Sunday, November 30, 2008

Staffing Resources Required to Implement EDI

When budgeting time, resources and personnel for setting up, implementing, operating and supporting an EDI and B2B department, it is important to understand the complete picture. There are a large number of different business, database, development, support and EDI resources that will be needed. Earlier in my career, I served as an EDI Manager in a medium sized PC manufacturing company and here are the IT resources that I was using on a regular basis.

1 EDI Manager (full-time)
5 EDI specialists (full-time)
1 Database Administrator (part-time)
1 IT standards team (part-time)
2 IT software engineers working on integration projects (part-time)
3 Oracle IT specialist defining business process and data integration requirements (part-time)
1 Communication/Security specialists (part-time)
1 IT Business Analyst (full-time)
1 IT Systems Analysts (part-time)
6 Business Process Specialists (part-time owners of business processes and different database applications)
1 IT Help Desk person (part-time)
3 IT Managers (part-time)
1 IT Network Administrator (part-time)
1 IT Data Center/Server Manager (part-time)
1 IT Web Portal Specialists (part-time)
2 IT Project Managers (part-time)
3 Directors of Business Units (part-time)

It may come as a surprise to many that contributions from 32 or more people are required to set-up and implement EDI in a medium sized company. Most are part-time, but their skills and experience are required in many planning and strategy meetings and on implementation projects.

The costs were easily over $1 million dollars per year in resources. That does not include the EDI/B2B system, annual support and maintenance, training and hardware costs.

Operating an internal EDI system cannot be an after thought. It requires a significant budgetary commitment from both the business units and the IT department.

I was managing an EDI team that needed to support many disparate software applications that required different business and systems experts, managers, developers and integration skills. That was certainly not the best and most cost effective IT environment to support. You could avoid many of the IT costs I incurred by standardizing on SAP and utilizing SAP’s Netweaver PI platform as your EDI/B2B integration point.
Companies that have standardized on SAP and utilize SAP’s Netweaver PI, have documented methodologies and business processes, a defined integration strategy for all of the various business processes and can decide between the options of either operating an EDI/B2B department internally, or using an EDI/B2B managed service provider.

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

Monday, November 24, 2008

EDI, B2B and Business Network Transformation Needs a Revolution Not an Evolution

Business Network Transformation, as I understand it, means changing the way companies have traditionally exchanged electronic business data with their trading partner communities. Efforts to transform traditional EDI have been underway for many years, but I think we need a revolution, not an evolution. Why -Because the approach to B2B/EDI is out-dated and inefficient. Let's discuss some of the issues:

  1. Most companies only exchange electronic business data with about 10-15% of their trading partner community because it is too resource intensive and expensive to proceed further. The ROI takes too long to achieve and the effort is too great. Companies give-up trying to connect more companies and simply fall back into a support mode and never achieve the complete ROI. The ROI is only maximized when you replace all paper processes with electronic data exchanges between trading partners. There will be a point of diminishing return on your on-boarding efforts, but many more trading partners could be transformed from paper to EDI/B2B if the cost of on-boarding were much less.
  2. The ongoing improvement and development of new and more complete EDI/B2B standards is always welcome, but does nothing to resolve point number 1.
  3. Great inefficiencies are built into the traditional approach to EDI/B2B, and to continue to build and grow your trading partner communities simply multiplies these inefficiencies. In the early 20th century, manufacturing companies needed to purchase their own electrical power generation systems to provide power to their own factories. They purchased giant generators, hired staff, installed fuel tanks and developed their own electrical infrastructures. This was necessary only up to the point when the electrical service was available to everyone through the power grid of the local electrical utility where shared costs and economies of scale reduced the overall costs. Once there was electricity available on power lines in front of the factory, companies could reduce their expenses and efforts by connecting to the managed utility service. EDI/B2B must adopt a similar approach.
Example of Inefficiencies:
  • 100 companies all need to exchange EDI with each other and their trading partner community (business network). 100 companies all purchase expensive EDI systems for $250,000 each (total $25 million).
  • Each company then needs to integrate the EDI data into their ERP. Let's estimate the integration projects at $250,000 each for 100 companies (total $25 million).
  • Each company hires 5 EDI specialists and an EDI Manager for an annual total of $600,000 (total $60 million annually).
  • Each company then needs to purchase hardware for the EDI system - 1 production server, 1 fail-over server and 1 test server for an estimated total of $30,000 (total $3 million).
  • The total costs in this example to get EDI up and running for 100 companies the first year is $113 million.
  • The $113 million is for year 1 only. If you factored all the staff costs, EDI system upgrades and annual maintenance/support costs, server costs and integration costs over 3-5 years it will be much higher.
The inherent inefficiencies in EDI/B2B today have given rise to a whole industries that thrive on EDI/B2B chaos. The more difficult to implement - the more services revenue the EDI vendors get. This is perhaps tolerable when everyone is making large profits, but in a tight market all companies are seeking efficiencies and I question if the traditional approach to EDI will survive the, dare I say - inevitable revolution in B2B?
The $113 million total is the total amount if each company purchased and implemented EDI/B2B separately (as most do today). Isn't it possible for ED/B2B to follow the example of the electrical utility industry? Can't companies view EDI/B2B as an important and necessary utility and work together to achieve economies of scale and reduce their development, implementation and support costs? Can't the business community simply organize a managed B2B/EDI service and utilize it for a monthly fee based upon use or the size of their trading partner community, rather than make large individual investments that only address the needs of a handful of their trading partner community and make achieving a positive ROI very difficult?

