Professional Documents
Culture Documents
Integrating and monitoring business-to-business (B2B) value chains through the use of external services.
September 2012
Increasing globalisation and diversity of both the suppliers and customers a given organisation has to deal with mean that supply chains are becoming ever more complex. Maintaining capabilities across broad functions requires systems that are well integrated, audited, secure and capable of being reported on at a granular level. Cloud-based approaches introduce new opportunities to gain access to advanced functionality, but also introduce issues around B2B integration for organisations. This report looks at the problems organisations face, the options open to them and provides advice on how Quocirca believes an organisation should approach putting in place an effective, integrated, overall B2B solution.
Rob Bamforth Quocirca Ltd Tel: +44 7802 175796 Email: Rob.Bamforth@Quocirca.com
Quocirca 2012
-2-
Background
Cloud Computing
Business-to-business (B2B) supply chains are becoming ever more complex. As the internet has enabled even the smallest organisations to participate in the globalisation of services and product delivery, many organisations now find themselves having to deal with thousands of business suppliers and customers on a regular basis, with the processes involved encompassing many different business functions. Indeed, some B2B suppliers will be participating in knowledge service provision, rather than the supply of pure physical goods. Therefore, Quocirca sees that what were seen previously as pure B2B supply chains have now changed to being far more critical B2B value chains (see Figure 1). Historically, much of the communication and collaboration along these supply chains has been carried out via manual paper/telephone processes, or using manual electronic means such as email and PDF documents. Some organisations have used more automated means, using standardised electronic data interchange (EDI) such as UN/EDIFACT or American National Standards Institutes (ANSIs) ASC X12 standards, but, even where such automation has been introduced, the variability in adoption of the standards, along with the multiple different versions and global/local dialects of such standards, can still lead to issues along complex value chains. However, even an automated approach such as EDI covers but one facet of a supply chain. Physical goods need to be catalogued in a manner that makes them easy for prospective customers to see. Invoices need to be created, stored and exchanged. Cross-border logistics, tax and duty issues, funds transfers and payment reconciliation are all a core part of pulling together a cohesive and coherent supply chain system. Queries are raised on delivery timescales; changes need to be made to product specifications. Skills from external individuals need to be brought into the mix, using communication and collaboration capabilities that need to be linked in with the overall process of managing governance, risk and compliance (GRC) issues. Many organisations have each of these areas covered in different silos, with in-house enterprise resource planning (ERP) systems, dedicated purchasing systems, internal document management and web-based content management systems all dealing with different aspects. In addition they will have point solutions, such as email, instant messaging (IM) and voice over IP (VoIP), etc. Somehow an organisation needs to connect together all of this critical information made available by their systems to get a clear picture of what is going on and respond effectively. This extended chain of interactions the B2B value chain means that organisations are starting to consider how they deal with the problems it presents. Cloud computing is a concept of providing access to computing functionality without the need to own or manage the hardware, operating systems or other software components involved. The National Institute of Standards and Technology (NIST) provide the following definition of cloud computing: Cloud computing is a model for enabling ubiquitous, convenient, ondemand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This cloud model is composed of five essential characteristics, three service models, and four deployment models. The five characteristics are that the service must be self-service, must have broad availability across a network, must use network pooling in order to meet technical workload requirements, must have rapid elasticity in order to allocate the resource pools appropriately, and that it must provide a measured service. The three service models are infrastructure as a service (IaaS), where just the hardware is provided and the customer provides their own software stack; platform as a service (PaaS), where a proportion of the software stack (e.g. operating system and possibly application server) are provided; and software as a service (SaaS) where the functionality is provided completely by the cloud service, although personalisation or modification of the software is allowed.
Quocirca 2012
-3-
Figure 1
Many companies are starting to restructure their IT infrastructure and evaluate cloud-based services as a way of updating some legacy systems. The aim is to develop more flexible B2B capabilities with less dependency on specific hardware and software aspects in a given business function so that, as the needs of the business change, the B2B infrastructure system can change with it. As cloud computing begins to mature and more services are sourced from both private and public cloud platforms, it becomes even more important that systems are well integrated, audited and controlled. Managing a highly dynamic, multi-sourced hybrid private/public cloud infrastructure may stress some organisations too much, but what other options are available? This paper looks at the various approaches that an organisation can take, what the pros and cons of such approaches are, and also looks to the future to provide advice to organisations on how to ensure that choices made today will provide a platform that can be built on for tomorrow.
