity between winemaking and E-Commerce has to be the requirement for constant management. As I think about it, an increasing percentage of our internal technology investments go to helping our global team manage the many programs we operate for customers, and the timeframes for dealing with issues keep shrinking. Like the vineyard that has only a very limited time to turn the grape harvest into grapes, our customers have only minutes to get their data to their partners. Unlike the vintner however, our time is growing shorter (I am surmising harvested grapes today rot at the same speed they rotted for the Romans), as the pace of business picks up. This demands constanct management, so through our ever advancing visibility and alert services, we too “taste constantly” — but I think maybe Curtis enjoys his tasting more than we do…

With an entire week devoid of any kind of air travel (vacation), I was a bit behind on my magazine reading. BusinessWeek published their “50 Best Performers” issue, but what I find absolutely amazing was a terrific article on the challenges faced by Chinese factories, due to rising wages and regulation!

The nuts and bolts have to do with rising costs of raw materials, increasing demand for a fixed supply of labor, and currency changes, but the outcomes are what are really interesting. Basically, the message is that cheap labor is not enough, or even necessarily desirable. Companies are looking into increasing worker productivity through automation, and I suspect there will be growing interest in substituting “information for inventory”, which has long been a practice in higher cost economies.

This is very interesting to the B2B world, because one of the traditional challenges in driving B2B into lower cost countries is that the technology costs are not competitive with using people to solve the same problems. This is not to suggest that there is not a lot of sophisticated B2B going on, just that the goal has not been to reduce staff but to gain some kind of edge in speed or customer service.

With the current economic situation, it appears that companies may rebalance their productivity initiatives — focusing as much on using technology to drive productivity as labor arbitrage.

I just returned from a wonderful Spring Break vacation with my family, spent camping in our recently acquired pop-up trailer in the cave region of Kentucky. Mammoth Cave National Park happens to be very close to Bowling Green, so we took the opportunity to visit the National Corvette Museum, and tour GM’s Bowling Green Assembly Plant, the only factory on earth that produces the legendary Corvette…

I have had the opportunity to work with various companies in the auto industry (including GM), but I have never been to a major assembly plant before, and it was a treat. What was especially impressive is that in modern plants like Bowling Green, every car is built to order, despite the appearance of “mass production”. The plant builds both Corvettes and Cadillac XLRs, but the Corvette line fascinated me because the “outside” of the car is assembled (painted, welded, put together) separately from the “inside” (axles, tires, transmission, engine, etc). At one point in the process, the bodies descend from the ceiling and are attached to the drive train. The amazing thing is that most of the components are specific to each car — so the entire assembly operation must be kept in synch.

What impressed me was how little inventory was visible, with mobile racks of kitted parts moving around the plant. Reading the labels that happened to cross in front of me I saw no two kits coming from the same source (mostly GM plants in the midwest, though some tier one suppliers were also in evidence). With not an RFID tag in sight, I saw barcodes aplenty (one dimensional in this case), clearly linked up to a powerful production control system.

I think most of the people on the tour with me were impressed by the plant, it was hard not to be. But I doubt very many were able to appreciate that Bowling Green is so on top of its supply chain parts flow that they can start a car even though many of the kits to produce it are not even at the downstream stations yet. Since every car is built to order, parts from all over the US and some from Mexico must arrive at the station in time to be assembled — and the entire line will have to stop if anything is missing (it didn’t stop in the three plus hours I was there).

I have worked in B2B for a long time, but I still really enjoy seeing what is possible when trading partners can move at the speed of information. It was a beautiful sight…and the cars were nice too.

GXS has a terrific set of clients in the retail industry, some of whom I have worked with for many years, so stories about the industry tend to draw my eye. The other day I was reading a widely syndicated piece from AP about retail retrenchment, when something caught my eye:

“Experts also say merchants are weathering downturns better because of new systems to control inventory and costs.”

I found this very interesting because this was not an article concerned with technology, enterprise IT, or B2B — and when you find statements like that in the general media, it is a good sign that the investments in technology are paying off where it matters the most. What I find interesting is that the article references the systems, but doesn’t really explain how a system can “help control inventory and costs”.

