For the past three years, the Internet and ecommerce dominated
discussions of businesses' plans for better connecting with buyers
and/or suppliers. A quick comparison of current ecommerce activity with
ongoing electronic data interchange (EDI) activity makes it clear,
however, just how embryonic is the role of ecommerce in the world of
business. Large companies in many industries depend upon EDI networks
to tightly link their own and business partners' logistics, inventory,
and manufacturing resource-planning (MRP) applications with minimal
user intervention.
Figure 1
Worldwide EDI Commerce and B2B ecommerce, 2000-2003
http://www.idc.com/en_US/images/newsletter/ebt20020110g1.gif
In 2001, the total value of goods and services businesses purchased
through ecommerce systems was $0.5 trillion; for EDI systems run by EDI
service providers such as GE GXS, IBM, Peregrine, and Sterling
Commerce/SBC, it was $1.8 trillion.
This large difference actually understates the disparity. Internet-
enabled EDI, that area of overlap between ecommerce and EDI, will
account for 33.3% of all business-to-business (B2B) ecommerce in 2001.
Excluding this segment, the value of goods and services purchased
through EDI systems is currently six times greater than the value of
purchases through non-EDI-related ecommerce systems (see Figure 1).
EDI Service Providers: A Wind at Their Back.
EDI service providers, commonly referred to as EDI value-added networks
(VANs), spent the past 20 years creating and operating today's EDI
solutions, but they received scant attention during the past four years
of Internet and ecommerce expansion. In today's economic environment,
however, the traditional EDI service providers are emerging as the
critical, if not leading, builders and operators of important ebusiness
solutions.
They have an installed base of large, multinational companies (both
buyers and suppliers) that already depend upon them to run critical
business applications and interact with business partners. They also
have the customers, the network, the experience, and (most importantly
in today's world of tight finance) a reliable revenue stream to fund
new investments.
.but Rough Seas Loom
The critical challenge for the traditional EDI service providers
relates to their perceived value -- that is, they are primarily viewed
as a provider of network transport, not as a provider of value-added
business services such as enabling suppliers and providing quality
assurance and business process integration.
The advent of lower-cost Internet technologies and public IP networks
represents both an opportunity for and a threat to EDI service
providers. They can leverage these new technologies to reduce internal
network operating costs and enhance the functionality of their existing
EDI solutions, but they also face the risk of cut-rate Internet-based
alternatives for basic EDI data transport. Such solutions are a direct
threat to current cash-flow streams.
Today's EDI service providers must parlay their existing investment in
network infrastructure, technical and operation expertise, and
predictable cash flow into new initiatives that focus on business
processes such as supply-chain management, service provisioning (e.g.,
telecommunications), and collaborative product design. XML will be a
critical component in this strategy, but it will also require the
building of tighter links between EDI service providers and the vendors
of leading business application software products.
-- Rick Villars
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