Quocirca 2012
-4-
Existing approaches
The main approaches currently being used for dealing with interactions between organisations in a value chain are: Manual - a mixture of paper-based catalogues, orders and invoices, combined with telephone calls and emails. Even where electronic documents are used, Quocircas research shows that many organisations regard .pdf documents as providing a degree of automation, when all that a .pdf document does is to provide a means of locking down the details in a document. Semi-automated - enterprise software, such as specific purchasing or enterprise resource planning (ERP) packages, may automate some aspects of the process, but the overall process remains fragmented across different semi-automated and paper-based systems. Proprietary or semi-proprietary siloed approach - using bespoke applications combined with more standardised technologies such as file transfer protocol (FTP), which in most cases just replaces email. Point integration - some companies have taken steps to aggregate functionality, using integration between specific systems such as purchasing or ERP to trigger standardised emails or data packets that can be sent to suppliers and/or customers who are able to accept such formatted data. Single standard some organisations have embraced a specific EDI or XML standard, but may be finding themselves struggling as they grow and needing to deal with new geographies or different industries where their preferred approach is not the one used by their new target customers or suppliers. Prescriptive web-based portals - smaller organisations may have been forced into using proprietary webbased portals to interact with their larger customers, having to access these systems and then manually transcribe information from their own systems into the web forms presented to them.
All of this leads to issues. Incoming and outgoing information may increasingly have to be dealt with as exceptions, using human interventions to take what should be a standard EDI exchange of information and turning it into a manual exercise due to the incompatibilities of the systems involved. Along with these interventions, other activities will need to be included; for example, email or a telephone call to let the customer or supplier know that there will be a different requirement for this particular transaction. Transcription errors can easily creep in with manual interventions. Printing out incoming emails, making notes based on a telephone call and then inputting information manually into systems, along with the use of transcription of information onto non-integrated web portals is not efficient and creating full information visibility, audit tracks and maintaining security becomes an issue. Increasingly, there is a need for complete end-to-end B2B processes to be looked at, and systems implemented that enable an open, flexible and secure means of automating all of the various aspects of the process.
Options
There are many options available to an organisation considering their position when it comes to B2B integration. Most will already have some tools in place, whether these are stand-alone systems that automate certain aspects of the B2B value chain, and/or some hosted or cloud-based systems that cover certain areas. Using a basic example, Quocirca recommends that an approach similar to the following is used: The first task is to figure out exactly where a given business is today. In order to do this, the main B2B processes will need to be mapped out and a gap analysis carried out between the current and desired approach. For example, a current purchasing process may involve searching through a mix of paper- and web-based catalogues, followed by a series of email and phone-based discussions with possible suppliers.
Quocirca 2012
-5-
By using an integrated system, the following benefits can be gained: Catalogues can be maintained by suppliers so that products are not only always at latest revision, but details on inventory levels and expected delivery lead times can be maintained in real-time. If all of the catalogues are in one place through the use of a managed service, a prospective purchaser can more easily compare offers to ensure that they are getting the best deal, not just the lowest price. Orders can be placed against what is in the catalogue, linked to the details. Legal agreements can be accepted based on the customers or suppliers basic terms and conditions, or can be negotiated through collaborative tools available as part of the system. A full view of the logistics chain can be maintained so that the customer and the supplier both know exactly where the goods are at any one time, and delivery can be acknowledged through electronic means, triggering invoices and/or payments automatically. All paperwork required for moving the goods across national boundaries can be automatically dealt with, and the various different standards for automated payment and funds clearance can be managed without the need for the supplier or customer to have in-depth knowledge. As the main process is now integrated, other aspects that may be within the remaining control of one or both of the companies involved, such as accounts receivable and accounts payable, can be integrated using standards-based processes so that these are automatically updated based on activity along the supply chain. Indeed, as supply chains become ever more complex, this kind of integration is the only real option available to companies. For instance, consider a customer requiring a set of items from a supplier. This supplier provides assemblies of components, so is dependent on the suppliers of the individual components to make up the order. Often, the end customer would contact the assembly supplier, who would either take the order and hope, based on historical data, that it would be able to get the components from the other suppliers in time, or would have to contact the different component suppliers before accepting the order, so running the risk that the customer would meanwhile source an alternative supplier that can quote a firm delivery date immediately. With a fully integrated system, dependencies can be built in. A customer looking for assembled components would be looking at an assembly supplier who has integrated their details with their component suppliers as well, so that