EDI/B2B is never simple, but there are ways it can be made much easier and more cost effective. These methods mostly involve combining information in a common repositories and centralize systems and services so each company can benefit from the combined work of the entire trading partner community and achieve the network effect. Let's look at another admittedly over-simplified but useful example of efficiencies that are available if the EDI/B2B community were to organize their efforts:
  1. The 100 companies decide to support one EDI/B2B managed services business which purchases and manages an EDI/B2B system that can provide EDI/B2B services for all (saves $24.75 million).
  2. This EDI/B2B managed services business develops pre-built integrations for the major ERPs and their associated core business processes. These can then be used by all 100 companies, rather than everyone incurring the expense of individual integration projects, tools and support (let's say it costs $5 million to develop the integration maps for the community, so the community saves $20 million).
  3. The EDI/B2B managed services business provides 24x7x365 support and staffing and on-boarding services (reduces the expenses in each companies' IT department for a total of $50 million annually - reduce EDI staff from 6 to 1 EDI Manager)
  4. The EDI community does not have to purchase and support 3 servers each (saves $3 million)
  5. The EDI/B2B managed services business could be funded by small fixed priced set-up fees and monthly maintenance and support fees based upon connected trading partners only. The costs for this service could be spread out over several years so it is easier and faster to achieve a positive ROI.
These 5 areas of savings could be significant as long as the set-up fees and support/maintenance fees were reasonable, and there are still more possible efficiencies that could be recognized. I recognize that there would be service fees, but they would likely be much less than self-funding an entire EDI operation internally.
  1. Let's suggest that a central repository is created (with a canonical Data Model) which enables all 100 companies to map their business processes and data requirements into this centralized repository.
  2. Each of the 100 companies in the EDI community connect to 100 additional trading partners through the EDI/B2B managed services business. Now there are 10,000 companies connected into this business network.
  3. The 10,000 trading partners could also be mapped into a canonical data model so their maps could be reused by others in the network.
  4. Now all 10,000 trading partners are available to exchange EDI/B2B business data to all of the original 100 companies in the EDI community and each other. NOW there could be opportunities for HUGE efficiencies. Each time a new trading partner is added - it is immediately available to all 10,100 of the companies in the business network.
  5. At this point a registry of the 10,100 trading partners (100 original plus 10,000 trading partners) can be established that enable all 10,100 to search through the lists of connected companies and easily connect with more trading partners. They could replace more paper based processes with more electronic connections. This produces further efficiencies and reduces processing and administration costs even more.
There are of course challenges to this vision.
  • How would you organize 100 companies to work together for the common good?
  • How would you cost effectively map the business processes and integration points of the original 100 companies in the EDI community?
  • How would you pre-build integration maps if you don't know all the database applications that you need to support?
  • This has been attempted by several industry EDI HUBs in the past with limited success. How would you improve and make it work?
The key, I believe, is in finding commonalities in the first 100 companies in the EDI community. Focus on 100 companies that all use the same ERP like SAP. Most companies, using the same ERP, have similar data requirements for common business processes like invoices and purchase orders. Focus on supporting SAP users with a subset of EDI/B2B message types and business processes. Provide a significant ROI on these. Expand support for an increasing number of business processes and EDI messages until there is full coverage. By starting with a KNOWN ERP you can effectively manage integration projects and leverage your efforts across a broad user base and keep the upfront investment reasonable which keeps the prices down for the customers of this managed service.

In this scenario - SAP is what all the 100 companies have in common. This can be an aggregation point for creating cooperation. The ability to leverage SAP work across all 100 companies is understood and well documented. SAP's support would make this all the more interesting.

The term business network transformation - changing the way things are done today in EDI. How long will companies continue to try to self-fund the entire costs of implementing EDI/B2B the old fashion and inefficient way?

