InformationWeek.com

Welcome Guest. | Log In| Register | Membership Benefits

April 3, 2000

E-Market Connections
Lack of application integration is limiting the benefits of E-markets, but vendors are addressing the problem

By Jeff Sweat

Related links:

Maxager Pushes Profit-Analysis Tool For Online Marketplaces (2/29/00)

Software Package Eases Sales-Channel Conflicts (2/28/00)

Extricity Rolls Out Software Suite For Online Marketplaces (2/23/00)

TechEncyclopedia

Need a definition of a technology term? Look it up here:

Send Us Your Feedback

lectronic marketplaces may be The Next Big Thing, but companies seeking to tap this potentially lucrative channel are encountering an obstacle--the yawning gulf between their own IT systems and those of the potential suppliers and customers they meet on exchanges.

E-marketplace operators, their business customers, and software developers are now taking steps to do something about the situation. Staples.com Inc. last week said it's turning to WebMethods Inc., an integration specialist, to connect its StaplesLink.com site to nine exchanges, including the Ariba Network, Commerce One MarketSite, and Oracle Exchange. WebMethods will build a central hub so Staples.com won't have to create interfaces to each marketplace. "We only have to build one set of APIs to integrate with multiple marketplaces," says Mike Ragunas, chief technology officer at Staples.com.

But that's the exception. Few business-to-business marketplaces provide integration with their participants' back-end systems. Of the 600 exchanges tracked by AMR Research, only 10 have application integration built into the exchange. That means many marketplaces fall short on their promise of huge efficiencies. "At this point, a lot of transactions are still happening by phone and by fax and by E-mail," says Kimberly Knickle, an AMR analyst.

To change that, integration vendors are introducing new products and seeking a prominent role as the gateways to online marketplaces. Instead of developing interfaces to as many enterprise resource planning packages as possible, application-integration vendors will start building interfaces to marketplaces, say analysts. For instance, a company could write a single interface to an integration vendor's product that would then link to several exchanges. The process has already started: Application-integration vendor Extricity Software Inc. and marketplace vendor Commerce One Inc. have teamed to ensure that integration between back-end applica-tions and Commerce One's MarketSite doesn't require extra programming.

Extricity plans this month to introduce Extricity 3.0, middleware to help businesses that don't want to integrate with all of a marketplace's participants. The software gives businesses the ability to generate Extensible Markup Language forms, which can be viewed with a Web browser. A recipient of an XML form can either transfer it into a procurement or supply-chain system, or fill it out from within the browser window and then manually enter the data into the company's system. In either case, when the partner responds, the returned XML form feeds back into the sender's system and moves through the usual workflow processes.

Application-integration vendors are focusing on XML, which is quickly becoming the accepted method for business-to-business communication on the Web. But until entire industries create standardized XML tags for data, even E-marketplaces within the same industry are likely to use slightly different versions of XML, forcing integration vendors to support all of them. "It's a moving target," says Dave Power, VP of marketing at application-integration vendor Mercator Inc.

To deal with the variations, Mercator's Commerce Exchange Server, due out this month, will let businesses build different versions of XML for different marketplaces. If a company builds an XML version for Chemdex and another for ChemConnect, Mercator will transform an order request into the appropriate version of XML and send it to the right exchange.

IBM and Microsoft are also working on XML. IBM this summer is adding XML compliance to its WebSphere application server. The new product, WebSphere B2B Integrator, is optimized for online marketplaces. The software adds functions such as dynamic pricing, workflow management, and the ability to generate requests for proposals.

Next month, Microsoft will release a "technology preview" of BizTalk Server 2000, an XML engine similar to IBM's product. The preview will be followed by a beta version this summer that will include a graphical workflow engine to support business-to-business exchanges. The final version is due in the fall. About 300 companies are already testing the server, which encodes documents such as purchase orders and invoices with XML tags, encrypts the files, and transports them over the Internet.