While there are many systems that can affect inventory and costs, I like to think in general that we are attempting to affect a couple of key business capabilities, regardless of the technology:

1. How far in advance we can see what is happening
2. How quickly we can react to changes in demand or supply

These are obviously related, and interact to create “uh-ohs” or “ahas”… First to the “uh-ohs”

The above diagram is my very simplistic picture of the situation when the range of vision is shorter than the range of action, meaning by the time I realize I need to do something, it is too late. This is akin to a ship relying on the sound of scraping metal to alert it that rocks are near, rather than a lighthouse. It is tempting to do focus entirely on the red — that is, seeing farther out — through event management, forecasting, etc — but we can also change the equation by reducing the amount of time to respond to change.

In the B2B world (and not just in retail), it turns out that similar systems and technology help out with both. As a start, companies that manage their supply chain more effectively are able to sense (visibility) and respond (action) much more quickly than rivals. While it is tempting to get excited about the new possibilities of technology, many companies are not even managing the basics, like functional acknowledgements, yet (FAs are an electronic document sent back in reply to an electronic document. Basically, if you don’t get an FA from a partner, they may not have your order/ship notice/invoice/etc). Insisting on B2B integration with your supply chain, and then handling the basics well will provide more rapid information and the ability to execute more quickly. Implementing B2B gives you productivity, but doing it really well helps you see farther and act faster.

Beyond basic B2B, capabilities like logistics tracking and visibility will substantially enhance visibility, and enable members of your team to react more quickly because they have more information at hand. A system like logistics visibility is constantly “watching” the stream of logistics B2B traffic between logistics providers, and watching for exceptions or incidents.

As much as I love the software and services we build and operate for a living, the key thing is really the goal — we have to see problems (and opportunities) early enough to have time to act. Leveraging people, process and technology can get us from “uh-oh” to:

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. 

The folks over at Supply Chain Digest have put together a collection of thoughts from industry and academia about what is going on in 2008.  Often collections like this are nothing but aphorisms, but this one is different.  Among the gems:

• Jeff Karrenbauer of Insight, Inc — “the obvious outsourcing choice of , for example, the Pacific Basin, is often simply wrong”
• Jon Kirkegard of DCRA, Inc — “Postponed manufacturing state-side of imported key components will increasingly be seen as a major solution to supply chain and business challenges….”
• Larry Lapide of MIT — “Many companies will ’slow down’ their supply chains by using less expensive and slower transit modes”

While there are some areas of agreement, there are far more areas of disagreement about outcomes and effects — which is why I like this article.

For my part, what I find most interesting is the looming impact of fuel and energy costs (combined with changes in currency valuation).  If companies respond — as I hope they will — with much more aggressive leveraging of logistics information and a “postponed manufacturing strategy”, our payback for this more challenging period could be improved productivity, and progress in the quest for a demand-driven supply chain.

Hope you are having a wonderful holiday season, full of peace and joy — but courtesy of a recent customer visit, I learned it is not at all restful for some elements of the retail supply chain…

Many people don’t realize that much of the supply chain activity (ordering, forecasting, etc) is in the distant past when “Black Friday” hits after Thanksgiving — but it is.  Aside from the understandable need for advance planning, there is the small fact that information may fly around at the speed of light, but goods for store shelves must still be shipped great distances!  But modern supply chain practice goes far beyond just orders, and not every category of good must be shipped thousands of miles.

Some retail goods that are produced (or warehoused significantly) closer to their ultimate markets have the ability to respond do “demand signals” much more rapidly.  This can be because the goods are shipped by air, or manufactured locally (”locally” meaning within reach of high speed transportation), or warehoused in different regions that are capable of supplying one another.  Traditionally the domain of industrial parts that were JIT (just-in-time), it appears that key consumer goods are now capable of rapid response to demand.

This is of particular interest to me because of the role played by rapid information exchange — especially consumption and forecast data.  As goods fly off the shelves, that information is shared back into the supply chain, which then scrambles to refill the void.  This is an especially lucrative practice for goods that experience enhanced value during the first several days they are on sale, like music, books, movies, and video games (software, not the consoles — alas, see Steve’s column for the realities of complex hi-tech gadgets….).

Assuming you buy that such items can be more flexibly resupplied than many other goods — why the surge in demand?  This was the piece I didn’t understand, but GXS is not a consumer goods company.  The recent swelling of gift card sales, combined with retailer skill in attracting shoppers in the post holiday season has made the few days after December 25th some of the biggest shopping days of the year!  The only challenge is that those stores have been heavily shopped right up to Christmas Eve, and need to be replenished as much as possible to capture all that spend.