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

Thursday, November 13, 2008

EDI & B2B Intelligence & Metadata

When many people think of EDI or B2B systems they most often think of the of the following:
  • EDI translator software
  • VANs or AS2
  • File formats
  • B2B or EDI standards
  • Implementation Guide Editors and Testing suites
  • Web Services
  • Application Servers
  • Customer or supplier web portals
  • XML editors
  • Communication Protocols
These are all part of most EDI and B2B systems and are useful tools, but the most value components of a EDI and B2B system are the B2B metadata repositories (B2B MRM), and an effective database application to manage your business network ecosystem. The concept of a B2B MRM may include a number of different technologies, methodologies and strategies among them: canonical data models, global data types, universal mapping databases, auto-mapping applications, B2B standards repositories, test data generators, testing tools, trading partner management solutions (CRM for B2B), API and integration script libraries, web services repositories, etc.

The B2B MRM concept is strategically important because it could alter the competitive landscape of the EDI/B2B marketplace and traditional ways of implementing EDI and B2B. Critical B2B information concerning database schemas, mapping specifications, process/work flows and trading partner profiles are developed and stored not in the EDI and B2B vendors’ applications, but rather in an independent database in a B2B MRM.

The projected result of the B2B MRM concept would be to commoditize EDI and B2B solutions (adapters, mappers, translators, communication gateways, etc.) and to uncouple the intellectual assets (maps, process flows, trading partner details) and to make them application/vendor independent. This concept has the potential to free up the customer from the EDI/B2B software vendor and to make EDI translators and VANs commodity items that could be changed at will.

Customers who fully utilize the B2B MRM concept would have both the freedom and flexibility to move between EDI/B2B vendors or On-Demand EDI/B2B managed service offerings. This has the potential of revolutionizing the EDI/B2B software industry and could enable a significant shift in power from the EDI/B2B application vendor to the end user.

Wednesday, November 12, 2008

Challenges to EDI, B2B, Business Network Transformation and Supply Chain Collaborations

Business Network Transformation is not easy today, and it is projected to become a much bigger challenge for companies. Recently the Aberdeen Group reported that IT departments are under increasing pressure to improve B2B collaboration as multi-enterprise supply chains are rapidly expanding.

Emerging multi-enterprise supply chains and extended customer networks make it critical for companies to have a strategy that is scalable and that enables the efficient automating of the communications and business processes between trading partners so there can be real-time collaboration. The answer is not to hire more staff, spend more time on the phones, and process larger numbers of paper documents. Business Network Transformation requires a different strategy and plan to quickly automate these data exchanges using emerging B2B/EDI/XML strategies, methodologies and technologies that are flexible, efficient and cost effective.

