Three vendors with roots in business-to-business integration have snapped up data synchronization specialists in recent weeks, highlighting the growing importance of data quality in electronic transactions.
Global Exchange Services (GXS) started the trend by acquiring Haht Commerce Inc., which makes product information management software, in a US$30 million deal completed in February. Then last month, IBM Corp. completed its purchase of a Haht competitor, Trigo Technologies Inc., for an undisclosed amount. Most recently, Sterling Commerce Inc. acquired TR2, a privately held company that offers hosted data synchronization services, for an undisclosed amount.
GXS, IBM and Sterling share a history of providing network services for business-to-business e-commerce via value-added networks and related transaction delivery networks. Analysts say it makes sense for vendors of trading-partner integration services to add tools for managing enterprise data integration to their offerings.
For users, the combination means one vendor source for their global data synchronization efforts, Gartner says. Previously, users needed two different types of products to handle data synchronization: tools to manage data integration among different systems within the enterprise and technology to synchronize that data with trading partners, the research firm says.
Before the Haht purchase, GXS offered hosted services for trading partner integration, and hosted catalog services. What it didn’t have was the software deployed inside an enterprise to aggregate product information. The Haht acquisition adds licensed product information management software to GXS’ product portfolio.
Sterling had a family of licensed integration broker software; TR2 adds hosted data synchronization services to its lineup. For IBM, the Trigo acquisition adds product information management capabilities to its WebSphere family of integration middleware.
Keeping data clean
Data synchronization is an initiative common to consumer goods and retail companies. It involves reconciling the product data that gets swapped among companies to reduce errors in invoicing, purchase orders and product delivery.
Analysts say retailers and suppliers are wasting money swapping obsolete or inaccurate data in business-to-business transactions. According to Ernst & Young, administrative and paperwork errors are responsible for 13 per cent of the US$46 billion retailers could lose annually to inventory inefficiencies and theft.
AMR Research Inc. identifies costly problems caused by unsynchronized item data:
— About 30 per cent of items are typically out of sync; fixing errors can cost US$60 to US$80 per item.
— Mismatched data means incomplete deliveries. Nearly 40 per cent of invoices result in deductions.
— Unsynchronized data can result in delays of up to four weeks in new product introductions.
— Inaccurate orders need to be reworked manually, forcing costs up seven-fold and adding five days processing time.
Investing in data synchronization technology can eliminate these problems, AMR says.
Data synchronization software aggregates and organizes item-related data from multiple application sources. It’s often used in conjunction with data syndication initiatives such as UCCnet Inc. compliance. UCCnet is a non-profit organization that manages an item registry for companies’ product data. Its services let companies register and synchronize item and partner information in a neutral, central location.
How it works
The way it works is suppliers provide product, location and trading partner information to the UCCnet registry. UCCnet data synchronization services then check the data for compliance to standards and validate that the data is consistent with that other trading partners use. If a party makes changes to any of the 150-plus possible attributes describing a product, UCCnet makes sure all systems are aware of the change.
Retailers such as Wal-Mart, Wegmans, Ace Hardware, Lowe’s and The Home Depot are requiring their suppliers to begin exchanging data via UCCnet’s data synchronization standards and hub.
These retailers’ initiative led Central Garden & Pet Company to launch its own UCCnet data-synchronization efforts, says Stephen Levandowski, CTO at the Lafayette, Calif., manufacturer and distributor of garden and pet products.
A US$1.2 billion company, Central Garden & Pet has grown by acquisition and operates 25 business units, Levandowski says. Historically the company has decentralized its IT operations; each business unit runs its own business systems.
But when Central Garden & Pet faced UCCnet directives from several key retailers — most of which buy goods from more than one of its subsidiaries — it decided to act globally.
“We learned at least 20 of our customers were going in this direction,” Levandowski says. “That kind of triggered us to step back and say, ‘Does it make sense to address this 25 different ways in each of our business units, or should we be looking to leverage a common approach?'”
Central Garden & Pet chose product information management software from Haht, before GXS acquired the vendor. It uses the Haht software to organize data from its 25 business units before submitting it via file transfer to the UCCnet registry.
So far Central Garden & Pet is not very sophisticated in its UCCnet connections. But as the number of products being fed through UCCnet grows, the company plans to implement a more mature integration service, Levandowski says. GXS’ purchase of Haht makes it a logical place to turn for UCCnet connectivity.
“Right now our priority is to meet these immediate registration and certification steps,” Levandowski says. “But once we have the infrastructure in place, we definitely would consider using GXS for connectivity.”
The RFID connection
Data synchronization also has relevance beyond UCCnet compliance. Getting data into a standard format is a prerequisite for more advanced e-commerce initiatives, such as vendor-managed inventory and collaborative planning, forecasting and replenishment.
Radio frequency identification (RFID) projects, too, require stable, accurate data sources to succeed, observers say. As suppliers begin to tag pallets and cases with wireless RFID labels and supply-chain systems begin tracking the movement of these tagged goods, the amount of data the trading partners exchange will grow exponentially, says Bobby Patrick, senior vice-president and chief marketing officer at GXS.
“RFID will require moving information faster and in much higher volumes,” Patrick says. “In a real-time world, the ripple effects of data that has not been cleaned will be severe.”
Levandowski agrees. The work Central Garden & Pet has done to synchronize its data for UCCnet participation will make it easier to begin participating in RFID pilots with its retailer customers — many of which are mandating the use of RFID tags on cases and pallets.
“Technically we’ll have built the database and the processes for characterizing all of the products that we sell to these customers, and we’ll have built it in an industry-standard way,” Levandowski says. “This means we won’t have to rebuild and re-certify all these items as we get into implementing RFID.”