Monday, October 27, 2008

The Complexity of B2B and EDI Implementation

Let’s start out by discussing the tasks involved with EDI and B2B implementations. EDI and B2B implementations involve many different people, systems, documents, business processes and trading partners. All of these variables must be discovered, analyzed, documented and addressed during the implementation and maintenance of EDI and B2B systems. These variables make for complex working environments as you can imagine.

It is natural to think that the EDI and B2B software solutions providers would have developed software tools and applications to simplify the management of these variables, but they have been reluctant. The reasons can be found in their annual financial reports which detail that traditional EDI translator companies make between 67-69% of their revenue from services. They view complexity as a driver for consulting revenues, and therefore have little financial motivation for simplifying these challenges.

EDI and B2B Projects and Tasks

Let’s consider the work involved in a EDI and B2B project implementation.
  • Decide on a B2B Strategy
  • Educate top management on the value
  • Obtain top management support and funding
  • Recruit and hire an EDI / B2B team
  • Establish a project team (get on all of their calendars)
  • Conduct/obtain EDI / B2B training (bring in trainers or incur the travel expense to send them elsewhere)
  • Educate the business users on the B2B / EDI processes that impact them
  • Select B2B / EDI technology platforms, tools, standards and integration applications
  • Perform an EDI audit (trading partner survey to learn what your supply chain and customers can support and integrate)
  • Develop cost benefit analysis of automating each business process and trading partner community
  • Select and prioritize trading partners
  • Decide on a data exchange / EDI standard
  • Establish EDI Trading Partner agreements/contracts
  • Negotiate with your trading partners to actually sign them
  • Map to EAI/ERP/Databases/Standards
  • Conduct Pilot
  • Review Pilot
  • Promote results and get more funding to expand the project
Let’s now take a look at some of the specific tasks required for EDI / B2B e-Commerce implementations.
  1. Identify, categorize and prioritize trading partners (customers and suppliers)
  2. Identify B2B standards that meet your business needs
  3. Customize these B2B standards to match your existing data requirements
  4. Document your customized implementation guides for future reference and sharing with trading partners
  5. Negotiate the definition of data elements (what do you mean by unit?)
  6. Define business rules and process flows
  7. Define and negotiate "technical dictionaries and descriptions" to be used
  8. Define escalation procedures for production errors
  9. Define and agree on implementation schedules and switch over dates
  10. Negotiate trading partner agreements
  11. Create test data files that match your standards
  12. Use the test data files to test the system
  13. Communicate any errors to your trading partners
  14. Identify trading partner contacts (project leader, EDI specialist, Business owner, etc)
  15. Integrate the data to your ERP or API
  16. Manage multiple implementation projects at the same time so you can on-board your 348 suppliers before year 2043
  17. Analyze the effectiveness of B2B exchanges with specific trading partners
  18. Adjust business processes to take advantage of automated B2B exchanges in near real-time
These are just a few of the daily tasks necessary to implement B2B. It takes expertise, business process re-engineering and a significant investment of time and resources to implement B2B.
Today, many companies are recognizing that they want B2B data exchanges with their business network, but perhaps on a managed service basis so they don't have to incur all the costs upfront and maintain it over time. They are treating the B2B connections more as a telephone service. They want the benefit and use, but don't want to implement and manage all the network connections themselves. They would rather find a service provider that can spread the implementation costs over thousands of users and manage the 7x24x365 service from a secure data center staffed by experts.

If you would like to discuss this topic in more detail please contact me.

Friday, October 24, 2008

SAP’s Investment in Linkedin and EDI and B2B Collaborative Networks

It was reported today, October 23, 2008 that SAP’s Venture Capital arm made an investment in Linkedin, a business focused social networking site that many of us use. I am especially fond of Linkedin as it kept me in contact with people that ultimately hired me. There are a lot of industry folks scratching their heads and wondering why SAP would invest in a social-networking site like Linkedin, but I am not one of them. I will tell you why in a moment.

Let’s talk about Linkedin. Linkedin enables a person to create an online profile (much like a resume or CV) and then connect to other people’s profiles that are known to you through personal and/or professional relations. The result is the user ends up with millions of professional connections through relationships that have relationships that have relationships. You connect only once, but then you have access to millions of other professionals that are in Linkedin’s collaborative network. Each user that joins Linkedin brings with them a network of professional contacts and relationships, which are added to and become part of the collaborative network. The ability to easily connect to other users on the network is already built into the system. It is a simple button click to expand one’s collaborative network.

Now let’s revisit a recent statement from SAP co-CEO Leo Apotheker, “SAP will be focusing future development of its business suite of products and Netweaver integration middleware at meeting business needs to develop and maintain collaborative networks.” Where can one find an example of a more “collaborative network” than Linkedin? I see SAP’s investment in Linkedin as an investment in training and consulting on how to both do and be a collaborative network.

If you take a look at SAP’s recent strategic investment in Crossgate,, you will see another example of a collaborative network. Crossgate’s Business-Ready Network, for B2B / EDI managed services, enables SAP users to connect once and have access to all the other users on the network (over 40,000 at last count). Each time another company joins this network, and adds their trading partner community, the network expands for all other SAP users. This collaboration greatly reduces the time and expense of communicating business-to-business for all SAP users. This is a B2B collaborative network.

Henning Kagermann, SAP co-CEO stated at SAP's Sapphire conference, “Collaboration is the most important market transition going on in business… It's about connecting systems. We have to move out of our comfort zone and manage these networks collaboratively."

Can you now see the Collaborative Network connection between the Linkedin investment and the Crossgate investment?

If you would like to discuss this topic in more detail please contact me.

