It wasn't long ago -- the late 1990s, in fact -- that industry pundits said value-added network (VAN) providers focused on B2B electronic document interchange (EDI) services were destined for the scrap heap. Their proprietary networks were expensive to operate and challenging to use, prompting many to predict they would soon be rendered obsolete by up-and-coming Internet-enabled B2B service providers.
Well, a funny thing happened on the way to oblivion: VANs embraced open, Internet technologies to deliver Web-form-driven EDI and have moved upstream into all forms of on-demand services that help business small and large more efficiently synchronize supply chain activities with partners across the globe. In fact, one of the grand dames of the VAN world, GXS (Gaithersburg, MD), recently unveiled a partnership with Microsoft Corp. that reflects its continuing push to remain vital to companies seeking a way to manage the burgeoning ranks of globally dispersed suppliers from the familiar confines of the desktop PCs.
The former General Electronic Co. EDI service provider once known as GEIS (now owned by private equity capital firm Francisco Partners) is standardizing on the software giant's foundation technologies and industry-standard XML to enable customers to exchange supplier data via the Internet. It is embracing Microsoft's BizTalk Server for business process integration, SQL Server database and the upcoming Microsoft Office 2007 as the underpinnings of its "Trading Grid" Internet service that the two companies will jointly market with the help of Microsoft's global network of resellers of its Dynamics business software.
Microsoft Office 2007 is the lynchpin of the partnership. The much-hyped offering is expected to offer embedded EDI capabilities -- such as the ability to automatically translate EDI forms into XML documents that can be opened by Outlook using Word when it debuts later this year. "There will be a ribbon bar with EDI-specific actions in it," notes Bobby Patrick, GXS, senior vice president and chief marketing officer. "So, [a user can open] a PO and it will look like a PO."
Previously, users of Microsoft's Dynamics CRM had to rekey order information transmitted by fax, e-mail or even phone into their CRM and ERP systems to impose some semblance of automated structure around order management and financial accounting. By embracing Microsoft technologies, Trading Grid customers that use Office and Outlook can accept orders on Excel spreadsheets or any comma delimited file without the need of complex field mapping or translation software. "We've solved the same problem for businesses as Microsoft and Quicken did for consumers by synchronizing their [PC-based] personal financial books with their [Web-based] bank accounts," Patrick explains.
Beth Enslow, an analyst with AberdeenGroup, says GXS's approach shows considerable business savvy, and represents yet another step in the old-line VAN's transition into 21st century computing by moving from static Web forms to more dynamic desktop/Internet-enabled business process integration. "GXS is being smartly opportunistic by ... making the [Microsoft] technology available [to businesses] to take advantage of," she says pointing out that by using Microsoft desktop as an inbox, the challenges of scale many traditional VANs have faced quickly disappear as any business with an Office and Internet equipped PC can exchange timely and relevant supply chain information. "It's an evolutionary step but a significant one."
While the partners will initially train their marketing lenses on smaller, North American companies, SMB manufacturers, retailers and IT consultants whose businesses pivot around Microsoft desktop productivity applications, success will ultimately depend on the endorsement of bigger players with more a wider array of business partners. It's a scenario reminiscent of Wal-Mart's mid-'90's decree that suppliers doing business with the Bentonville, AK retailer needed to use EDI or find another customer. "They will need bigger hub companies to encourage it," Enslow concurs.
And GXS will need close cooperation with Microsoft and its reseller partners, many of whom are looking at EDI and other supply chain-oriented business process management engagements as a way to bolster sagging product resale margins. GXS's Patrick says his company is already working closely with Microsoft: The two companies' Indian development arms are collaborating to make sure their technology platforms remain in lock step.
Patrick won't make predictions on the adoption rate of the Biztalk-enabled GXS Grid. It will depend on how quickly SMBs install Office 2007, as well as the accelerating penetration of Microsoft Dynamics products, CRM in particularly, which has received a hardy embrace from customers that have had to endure a protracted wait.
Meanwhile GXS traditional competitors aren't sitting still. Rival VAN Sterling Commerce, as well as country-specific telecom giants such as Deutsch Telecom, British Telecom, France Telecom, are all working with partners to eventually deliver similar capabilities. "All the major VANs are moving to Internet-based technology and Web forms," Enslow says. "What's new here is that GXS is taking it to the next level by integrating [supply chain business process management] into the desktop."