Brave, innovative companies will use the Internet and trading partner relationships in a more strategic way than we have seen so far.
Interactions will undoubtedly extend deeper inside companies, and isolated supply and demand chains will inevitably evolve into electronic communities that leverage specialisation. This is a continuing trend and a goal that is only partly met by existing technology and solutions. These interactions clearly need to be secure, reliable and take place in real-time if any incentive for business change is to be achieved.
Naturally, there are several business and technical standards, but they typically lack widespread adoption. There are also doubts and issues relating to which to adopt and coercive pressures that may influence adoption.
The management challenge emerges as one of the principal issues of successful business-to-business (B2B) interaction when you mix in the increasing need to evolve business at a more rapid pace to beat the competition. This includes working with new partners, outsourcing non-core activities, and developing new products and processes.
Yet successful B2B is about not only reaching out and creating new connections, but also hooking up into internal processes to satisfy business needs in the most efficient and effective manner.
Fundamentally, B2B requires automatic integrated system-to-system interaction among trading partners. Integration with enterprise systems
Ultimately, it should be possible to find new services and partners quickly and easily, and create new electronic relationships. The B2B build-out primarily involves a select set of key partners. However, companies are likely to have more partners in the future and require the ability to easily interface with their systems and services.
It is worth remembering that B2B is about the entire commerce chain, including collaborative design, forecasting and planning, sourcing, financing, logistics, contract management and settlement, although the focus tends to be on procurement, marketing and online sales.
As well as different activities and processes, the realm of B2B integration also extends to the myriad of service providers, and involves intermediaries such as trading hubs and exchanges, and new modes and different levels of software delivery, for example, Web services.
Not to be forgotten, successful B2B e-commerce also requires a reliable means of exchanging messages using the Internet that includes guaranteed delivery and integrity.
Business process automation is a widely recognised goal of B2B. It can be considered to comprise a combination of public and private processes. Shared public processes are developed by detailed agreement between partners or have been defined by standards bodies, including EDI, RosettaNet, VICS (Voluntary Interindustry Commerce Standards) and CPFR (Collaborative Planning Forecasting and Replenishment).
These support a patchwork of interactions that address certain processes and industries, and degrees of detail. They may be implemented using different means. Continuing development should further aid B2B process automation.
Private processes are often regarded as the unique back-end procedures carried out within the enterprise that define the function. Private processes are unlikely to be standardised as such, as they are a core source of competitive benefit.
Many organisations support either public or private processes but not the end-to-end capability that provides the necessary visibility to create real value from B2B interactions.
Standards are an issue that can be discussed at great length and, in their entirety, are beyond the scope of this article. Suffice to say that the lack of a standard for describing information and transactions has hindered B2B interaction and integration.
Recently, XML has helped with the describing and customisation of the content of B2B messages. However, there are multiple derivatives developed under different and sometimes competing initiatives.
But let's be realistic. There will undoubtedly continue to be a range of standards that meet specific needs and some degree of competition, while this gives providers a competitive edge.
Also, given the need to interact across industries, and the different state of play of partners, there is likely to be a need to communicate through a range of means. B2B integration solutions need to accommodate this diversity.
B2B is a serious business with large transaction values and time-critical interaction. B2B connections need to guarantee delivery, ensure security of message contents, deal with errors, and so on.
This kind of reliability needs to be provided across the Internet but additional components are necessary to make the Internet a robust and reliable vehicle for business transactions. Such elements address exception and error handling, arrival times, notification of failure, authentication of messages to control access, non-repudiation and message screening to protect internal systems and audit logs.
Management and implementation issues
There are also a number of important implementation issues that need to be considered when establishing B2B links or collaborating with trading partners.
The evaluation and prioritisation of processes and respective areas of the business should be undertaken to establish where the greatest benefits could be achieved. Also, achieving process harmonisation may not be as simple a task as originally imagined, for the reasons already discussed. This is an area that should receive careful attention and not be unduly rushed.
The impact on the organisation of process harmonisation should also not be overlooked or ignored and may well be fundamental to achieving the desired benefits.
Partner selection is another crucial part of establishing a B2B trading community. This will involve categorisation and factors such as readiness, size and importance of partner.
Enabling partners is another key issue. Leading organisations will have a role to play in mobilising their partners to participate. This is likely to be an unshakeable responsibility which should not be ignored. It doesn't matter how prepared your organisation is if your key partners are not mobilised effectively.
Part of the selection process will also need to address third parties such as professional service organisations, systems integrators and other types of service providers. The next evolutionary stage of B2B is collaborative commerce (or c-commerce). B2B and c-commerce are not out of the box.
B2B needs to be planned in advance, yet companies should be wary of "the moving target". Don't plan too far ahead. Revise plans and take small achievable steps.
Companies should identify what each partner brings: technologies, skills, clients and so forth. Remember that B2B is not just about the physical connection - it's about sharing information, talent, and resources to create new value in processes, products and markets.
Overall, be realistic about what can be achieved and don't oversell or exaggerate the value proposition. B2B needs strong, forward-looking leaders and management buy-in, not to mention tremendous influencing and negotiation skills.
Butler Group believes that effective partner management will be a key core competency of successful businesses of the future.
Flexibility going forward in the B2B space is clearly critical. Given the array of technologies and collaborative applications emerging to operate across trading communities, it is essential that any solution can effectively cope with change.
Butler Group suggests that prospective customers ask vendors to set up a pilot between themselves and their partners and ask the vendor(s) to demonstrate how it handles transformation of processes and transition between partners.
Companies may well have different strategies according to industry, geography or culture. If possible, introduce some of this complexity into the trial.
Estimates of the market size for B2B e-commerce and c-commerce vary, but all indicate substantial growth. One such statistic suggests that B2B e-commerce will grow from around $150bn (£102bn) in 1999 to more than $7tn by 2004.
The following are some examples of the potential savings that can be achieved through collaborative relationships based on B2B infrastructure:
General Motors attributes 80% of its design and development costs to design changes. Vehicle development time using Covisint, the online automotive hub, will be reduced from 42 months down to only 12 to 18 months. It will save $3.5m in paper-based costs alone.
It is also believed that build-to-order manufacturing in the car industry facilitated by B2B e-commerce could reduce costs by between 10% and 15%.
Complicated as it may seem, technology infrastructure represents only part of the challenge. B2B has to accommodate business and technological diversity, and offer ongoing flexibility.
As the number of partner interactions increases, so does the complexity. Therefore it has to be manageable, something that vendors could do more to address. It also must be capable of future Web service-based B2B models and standards.
Common open standards are important, as is a realistic business model. Technically built-in intelligence should play a significant part in making B2B networks more manageable.
Focus on the bottom line signals a return to common sense. However, this should not be misinterpreted as a need for savage cutbacks and stillborn IT projects. B2B can deliver significant cost savings through process improvement and streamlined operations. With the right strategies companies can reap tremendous rewards.
About Butler Group Research and Advisory Services
This paper is reproduced from Butler Group's Research and Advisory Services. For more information on this and other technology-focused services, contact Mike James on +44 (0)1482 586149, e-mail [email protected] or visit http://www.butlergroup.com/company/products.asp