Tuesday, October 14, 2008

SAP, EDI, B2B and Business Network Transformation

Paolo Malinverno from Gartner stood up at a press conference this week in Berlin at SAP's TechEd and asked Leo Apotheker, Co-CEO of SAP, about their bold move to invest in Crossgate (an Automated Business Exchange for SAP users) and the potential next steps. Leo answered, "Our decision to invest in Crossgate is a very important step towards Business Network Transformation and this is our strategy."

This development begs the question - What is a business network? A Business Network is a revised and updated term for trading partner communities. The term refers to companies and organizations that engage in business activities with each other. For example, the chemical company ACME conducts business transactions with vendors/suppliers, customers, banks and government entities. All of these entities make up ACME’s Business Network.

ACME’s business requires huge amounts of in-bound and out-bound business information to be exchanged. Most often this information is printed and/or received on paper forms that are time consuming to process, error prone and inefficient, sent or received by the slow postal service, fax or email where they are processed again, archived and turned into reports that enable managers to make business decisions (often on out-dated information). The larger the Business Network, and the more business information that flows through the system, the bigger the paper processing challenges becomes and the longer it takes for information to be provided to decision makers. This can lead to the following problems:

  • High paper processing expenses
  • Lack of visibility into the supply chain
  • Delayed visibility into demand
  • Delays in collecting, processing and paying invoices
  • Missed opportunities to benefit from significant early payment discounts

Traditionally, if ACME wanted to reduce the amount of paper documents exchanged between itself and its Business Network to improve efficiency, reduce costs and improve visibility into its business, it would need to purchase an expensive EDI/B2B solution, hire IT staff and consultants, invest in training and implement a lengthy and expensive multi-year effort to transform t their Business Network from paper to electronic data exchanges. This is a daunting and expensive task and requires significant resource investments in the best of economic times.

It can take up to 37 days to automate a partner and costs up to $5,000 to integrate just one partner process (i.e. a customer sales order). What if you have thousands of trading partners and many different electronic documents to enable in your business network?

The challenges listed above are significant, but let's also consider the rapid pace of change in many business networks. Customers, vendors, suppliers and financial institutions are being changed and reorganized regularly to address changing product lines, changing marketplaces, new ventures, and mergers and acquisitions. How can ACME achieve the benefits of electronic data exchanges in their business network if the target is moving and the resources required are cost prohibitive?

Companies and industry experts are identifying the ability to resolve these challenges as a key competitive issue. “In a world where business networks are emerging as a new unit of industry competition, the gating item has been business network-enabling systems,” said Geoffrey Moore, author of “Crossing the Chasm” and managing director at TCG Advisors.

SAP, the worlds largest supplier of business software, also recognizes this challenge and has recently invested in a company they believe can help resolve these issues. “SAP’s investment in Crossgate complements our existing business process outsourcing agreement and funds continued innovation in business network-based services for SAP users in all market segments,” said Jim Hagemann Snabe, member, SAP Executive Board. “We are providing companies with solutions that are key enablers for business network transformation, allowing them to increase their flexibility to capitalize on market changes and opportunities.

One of the key points Snabe emphasized is the need to provide a solution for SAP users in all market segments. Many of the B2B industry hubs that have grown up over the past few years such as Elemica (chemical) and E2Open (High Tech) have focused on a limited set of industry standards and have failed to broaden their support for cross-industry standards that are needed by their members. This leaves many companies searching for a solution that addresses the wider needs of their supplier and customer bases.

SAP co-CEO Leo Apotheker spoke at length recently about the growing importance of business networks as the boundaries between enterprises are beginning to disappear. Apotheker said SAP would be focusing future development of its business suite of products and Netweaver integration middleware at meeting business needs to develop and maintain collaborative networks.

Wednesday, October 1, 2008

Why Do SAP Customers Use B2B and EDI Exchanges?

I have had several conversations in the last week with SAP customers that use B2B and EDI Exchanges. Many of these companies have EDI and B2B experts on staff and have made significant investments in internal EDI systems, yet they are outsourcing much of their work to these exchanges. WHY?

Here are some of the reasons:
  1. They have acquired several new companies and need to integrate new customers and supply chains into their SAP or ERP system via EDI/B2B quickly. Their existing IT staff do not have the time nor resources to take on additional trading partner enablement projects.
  2. The company's supply chain partners are mostly connected with the Exchange already, so they can save money and integrate much quicker through the Exchange.
  3. It is time to renew maintenance agreements and/or upgrade their EDI system. The company does not like the EDI system and the cost is prohibitive. They would rather outsource EDI going forward and pay a fixed monthly charge.
  4. The original EDI experts have long ago left the company and EDI is viewed as a weak link or risk in the IT environment. They would rather put their EDI system in the hands of experts that will monitor, support and maintain it 7x24x365.
  5. Several companies would rather use an SAP centric EDI/B2B Exchange that tightly integrates with their existing SAP system, rather than an agnostic third party EDI system that is expensive and not part of their corporate IT strategy.
  6. Many times the experts that work at EDI/B2B exchanges like Crossgate can implement or on-board trading partners much quicker due to their experience levels, and often times they have already implemented with the trading partner and can reuse maps and messages.
  7. In the high tech industry - supplies chains and contract manufacturing partners change so often that companies would rather have these relationships managed by an EDI/B2B Exchange that can quickly on-board new partners and reuse existing maps and EDI or Rosettanet messages rather than hire more IT staff to keep up with the changes.
  8. The bottom line - many of these companies feel they can get better results, in shorter time frames and for less money by using B2B/EDI exchanges than by staffing up their internal EDI/B2B departments and investing in more and more EDI and B2B software systems, training, maintenance and support.
If you would like to discuss this topic in more detail please contact me.