Quocirca 2012
-6-
Cloud integration
The provision of cloud integration will take one of two main forms. Some integrators will have very little infrastructure, probably using co-locational facilities or hosted platforms to provide basic integration between different functions and applications from different cloud providers. By using available standards, these aggregators will pull services together, and will generally act as the prime contractor between the customer and the various different cloud services, providing a single contract between the parties. The second type of cloud aggregator will already provide a degree of functionality. Many will only provide some basic functions, such as email, hosted storage and possibly communication and collaboration tools, whereas others will be providing highly functional platforms, such as B2B value chain capabilities. It is likely that this kind of aggregator will also be a prime contractor, but will probably not want to take responsibility for all of the different cloud services that could be supported. However, through the use of open standards and connectors built around existing capabilities, users of such a service would be able to integrate services themselves to use the capabilities of the B2B platform. The key for organisations is to ensure that the chosen service provider is fit for purpose. In dealing with value chains, the main need will likely be that of easy integration of existing enterprise systems into business processes that flow through to customers and suppliers. However, any platform that the service provider recommends must be open enough to be able to embrace external cloud services as required through easy integration (see Figure 2).
Quocirca 2012
-7-
Futures
The future for B2B systems is increasingly complex, and it is growing more unlikely that an organisation will be able to effectively manage such complexity in-house. B2B operations will require further integration of functions that, at the moment, may be seen as outside the main processes or are currently being dealt with as islands of function due to the applications or groups involved. However, as globalisation deepens, organisations of all sizes should take the opportunity to discover suppliers who can offer greater value and customers who are searching out a better value supplier for their physical goods, while ensuring that these deals are negotiated fully, securely, legally and speedily.
Figure 2
A simple B2B cloud service can enable more efficient B2B transactions such as providing access to up-to-date catalogues, logistics planning and compliance. However, as more services become available via the cloud, the openness of any chosen B2B cloud provider becomes important. For example, the use of external data sets enables due diligence to be carried out on a possible customer or supplier. It is good to be able to identify what looks like a more cost effective supplier of goods somewhere in the world but is the company trustworthy? Does the customer have legal cases against it and how well has it performed in payment of invoices? Cloud information service providers such as Dun & Bradstreet or Experian offer information services that can add value to the B2B chain and should be integrated into the process as seamlessly as possible. A good B2B provider will be looking at how best to offer application programme interfaces (APIs) that make this easy. There is a marked growth in functions becoming available from the public cloud that go beyond what an organisation can provide in-house. For example, much geo-locational analysis that organisations need to carry out does not need high-end, in-house systems; Google or Bing Maps can enable simple information to be mapped, such as information from the logistics side of the B2B supply chain, or heat maps of where customers are. With such
Quocirca 2012
-8-
Recommended approach
The key is to ensure that a chosen B2B value chain system not only meets todays needs, but also provides the flexibility to respond to changes in both technology and business in the future. This means ensuring that the chosen solution is open and based around both technical and domain excellence. Therefore, Quocirca advises looking for a provider with the requisite skills in managing B2B integration from a global capability, based on a mix of both large and small businesses and providing easy on-ramping for those companies that are required to be part of an overall B2B supply chain. They should also have the skills to be able to closely integrate the required functionality in a businesss extended B2B value chain from multiple different sources. This prime contractor should be the one that takes the responsibility for ensuring that all of the integrated functions work as detailed in the contract, and could be a cloud service provider, cloud broker, or an existing systems integrator. To ensure that this is the case, Quocirca recommends the following approach. Ensure that your own organisations business risk profile is understood o Is cost the biggest driver in the organisation? o Does managing risk have a stronger drive in the organisation e.g. is managing compliance against local or central legal requirements of critical importance? What is your organisations view on IT? o Is IT seen as a core differentiator? o Is IT seen as a cost centre that is constraining the business? o Is the organisation looking to outsource as much IT as possible to reduce the need for managing hardware and data centre facilities?
