Trust and communication come before electronic tools

Hollis Bischoff, vice-president of electronic business strategies with the research and consulting firm META Group, Inc., spoke to us from her San Francisco base about the slow progress and various difficulties of enterprise e-business transformation in North America.

IT Focus: What do you see as critical for Canadian companies participating in the global market to consider in the broad context of build-to-order, channel relationships, e-business and e-marketplaces?

Hollis Bischoff: The question we get asked a lot is: is the relevancy of e-business still high, given some of the spectacular failures of the last year and a half and given some of the challenges people are facing in getting budgeting today? In order to put this in context, we need to start by answering that question.

E-business in this context is externalization – taking my enterprise and opening the doors beyond its walls and boundaries; it’s optimizing its processes both internally and externally; its integration both internally and externally. Those three factors have not gone away. The pressure’s on companies to reduce costs by becoming more efficient; streamline partner relationship whether it is adding a new partner or making a closer relationship with a partner I have now. What has gone away is the unreal expectation… that e-business was… going to answer all the problems we had in getting our business revenue growth. If you put your transactions in XML, everybody would be able to talk to everybody else; we wouldn’t have language barriers any more; we wouldn’t have to worry about security any more. We all got really excited about that. We’ve had a heavy dose of realism. Now people look at the objectives of what e-business will accomplish. It is reducing costs. It’s about setting up expectations and relationships with my partners; building customer loyalty, retain customers, hit parity in the marketplace.

Those requirements… aren’t going away. The only real thing we have today to gain competitive advantage is to do the things electronic business enables: integration, externalization and optimization.

IT Focus: In terms of channel relationship management, what advice would you give those in the manufacturing/retail/wholesale sector?

Bischoff: Clearly define your focus as making it easier for your customers. If you’re in manufacturing, it’s making it easier for wholesalers to do business with you; making it easier for the resellers to do business with your wholesalers; and ultimately it is about making the wholesaler, retailer and end consumer more comfortable at doing business with us.

We want mechanisms on that Internet site to allow (customers) to seamlessly move from the discovery process to the purchasing processing. The only way they can do that is if I’ve integrated those sites together. That means I have to have the manufacturer, the retailer and the wholesaler all come together with a single experience for the end consumer.

Another issue is where you have a manufacturer and dealer relationship where there is a lot of regulations around who can sell what. Automotive manufacturers come to mind quickly. We want to provide interactive training, additional product information than we would necessarily provide to the end-consumer, the ability to process functions quickly, do co-marketing and co-branding – the more we can electronically distribute that, the less chances for error and the higher success rate.

So those are the two keys: making the end consumer more powerful and empowering the middle person or your dealer or retailer by giving them more interactive information and compensating them more quickly for them.

IT Focus: Do you have any idea of how many companies are involved in this?

Bischoff: It is extremely low still. This is a very nascent industry right now… Certainly you see a lot of auto manufacturing in this, electronics and appliances. The ones who are really aggressively going after this to the tune of setting standards are the high-tech like disk drive manufacturers and companies like Nortel and Celestica who are really active in an organization called RosettaNet which is about setting the standards of how to communicate.

That’s the biggest challenge. It’s not about the tools or whether we can imagine it. It’s all about building this relationship trust which allows us to get to a common set of languages which allows us to easily interchange information.

IT Focus: This sounds as elusive as world peace.

Bischoff: It is! And it really is world peace. That’s why everyone got excited a few years ago when XML came out. If that problem is solved, we in many ways we will have solved world peace. We know the reality is hard work, lots of time in relationship building and trust in people we haven’t normally trusted in the past. That’s the hard ugly reality.

There is great hope… We’re seeing private e-marketplaces becoming bigger with private commerce chain linking up starting from the procurement side all the way through to the sell side. It usually takes an enterprise to start that. Usually it’s the big one, whether it’s the manufacturer or wholesaler or retailer, starting to stand up and say: ‘we can do this better if we work together.’ What that means for a wholesaler is that they might belong to multiple ones of those. It means that they need to ensure their infrastructure is flexible enough and (that) they’re open to working through all these (issues). This isn’t a technology problem. It is a trust, relationship, transformation problem.

IT Focus: Do we have the technology required, then?

Bischoff: We have much of it. Is it totally industrial strength and totally secure? For a price, yes, but one reason that’s not moving ahead is because we don’t have enough adoption yet. There are some really cool things that are going to help us.

IT Focus: Such as?

Bischoff: Web services. To integrate externally, I have to have integrated internally. Typically I’m going to have to give you a dozen pieces of information from six different systems. I’m going to put together some sort of context that makes sense to you and ship it off to you somehow and somehow you’re going to make sense of that. That dozen pieces of information has to go to six different places in your back end system. We’ve got EAI (enterprise application integration) software inside my organization and inside your organization to do that with something called IEI – inter-enterprise integration – or B2BI, business to business integration tools – that takes it from me to you. Very, very expensive – in the millions of dollars – and a very intensive burden overhead. If I had SAP, PeopleSoft in my organization, then I have to custom-code to that. If you at the other end have Oracle and other stuff, you have to translate everything I send you to read it. Everything is proprietary. Nothing is open yet.

What Web services does is (it wraps) a protocol called SOAP (Simple Object Access Protocol) – a common universal standard regardless of what application I’m in – and almost all the application vendors are recognizing SOAP. Then there’s the WSDL – the Web Services Description Language – (which) tells me what is in my service in a standardized way that everyone can understand. It simply says: here is a common way to describe what you are – (for example,) you are an order management system.

Then there’s the UDDI registry (which) says after I’ve created an order management web service, which is some functionality and information that I’m going to receive or send to you, then I can register it and say it is available for someone else to use.

One of the things as a wholesaler that you want to do is check your build to order at my manufacturing plant. I can simply build a web service called ‘Check Order Status.’ Because it uses those standards, it ignores all the proprietary stuff…

The entry point of the web services because I’m looking at a single function and not integrating a whole bunch of stuff together tends to be very low – under $25,000 – and will be lower as they are used more. All application vendors will be opening up this way. I can integrate internally with my SAP with my PeopleSoft because they’re going to have this shared open axis.

We’re about 18 months away before any serious adoption…

We’re going to start seeing third party companies providing these services that will be generically available to everyone that they can use and start assembling things.

Because we’re going to have applications be Web services-enabled, you’re going to start being able to build extensions that plug into your own application. We’ll start seeing little pieces of Web services with old-fashioned integration. It starts ‘commoditizing’ integration, one of the three pillars of e-business. This starts ‘componentizing’ things. As it gains more understanding of the power of it, it will become more powerful as a result.