Let's identify some of the common challenges businesses face with their EDI/B2B efforts today:
  1. Typically only 10-20% of trading partners are connected to the business network via EDI/B2B, causing slow, error prone and expensive paper based systems to continue to be maintained. This delays actionable information from reaching decision makers, reduces visibility and limits real-time collaboration between supply chains, customers, LSPs, etc .
  2. 80% of the typical EDI/B2B department’s time is dedicated to maintaining existing B2B connections and EDI systems, this limits the opportunity to automate new business processes, on-board new trading partners and integrate more B2B messages. Without these the business units are not able to achieve their automation and collaboration targets.
  3. I have seen many cases where the "tail is wagging the dog". The limitations of the company's EDI/B2B capabilities dictates what the business can accomplish. This is not a desirable or sustainable condition as it can impact the ability to deliver efficiencies, reduce costs, implement new and improved business processes, provide better customer support and the ability to realize profits.
  4. Point-to-Point mapping of custom EDI/B2B messages create difficult, expensive and time consuming integration projects. The larger the number of trading partner’s in your network the higher your risk of a “combinatorial explosion” of mappings and integrations that are nearly impossible to document, maintain and efficiently support over time
  5. Point-to-Point mappings and integrations break when changes are made to the data sources (Point A) and/or data destinations (Point B). Many companies support hundreds and even thousands of point-to-point integrations that can be broken by updating applications and databases. This IT integration problem alone has stopped or delayed many companies from updating and improving their software systems and IT infrastructures which prevents them from achieving the benefits of improved business systems and processes. Most companies upgrade or update their ERP systems every 5-7 years. This is a predictable problem that needs to be addressed at the highest levels.
  6. EDI translator costs, server costs, VAN fees, annual maintenance fees, training fees, changing EDI/XML standards and specialized high-costs EDI staff result in significant yearly costs that often fail to generate the anticipated ROIs in the expected time frames
  7. Backlogged EDI/B2B IT integration projects prevent the rapid on-boarding and integration of new acquisitions, business processes, customers and extended supply chain networks. This causes delays, poor customer support, lack of compliance and the implementation of costly, slow and error prone manual paper processes as a substitute for efficient processes
  8. To take advantage of many emerging multi-enterprise supply chains, companies are required to collaborate with an increasingly large number of trading partners in near-real time. In order to participate, companies need to be able to quickly and cost effectively connect via EDI or other B2B data exchanges. The inability to quickly support these requirements may eliminate your ability to participate in these business opportunities and processes.
  9. Sometimes the EDI/B2B department is unresponsive to the needs of the business units and this prevents the business unit from reaching their financial or performance targets. This is a common IT bottle neck and weak link in the business process chain that needs solved.
  10. Many companies have a decentralized IT environment with multiple EDI/B2B systems and specialized supporting staff in different divisions, locations and business units causing duplication of expenses, integration projects, mapping, staffing and support that is unmanageable and unsustainable in the long term.
  11. Limited or no reuse of mapping and integration work with point-to-point configurations result in costly projects that become increasingly problematic to support.
  12. EDI/B2B implementation methodologies with limited or no reuse capabilities does not become more efficient over time. Efficiencies and scalability can only be realized when the ability to reuse the work is incorporated into the system, and standardized processes, maps and integration methodologies are utilized. The increasing demand for more customer and supplier B2B integrations means that this is a growing problem that needs resolved quickly - business network transformation.
  13. Often a company’s high profile strategic plans for business network transformation and supply chain collaboration are delayed and/or not achieved because the IT department is unable to meet the requested time lines due to other priorities, existing IT development projects and limited IT budgets and resources
  14. Many companies conduct business across multiple vertical industries that may require different EDI/B2B standards, content and data formats. Supporting a large number of different B2B standards and industry requirements may add substantial costs in training, specialized personnel and additional technologies.
These are a few of the common issues many companies face in managing their B2B/EDI efforts and capabilities. There is a consensus among IT analysts that the ability to connect rapidly and efficiently with greater numbers of customers and suppliers using B2B data exchanges is an absolute requirement. There is a growing sense of urgency to resolve many of these challenges.
SAP's 2008 emphasis on business beyond boundaries and focus on business networks, business network transformation and extended supply chain collaboration is timely and needed. I see the developments on Netweaver PI, Enterprise Services Repository, Global Data Types and recent efforts to help clients solve B2B challenges as good progress in the right direction.

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

Friday, November 7, 2008

Business Networks, Intellectual Assets & B2B and EDI

The assets of a company are not only found in their patents, products, brands, capital, customer databases, facilities, equipment, and inventories, but also in the intellectual assets they possess within their IT departments. These assets when managed appropriately can be a significant source of competitive advantage, especially when you depend on your business network to manufacture, market, sell and deliver your products.

Business processes and metadata (information about information) are a significant and important category of intellectual assets. They might include; processes for ordering supplies, processes for changing orders, processes for monitoring the delivery of orders, processes for generating and sending purchase orders and processes for accepting supplier invoices. Business processes are often executed by the purposeful movement of formatted data such as traditional EDI, XML schemas and other data formats in an organized, documented and repeatable manner. The big problem - rarely is this data easily found and available for efficient reuse across the enterprise. Often this exact process is being funded, designed, developed and deployed only once, in one location, with one product line in one division. This problem represents an enormous waste in most companies.

Business processes and their associated data requirements are often dispersed throughout the organization in different software applications, different spreadsheets, databases, technology platforms, physical locations and within the minds of different personnel. The lack of a centralized data repository to store and make searchable this information leads to the loss of thousands of hours of development time and accumulated intelligence, delayed projects and wasted money.

It is not just technical information that needs to be organized. The following list contains examples of other important information that must be gathered, documented, stored and organized specifically in the B2B/EDI arena:

1. What data does a particular business process require?
2. Where is this data located?
3. How is the data formatted?
4. What are the semantics of the data?
5. Are there existing scripts that have been written to import and export the data from the source?
6. Where are these scripts?
7. Are these scripts documented?
8. Who wrote these scripts and is this person available to debrief?
9. What are the mapping and transformation requirements for this data?
10. Does this data need to be transformed/converted into multiple formats?
11. Are there industry B2B / EDI standards involved?
12. Is there documentation concerning this particular business process?
13. Who are the business and technical owners of this business process both internal, and at your trading partner's location? How can they be contacted?
14. Are there documented security requirements?
15. Who are the business and technical owners of each step in the business process?
16. How can you contact them?
17. Who owns the applications and hardware that runs this business process?
18. Is there an organized project team that is implementing this business process? Who are they? How can you contact them?
19. Is there a method in place to identify open issues and resolve them? Where is this documented?

