B-to-B integration vendors facing shakeout

The market for online business-to-business integration is in the middle of a consolidation as vendors join forces to offer solutions that expand traditional EDI (electronic data interchange) trading by implementing emerging XML technologies.

Last week, Peregrine Systems Inc., a San Diego-based vendor with roots in EDI, announced plans to acquire Belmont, Calif.-based Extricity Inc., for its business process and application integration software.

Dallas-based i2 Technologies Inc. also announced last week that it had tapped webMethods Inc., in Fairfax, Va., to provide the common integration platform for its entire product line.

Separately, New Era of Networks Inc. (NEON) and NetFish Technologies Inc. were both acquired last month for their integration solutions.

One of the main drivers of the ongoing shakeout in the business-to-business integration market is the failure of XML to emerge as the prominent technology for online business-to-business trading, said Shawn Willett, an analyst at Current Analysis, based in Sterling, Va.

Many of the business-to-business integration companies were launched to link business processes that were to be upgraded from EDI to XML, Willett said. Instead, there has been a lack of standards surrounding XML, he said.

“Everybody thought that [XML] was going to take over the world, and EDI would just go away,” Willett said. “[XML is] an immature technology. People have … to take the EDI documents that are out there and transfer them to XML,” he said.

Ariba, Commerce One, and other business-to-business players are likely to follow i2’s lead by either partnering to embed integration tools in their offerings or by acquiring the appropriate vendor, Willett said.

Steve Gaylor, senior director of product management at Peregrine, said the Extricity acquisition will allow Peregrine to push EDI or XML to link users’ processes with one another for business-to-business (B2B) commerce.

This is critical for business-to-business marketplaces that are trying to ramp up their networks to achieve the critical mass of buyers and sellers needed for liquidity, said Dave Cope, vice-president of marketing at Extricity.

“You need to get enough businesses that are B2B enabled … so the next business that plugs in gets a huge amount of value,” Cope said.

“With a single connection to Peregrine, they can have instant access to 42,000 [Peregrine customers] that are B2B enabled and ready to work with them,” Cope said.

Jon Derome, an analyst at The Yankee Group, in Boston, said the business-to-business integration market is consolidating because vendors have overlapping solutions.

“The market can’t sustain all those vendors,” Derome said.