Based on the above, the organisations appetite for outsourcing, and the type of outsourcer to be chosen, can be ascertained. For example, in organisations that are predominantly cost driven, the requirement will be likely to be more towards a low-cost solution. This can lead to an increased risk as full compliance, suitable security, high levels of system availability, global reach and advanced functionality tend not to be available in low cost systems. However, even those who want to ensure that cost is minimised can consider highly functional B2B service providers who offer simple on-boarding of suppliers wishing to participate in a complete B2B chain without the need for strong integration and advanced functionality. For organisations that see IT as a core differentiator, using an external B2B service provider still makes sense. The domain expertise held by the service provider in areas such as cross-border logistics, ERP integration, e-invoicing and end-to-end supply chain management will free up full time equivalent positions within their own organisation that would otherwise have to keep up-to-date with these varied areas. There will also be a requirement for any
Quocirca 2012
-9-
If any of the above applies, then the use of a B2B integration service provider makes sense. Choosing a provider with global reach will provide the capability to enter new geographies and new industry sectors as a supplier more easily particularly where the provider has domain expertise on local commercial laws and compliance needs. When launching a new product, the use of managed catalogues will enable information to be pushed to as many prospects (and existing customers) as possible. Even where an organisation is not looking to expand in these ways, the use of a B2B service provider can provide greater reach within a single geography and can be used alongside other marketing approaches. For those at the customer end of the B2B chain, using a standard platform can encourage suppliers to do business with you in a more flexible way and combining this with greater levels of automation means fewer problems with transcription errors and silos of information, resulting in faster, more effective and efficient processes all of which will result in cost savings. The next step, as touched on earlier, is to carry out a gap analysis. Here, the existing business processes around B2B need to be codified, and then compared to what the ideal process would be. This will identify the gaps between what is being done now, and what should be done. To move towards the ideal process, the gaps can then be filled by implementing the missing functionality in-house or through external providers. To do this, it is necessary to see what functionality an organisation already has in place, assess whether this is still fit for purpose, and whether it has the capability to fill the process gaps identified above. Carry out an audit of existing applications and tools covering the complete business prospect-to-cash in bank and/or business supplier-to-payment processes. o What is sub-optimally supporting the business today and should be swapped out as soon as possible? o What has a mid-term future and should be planned for replacement? o What has a long-term future and should still be used?
Where systems are already at the point where they are not supporting the business adequately, the only real solution is to look to an external provider. The purchasing, delivery, provisioning and testing of a new internal system will take too long to respond to the business needs, whereas going to an external provider means the total process can be compressed into days or weeks. Again, integration into existing systems may be required, but it is better to focus on this than to have to focus on the technicalities of implementing a complete hardware/operating system/application server/application stack. Where there is a degree of life left in an existing application, this can be integrated via an external provider for now, providing the time required to plan more effectively. It may be that the use of an external cloud-based service will be a better route than replacing the existing system with a new in-house one.
Quocirca 2012
- 10 -
Conclusions
B2B value chains now require a different thought process on how to best solve the growing complexities of a mix of geographic, business process and technical issues. Globalisation now means that organisations often deal with suppliers and customers around the world as if they were in the same geography, yet issues around local laws, cross-border logistics and local variations around data formats can make such interactions overly onerous. At a business process level, dependence on internal systems can lead to constraints being placed on how such processes can change to meet the demands of the organisation. Outsourcing the technology and enabling an external partner to provide the deep domain expertise required in many areas of the process will allow the organisation to concentrate on the aspects of the process where they can make the greatest difference. Also, regarding the technology aspects, allowing an external B2B provider to carry out integration to other external functions where necessary means that the business can gain greater flexibility in its processes, and can therefore compete more effectively in the market. With this in mind, Quocirca believes that a B2B cloud services provider should be capable of providing the following: Ensure that suppliers can connect to their customers anywhere in the world, via any communications protocol or across any industry/regional specific network Allow customers to receive B2B information in exactly the format they require via extensive any-to-any mapping capabilities Improve the quality and accuracy of B2B information exchanged with customers Ensure that a suppliers own supply chain is ready to work on a new customer contract and exchange B2B information as soon as possible Support a customers manufacturing process by ensuring that production-critical documents such as Advanced Shipping Notices can be delivered within a specific production window Proactively monitor B2B transactions so that if any problems occur they can be resolved as quickly as possible, with minimal or no disruption to a customer
Quocirca 2012
- 11 -
B2B value chains are rapidly exceeding the capabilities for any one organisation to manage everything themselves. As adoption of cloud computing continues to grow, more functions will become available which will be beneficial to organisations looking to extend their B2B supply and customer reach. Failure to adapt existing systems to deal with increasing competition in the markets will severely curtail an organisations capacity to survive. The use of a B2B value chain service provided through the cloud, fully integrated into existing systems and new services sourced through other cloud providers will provide the flexibility for organisations to ensure that they can compete at the leading edge of B2B value chain capabilities.