It seems that Christmas comes both early and late for retailers, and in those categories where the supply chain has the shortest latency, information can maximize profits for businesses, and satisfaction for customers.

Happy Holidays!

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.  

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.

When I’m not on an airplane, I can occasionally be found leading a Cub Scout Den. Tonight, for instance, my Webelos played a game using compasses to navigate back and forth a circle of hundred feet in diameter. At each point in the game. The boys were given a compass bearing, which should point across the circle to a letter, which they would walk to. After reaching the letter, the boys would take a new bearing that you point them back across the circle to a different period. The game is won by getting six letters in the correct order on the basis of the compass bearings. What is interesting about this game is that you must do it one step at a time because you need the context of your last step to determine where to go next. The other interesting part of this game is that errors are cumulative, so once you’ve made one mistake, it’s likely contribute to downstream mistakes. As an example, some boys might start at the letter A. The first compass bearing is 32, which should take them across the circle to the letter X. However, some boys make a mistake and wind up at the letter L. This means their next bearing which might be 225 will be from the wrong point, increasing the likelihood of an error. You get the point. Since I want the boys to complete successfully, I periodically check their progress and help them correct mistakes. For the kids, this is actually a form of visibility or continuous business activity monitoring, although I doubt they thought of it this way.

The supply-chain business is very similar to this game in some ways, particularly in the compounding of mistakes. As new products or promotions are rolled out, some errors in forecasting or other planning creep in, and roll forward! At each stage in the process, there is a chance to either make new mistakes or compensate for old ones. You don’t need to worry about making new errors, that happens automatically — but compensating requires continous feedback. Since there are many participants in a typical supply chain, the feedback system that is most critical these days is “continuous visibility”. The idea behind continuous visibility is to leverage the many “signals” (sometimes called demand signals, although sometimes signals on the supply side are critical as well) being sent between participants in a supply chain to figure out what is happening — with an eye toward improving the situation. Vendors who specialize in this space are usually categorized as BAM, or business activity monitoring, vendors. But putting a complete system like this in place is not for the faint of heart, as it combines the toughest challenges of EAI and B2B into a single task — and then requires it be done in realtime to be worth doing at all! Having said that though, there is a path to follow that leverages the combined strengths of modern systems and existing assets. A good approach is to focus on detecting and managing events occurring in the supply chain, and correlating the events to detect patterns. Most BAM tools have great functionality in this area, and the younger market category of CEP (complex event processing) software is also very promising. But, sadly, most vendors assume you have a clean event stream to start with — which is rarely the case… In the B2B world, the document is king. Overwhelmingly the document is based on a standard like X12 or EDIFACT, but XML based standards are just as helpful here. Turning documents into events is a good way to get a basic monitoring system in play, and there are several ways you can go about it. Many high end EDI translators (including GXS’s Application Integrator) are capable of generating multiple files per document in translation (Application Integrator now generates an XML “meta-data” file by default, whose content is configurable), and they are also usually of accessing databases or making web service calls (but you have to watch for performance degradations, as these packages are very highly tuned for their core semantic processing tasks). The extracted data can usually be submitted to a BAM/CEP system using either asynchronous messaging or web services. Some B2B solutions, like Microsoft BizTalk, incorporate BAM capabilities directly into the package. If a company exchanges a complete suite of documents (from Order through Remittance Advice), events generated from that create a skeleton of supply chain activity that can be “fleshed out” through integration to other systems via traditional EAI or possibly web services. This is usually quite a bit more challenging than working with the documents, but also potentially lucrative since at this point you tend to have a good idea what kind of information is required. Within the GXS Trading Grid, we tend to generate events whenever we handle data, and then augment that activity with events “fired” from our key infrastructure and application services. Leveraging our centralized ESB (enterprise service bus), we can aggregate information flowing through it. In fact, a major focus continues to be generating ever more events to the “bus”, and making it easier to “see” what is going on. The patterns and practices for doing this emerged from work in our Managed Services environment, where we can achieve visibility into literally millions of documents that we manage — and we did it exactly the same way, starting with the documents and then integrating key systems one by one. Without a strong feedback loop in your supply chain, you might find yourself outpaced by former Cub Scouts who check their bearings often…