As is demonstrated by the list above, there is a significant amount of knowledge and intelligence that needs to be collected and used to connect business networks and business processes together. Traditionally this information has not been aggregated, documented and organized in a reusable manner or repository. When consultants, developers, business analysts or architects leave the company or are made redundant, and there is not a centralized repository containing this information the very success and sustainability of the business is at risk.

Documented business processes, SOA and web services offer strategies, technologies and methodologies for reusing development work, but there also needs to be a strategy for locating non-technical information. These processes need to have the assignment of people's names, contact information, physical locations, reporting structuring, servers, test data samples and documentation. A genius programmer is of little value if his/her work can not be found, reused, understood and exploited for the benefit of the company.

SAP's Enterprise Service Repository, Netweaver XI/PI, composite applications, IDocs, workflow and other technologies are examples of reusable intellectual assets and methodologies. These same kinds of strategies now must be extended into the B2B / EDI space to facilitate the rapid and efficient connection of trading partners in your business network.

How would you know who to contact in the EDI department of your suppliers to facilitate electronic data exchanges? Who is their boss? Where would you find the owner of the JIT delivery business process of your key suppliers? How do you know if this process is already in use somewhere else in the company? Is another division of the company already using EDI standards, messages, APIs and business processes that you can reuse? How do you find them?

Reuse, and optimizing the value of all development projects is absolutely necessary in times of shrinking sales, profits and fewer IT resources. There needs to be an effective way of organizing, sorting, searching and reusing B2B maps, integration projects, previous connections, existing data exchanges, integrations, APIs etc. It is these very challenges that I believe are being addressed now by SAP's Business Network Transformation strategies.

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

Monday, November 3, 2008

EDI, B2B and Business Network Transformation in Today's Economy

If there was ever a need for an excuse to transform business networks, the latest sales reports from the automotive industry can provide it. Things must change. As the saying goes, "If you always do, what you have always done, you will always get, what you have always gotten." The current business model is unsustainable. Companies need to scrutinize every expense and activity with the question - Does this expense or activity add value to my core business or is it a commodity item? Commodity items include any activities or expenses that are required to operate a business, but do not offer any competitive differentiators or specific value above and beyond what every other business has.

Electricity is an example of a commodity item. Yes, your company needs electricity, but you can buy it for a monthly fee from a utility without having to invest, operate or maintain your own personal electrical power plant. What other services does a company need that can be purchased as a service for less money than building and maintaining it in-house? Can you save money and invest in other areas that have much higher returns?

Today, companies are looking at each activity and expense and asking themselves the question - Is this a commodity item? Are there managed services companies (utilities) that can do a better job and for less money due to their expertise and economies of scale?

Here is another way of looking at it - ACME company designs, manufactures and markets the best widgets in the world. They are very good at designing and marketing widgets. ACME also runs a customer support center, a trucking company, an HR department, a payroll department, manufacturing operations, an IT department, an EDI department, and a facilities maintenance department , but ACME is not recognized or valued for any of these departments. Their competitive differentiators are designing and marketing the best widgets.

If ACME could find a higher quality and less expense way to run HR, customer support, marketing, manufacturing, IT, EDI, facilities, logistics and transportation, etc., then they could use those savings to further invest in developing the areas where they have competitive differentiators - designing and marketing widgets. This is not to say that these other departments are not important to your business, just the oposite - they are CRITICAL! They just aren't always competitive differentiators that need to be developed and maintained in-house.

If ACME chooses to focus on their competitive differentiators and use managed service providers for their non-core services, then they must have a solid business network strategy in place. This strategy must include an effective way of managing distributed services. This includes having real-time visibility into the services performed, accurate and real-time communications with the managed service providers. It will not be effective to introduce slow and error prone communications into an extended business network. The more you use managed service providers the faster and more accurate your communications must be in order to effectively manage it. The vision of a successful business network only works if the business network "connections" work.

OK - how do you ensure visibility, accurate and real-time communications with managed services providers in your business network? You need to automate and integrate your business processes with electronic data exchanges. The traditional approach is EDI, but flat file, XML, CSV and any other electronic data exchange can be used. You can not introduce a series of human interactions into a business process and maintain an accurate, consistent and real-time exchange of business data. It must be automated and integrated.

A follow-up question now - Are the electronic data exchanges, that automation and integration enable, a core value to your company, or a commodity service in the same manner as a phone service or the internet?

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