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August 21, 2000 |
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Opening Up The E-Markets
Vendors are tackling the problem of interoperability across business-to-business exchanges
By Steve Konicki with Alorie Gilbert
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he way Parker Hannifin Corp. CIO Paul Carson sees it, business-to-business marketplaces must become more like shopping malls, where users choose the stores. He wants suppliers and buyers to be able to conduct business through many exchanges, all from one virtual location.Parker Hannifin, a $6 billion manufacturer of motion-control equipment in Mayfield, Ohio, has 500,000 customers worldwide who could be doing business on dozens of exchanges, Carson says. "We can't post content to all those exchanges," he adds. "That's unmanageable."
The company's situation is not unique. Now, enterprise application and marketplace infrastructure vendors are beginning to help solve the problems caused by the proliferation of exchanges that weren't designed to work together.
J.D. Edwards & Co. last week unveiled a new version of its OneWorld XE software that lets businesses manage supply-chain collaboration with buyers and sellers in multiple trading exchanges running on its own products and those from Ariba, Commerce One, IBM, i2 Technologies, and Sun Microsystems/Netscape's iPlanet. J.D. Edwards says more than 45 exchanges and E-business hubs run on its architecture.
Two weeks ago, i2 said it was opening its TradeMatrix architecture to integrate with exchanges that don't use its technology ("i2 Casts Wider Net Over Online Marketplaces," 8/14/00).
Demand by customers for marketplace-to-marketplace integration is "a growing and very significant trend," Gartner Group analyst David Hope-Ross says. "It's potentially the most important new development in trading exchanges since the idea of business-to-business began to take shape."
IBM, SAP, and PeopleSoft think so, too. Later this year, IBM will debut B2B Integrator, which lets users of its WebSphere marketplace product do business across exchanges that run on leading exchange platforms. Greg Rietzke, SAP's VP of E-business, says SAP and partner Commerce One, in which it holds an equity stake, are exploring ways to provide connectivity from marketplace to marketplace and to let SAP customers connect to a variety of exchanges. PeopleSoft says it expects to move in the near future toward enabling users of its ERP software to connect to exchanges run on software from other vendors.
The technology promised by J.D. Edwards "will accelerate the process of marketplace interoperability," says AMR Research analyst Rod Johnson. Ontario Store Fixtures Inc., a Toronto manufacturer of custom-designed store displays for companies such as Victoria's Secret, has already begun installing the new version of OneWorld XE to enable itself and its customers to connect to multiple exchanges. Delvin Fletcher, Ontario Store Fixtures' VP of information systems, says he's been waiting for an offering like this, because business-to-business exchanges are so oriented toward a particular industry that they are "almost like silos, not marketplaces."
The developments are certainly piquing Parker Hannifin's interest. The company, which has facilities in 30 countries and uses J.D. Edwards' ERP software in all its non-U.S. operations, maintains its own Web store and does some business on MRO.com, a supplies-procurement exchange. But that falls far short of what Carson would like to do. "I need to be able to post my catalog in one place, on one exchange, and display it to all the customers who use any of 40 or 50 different exchanges," he says.
OneWorld XE is designed to let him do just that, ensuring the integrity of transactions, controlling approval of sales or purchases regardless of the exchange platform, and enabling customers to automate purchasing by using business rules to manage exceptions, such as higher-than-expected prices or lower-than-ordered quantities (see story, "More Than Just Exchanging Data"). Packaged applications such as OneWorld XE also can lower the cost of integration projects, which can run into the millions of dollars for custom-built connections to even just a few exchanges.
Still, AMR analyst Johnson says IT managers would be naýve to think they could avoid doing any work to fully integrate other business applications with the J.D. Edwards software.
Even as packaged interoperability offerings make their way to market, some large companies will continue to require the pricey custom integration services available from providers such as WebMethods Inc. WebMethods CEO Phillip Merrick says a packaged marketplace-to-marketplace product won't satisfy most of his large customers, who have very precise business-to-business E-commerce needs. Supporting each of the types of transactions and business documents they require, and the Extensible Markup Language, electronic data interchange, or Internet processes for flowing digital information from exchanges into their back-office applications, often requires custom development, Merrick says.
Staples Inc., the office-supplies chain, enlisted WebMethods nearly two years ago to help create Stapleslink.com, its vertical contract-purchasing exchange for businesses. It has since called on the integrator to connect users to Stapleslink.com from other marketplaces, their own internal portals, or Web-enabled procurement applications from Ariba, Clarus, or Intelisys.
The process requires some fancy footwork: When a purchasing manager enters an order, it's stored on Stapleslink.com, while technology that WebMethods designed automatically pushes the order into the buyer's procurement system for approval. The approved order then gets pulled back to Stapleslink. com to be filled. "The entire process of getting approval is transparent to the person doing the purchasing," says Anne-Marie Keane, VP of business to business E-commerce for Staples. "What he sees is only that he enters the order and we ship it."
Staples expects to add support soon for exchange software from Commerce One-SAP, Oracle, and possibly J.D. Edwards, Keane says, letting companies exchange information with Web applications and back-end systems used by partners and customers.
It's obvious that businesses want interoperability. But do exchange operators want it, too? Yes--and no, for some basic competitive reasons.
ChipCenter.com, an electronics component exchange that connects distributors with engineers and purchasing managers, sees interoperability as a threat to its business model. It is "absolutely not" interested in linking to other sites, says chief marketing officer Ron Mabry. Integration with other exchanges, especially exchanges that might directly compete, "is like asking Amazon.com to provide a hot link to Barnes & Noble.com," Mabry says. (CMP Media Inc., which publishes InformationWeek, is an equity stakeholder in ChipCenter.com.)
Others think exchange-to-exchange commerce can work, as long as ground rules are set for sharing fees for cross-exchange transactions and for handling situations where bidders on different exchanges match a buyer's posting price at the same time. Otherwise, "you'd be on the hook for 100,000 parts instead of the 50,000 you wanted," says Bob Kramich, VP of Marketing for NECX.com, another electronic components exchange.
The rush of activity is also leading to a new kind of exchange, says Gartner's Hope-Ross--one that will be trailblazed by leading exchange infrastructure providers. Those vendors will offer "hubs" that integrate trading exchanges, regardless of the software running them, to provide procurement, supply-chain, fulfillment, financial, logistics, and other business services.
It's happening already. Ariba this week will debut marketplace integration hub, the Commerce Services Network. CSN lets buyers and sellers store financial data and manage their payment and other financial processes online, no matter which exchanges and banks they subscribe to.
Marketplaces once changed the rules for business-to-business commerce. Companies are now demanding that marketplace rules change to meet their needs.
"Customers don't want their business-to-business relationships to be defined by the marketplace where they do business," says Patrick Hogan, J.D. Edwards' VP of technology and business-to-business E-commerce. "They want to define how they do business by the multiple exchanges on which they're able to do business."
--with additional reporting by Larry Greenemeier and Cheryl Rosen
Photo by Brian Smith
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