Quocirca 2012
- 12 -
About GXS
GXS is a leading B2B integration services provider and operates the worlds largest integration cloud, GXS Trading Grid. Our software and services help more than 400,000 businesses around the world, including 72 per cent of the Fortune 500 and 22 of the top 25 supply chains, extend their partner networks, automate receiving processes, manage electronic payments, and improve supply chain visibility. GXS Managed Services, our unique approach to improving B2B integration operations, combines GXS Trading Grid with our process orchestration services and global team to manage a companys multi-enterprise processes. GXS has direct operations in 20 countries, employing more than 2,400 professionals. To learn more about GXS visit www.gxs.eu, read our blog at www.gxsblogs.com and follow us on Twitter at twitter.com/gxs.
REPORT NOTE: This report has been written independently by Quocirca Ltd to provide an overview of the issues facing organisations seeking to maximise the effectiveness of todays dynamic workforce. The report draws on Quocircas extensive knowledge of the technology and business arenas, and provides advice on the approach that organisations should take to create a more effective and efficient environment for future growth.
About Quocirca
Quocirca is a primary research and analysis company specialising in the business impact of information technology and communications (ITC). With world-wide, native language reach, Quocirca provides in-depth insights into the views of buyers and influencers in large, mid-sized and small organisations. Its analyst team is made up of real-world practitioners with first-hand experience of ITC delivery who continuously research and track the industry and its real usage in the markets. Through researching perceptions, Quocirca uncovers the real hurdles to technology adoption the personal and political aspects of an organisations environment and the pressures of the need for demonstrable business value in any implementation. This capability to uncover and report back on the end-user perceptions in the market enables Quocirca to provide advice on the realities of technology adoption, not the promises. Quocirca research is always pragmatic, business orientated and conducted in the context of the bigger picture. ITC has the ability to transform businesses and the processes that drive them, but often fails to do so. Quocircas mission is to help organisations improve their success rate in process enablement through better levels of understanding and the adoption of the correct technologies at the correct time.
Quocirca has a pro-active primary research programme, regularly surveying users, purchasers and resellers of ITC products and services on emerging, evolving and maturing technologies. Over time, Quocirca has built a picture of long term investment trends, providing invaluable information for the whole of the ITC community. Quocirca works with global and local providers of ITC products and services to help them deliver on the promise that ITC holds for business. Quocircas clients include Oracle, Microsoft, IBM, O2, T-Mobile, HP, Xerox, EMC, Symantec and Cisco, along with other large and medium-sized vendors, service providers and more specialist firms. Details of Quocircas work and the services it offers can be found at http://www.quocirca.com Disclaimer: This report has been written independently by Quocirca Ltd. During the preparation of this report, Quocirca has used a number of sources for the information and views provided. Although Quocirca has attempted wherever possible to validate the information received from each vendor, Quocirca cannot be held responsible for any errors in information received in this manner. Although Quocirca has taken what steps it can to ensure that the information provided in this report is true and reflects real market conditions, Quocirca cannot take any responsibility for the ultimate reliability of the details presented. Therefore, Quocirca expressly disclaims all warranties and claims as to the validity of the data presented here, including any and all consequential losses incurred by any organisation or individual taking any action based on such data and advice. All brand and product names are recognised and acknowledged as trademarks or service marks of their respective holders.