InformationWeek
Defining The Business Value Of Technology
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October 16, 2000 |
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So Many Choices, So Little Integration
E-marketplaces have work to do before it's easy to trade on multiple platforms
By James K. Watson Jr. and Joe Fenner
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he idea of online marketplaces creating nimble buyers and sellers who zip in and out of distribution channels has yet to materialize. The problem is that while there might be 10 significant exchanges for the energy industry, a utility may only have the resources to work with one or two at a time. And once a company invests in integration with one exchange, there's a natural reluctance to abandon the relationship in favor of other alternatives.Forrester Research says that $1.4 trillion will flow through online marketplaces by 2004. We at Doculabs don't doubt that. But with literally hundreds of marketplaces online now, and with new ones going into or out of business all the time, how do you pick the ones that give you the most bang for your buck? And how do you make sure that you aren't spreading your IT resources too thin as they do the dirty work of tying into multiple marketplaces?
In an ideal world, companies wouldn't have to place their bets on just one or two marketplaces. A better strategy is to spread those options across a number of marketplaces, giving the buyer or seller a chance to reach customers and suppliers via whichever method provides the best deal.
This sounds good in theory, but most of our customers are finding that to be too tall an order--especially considering the sheer number of marketplaces available and the speed with which companies may want to form and dissolve individual marketplace relationships.
Integration, of course, is the big problem. Tying in to additional trading partners or marketplaces means publishing catalog content and data, dynamically updating this information, integrating with accounting systems and other back-end systems, and ideally handling negotiations, contracts, and approvals.
Suppliers today must go through extensive data translation and integration efforts in order to work with a trading partner or a marketplace. For this reason, most companies that trade online concentrate only on integrating with their high-value trading partners or a limited number of marketplaces. The result is suppliers that are building a small number of point-to-point communications, as opposed to a broader syndication model that would let suppliers easily and quickly tie in to new marketplaces and partners in one-to-many or many-to-many relationships.
The marketplaces themselves must shoulder some of the blame. In a recent Forrester Research survey of 50 online marketplace leaders, 72% are deploying homegrown software, and nearly half use labor-intensive methods for integration. These marketplaces are finding that packaged application software is inadequate, so they must resort to using their own solutions and performing manual processing of new marketplace entrants.
The result is that some marketplaces are signing up participants faster than they can integrate them. If a given marketplace doesn't make it easier for suppliers to get up and running, suppliers will move on to easier exchanges. It won't get any easier for marketplaces if they continue to base their solutions on shaky infrastructures.
The good news is that the marketplaces won't sit idly by. They realize that their success and value is tied up in matching buyers and sellers together in frictionless trade. This means more than just providing a forum for exchange--it means providing an infrastructure that integrates the business processes of buyers, sellers, and the marketplace itself.
There's a flip side to making integration drop-dead simple: It's easier--physically and politically--for a supplier to leave a marketplace if it hasn't sunk money in up front.
But the marketplaces that bet on simple integration will provide a huge differentiation point that will attract new participants and foster loyalty, just like useful information or advanced trading features do. Simple integration turns a marketplace into a valued broker for ongoing trade between trading partners.
One tactic for simplifying integration with marketplaces or other outside trading partners is to use third-party integration products. There is no shortage of software vendors trying to capitalize on the opportunities to simplify interorganization integration.
Vendors of enterprise application integration (EAI) and other middleware components have extended their capabilities beyond company walls to address business-to-business integration needs--including marketplace integration. For example, vendors such as BEA Systems, New Era of Networks, Saga Software, Tibco, Vitria, and webMethods/Active Software specialize in helping disparate systems talk to one another, providing an integration layer that insulates in-house IT personnel from building these connections from scratch.
One of the big keys to business-to-business integration is the Extensible Markup Language. This data-definition language gives trading partners a standard way to interpret and exchange data--assuming they use the same data definitions and schemas. Uniform standards haven't been widely adopted yet, despite efforts such as the ebXML initiative and the RosettaNet consortium, which are working to define industry-specific standards for data exchange based on XML.
Fortunately, XML servers from vendors that include Bluestone, Microsoft (BizTalk Server), and webMethods provide a means to generate, exchange, and translate XML-based data. This should help companies and marketplaces move forward with XML even while industry standards are still being ironed out.
For companies going down the integration path, it makes sense to launch application integration and middleware tools in-house in order to first make connections among their own disparate systems. After building deep legacy connections, these same middleware components can be used to tie in with outside parties.
Meanwhile, the marketplaces themselves are beginning to turn to EAI and other integration technologies. Not only do marketplaces want to be able to integrate new trading partners quickly, but complex business-to-business transactions may involve multiple interactions with a number of trading partners using different back-end systems. Those trading partners may range from mom-and-pop operations to large conglomerates with electronic data interchange and other evolved trading systems already in place.
For companies that want to play the marketplace field today, the answer is to start deploying translation tools and enterprise application integration components. This approach will enable them to serve up data in a standardized way to multiple partners and will simplify the process of tying them in to back-end systems.
Recognize that you're likely to be working with many different marketplaces for different reasons. For example, you may work with several trading hubs in your industry to sell your goods, but you might also work with other exchanges for purchasing office supplies, procuring services, and even handling billing or invoicing.
In the longer term--the next year or two--expect the leading marketplaces to begin offering this level of integration. Whether they do it through professional services, better integration tools and standards, or third-party brokers, these exchanges know they must support seamless transactions and quick integration of new partners to survive.
While companies will still need to integrate their own back-office systems, they will eventually be able to rely on marketplaces or brokers to handle their business-to-business integration.
The problem is that with so many exchanges available, how do you know that you're betting on a winner right now? And since massive consolidation of marketplaces is inevitable, how do you make sure that you can quickly move elsewhere and strike new relationships so you don't get burned by investing in a marketplace that becomes obsolete?
The key is to keep your options open--and in the near term, that means adding the technologies that put your company in a position to syndicate your catalog data and tie in to any standard-based marketplace or trading partner. Don't just debate your strategy for another year or invest in expensive point-to-point integrations. Instead, start looking into technologies that will simplify your life, enable you to play the field, and insulate you from the instability and eventual shakeout of the online marketplace arena.
James K. Watson Jr. is president of Doculabs, and Joe Fenner is a senior technical writer with Doculabs, an independent advisory firm that helps companies choose technologies and strategies for E-business. You can reach them at info@doculabs.com
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