Microsoft says BizTalk will operate with Windows 2000's messaging services and directory without lots of custom coding. That was a big incentive for CapitalStream Inc., a Seattle software developer that supplies the commercial equipment financing industry. Next month, CapitalStream plans to launch CapitalStream.com, an online marketplace to connect banks and commercial lenders with companies leasing computers, heavy equipment, and real estate. The company has committed to deploying BizTalk Server to replace a phone-and-fax-intensive credit scoring and approval process. "It's kind of a balancing act--you've got to get to market quickly, but you also have to provide a very scalable, interoperable, secure marketplace," says Jeff Dirks, VP and E-commerce operating officer at CapitalStream.

Application integration lets exchange participants connect directly to their partners' IT systems. Companies can evaluate product availability, for example, by linking into a supplier's inventory application, or place orders starting in their own procurement application, then follow through with a supplier's order-fulfillment package.

"We have to reduce the number of steps needed to conduct a transaction and have transparency into the company we're doing business with," says Mark Klopp, director of digital business ventures for Eastman Chemicals Inc. in Kingsport, Tenn., a member of the ChemConnect marketplace.

Klopp says competitive bidding on ChemConnect has decreased the cost of goods Eastman Chemicals uses to manufacture its products, increased the prices for products it sells there, and let the company sell more products. That's because the marketplace lets Eastman spot sell to companies with which it doesn't have a contractual relationship. "You can find more stuff as a buyer and move more stuff as a seller," says Klopp.

But without integration, the process is cumbersome. Klopp says participants mainly use ChemConnect to meet each other, declare their needs, and negotiate sales. The actual transaction is handled by phone, fax, or E-mail.

Marketplaces that don't offer application integration will be at a disadvantage. "We don't see that any kind of static procurement site will last in this industry," says Jean Whitcomb, director of marketing for integrated services at Fisher Health Care, a division of scientific instrument maker Fisher Scientific Corp. in Pittsburgh. Fisher is interested in joining medical exchanges but has yet to see the kind of dynamic services--such as real-time inventory checking, order initiation, and logistics--that Fisher offers customers on its own site.

Some marketplaces are heeding the call. "We want to provide every service you need on our exchange so there's no need to go offline for any transaction," says Bob Witt, CIO of medical services marketplace Medibuy.com Inc., in San Diego. When all procurement transactions take place in the exchange, Witt says, Medibuy.com can gather data that its users--hospitals and their suppliers--can analyze for patterns in their procurement and selling processes.

Because Medibuy.com serves more than 1,800 hospitals, it can't do all the work itself. So the company has hired Vitria Inc., an application-integration vendor, to build middleware connectors to the major back-office systems used by many hospitals--23, at last count, including SAP and health-care-specific materials management systems. It will bundle them into a toolkit hospital IT departments can use to do the integration themselves.

The integration that takes place in marketplaces will likely be different from other kinds of application integration, because the relationships among the companies participating in marketplaces are more fleeting than conventional business relationships. Analysts say most businesses will integrate only their procurement, order-fulfillment, and inventory applications with marketplaces. And in some cases they'll provide access to these applications only through a browser.

Los Angeles clothing manufacturer Guess Inc. has been building a marketplace based on Commerce One's Market Site and Buy Site that will link to its suppliers--18 so far--and to companies that sell its clothing. Twenty of the 900 specialty retailers that sell its merchandise are set to go live with the exchange when it launches this week. But many of them, the company says, are mom-and-pop shops with almost no IT resources. Instead of tying them directly into the exchange, Guess will give them access to the marketplace through a Web browser. But Guess has integrated its PeopleSoft human resources application with the exchange so, for example, purchase authorizations can be automated.

That minimal connectivity is more than what most E-marketplaces support today, and analysts say that's got to change. Says AMR analyst Scott Latham: "At the end of this year, if you're an exchange and you don't offer integration, you're dead on the vine."

--Additional reporting by Alorie Gilbert, Paul McDougall, and Aaron Ricadela

Back to This Week's Issue
Send Us Your Feedback
Top of the Page