The Hindu Business Line : 'Sync'ing to survive

IN my earlier articles on Supply Chain Management (SCM) (Want profits? Change track in eWorld dated June 26, 2002, and Don't forget the small guy in eWorld dated July 3, 2002) I traced the evolution of the Internet as a business tool, some success stories on automated SCM and why they worked. But we saw that these success stories are far and few between and primarily confined to the big players. They don't really benefit the small businesses. To make SCM benefits go down the line, technical and business standards are required, and I dwelt on the key technical standards that can forge effective SCM links between small and big players.

In this article, the focus is on business standards.

While the technical standards ensure that business applications can communicate with each other using the Internet infrastructure (similar to our telephones and telephone networks all being compatible), the business standards ensure that there is a commonly accepted standard for business vocabulary and business processes (as we share the same language, terminology, protocols and templates for common scenarios for us to be able to communicate using the telephone).

There are a few different ways in which the business standards have been set thus far. There have been instances where the dominant player in a domain (the 800-pound gorilla) dictates the standards to all its trading partners. Good examples are the automation solutions provided by shipping giants such as FedEx and UPS to their small and home business customers. Though they provide well-designed solutions using which the small businesses can get freight rates, place pick-up orders and track shipments seamlessly from a myriad of applications (Excel, Access, and so on), typically they will not entertain any request for custom modifications (say to the length of the address field). However, this model does not work among equals. For example, a shipping company cannot hope to thrust its automation solution without any modification on a large customer such as Cisco or Dell.

The RosettaNet model

Another option is to negotiate and agree upon the business interfaces with a customer. However, developing such "custom standards" for each customer is not a scalable option. Hence, the only viable option appears to be for the key players in an industry to form a consortium and agree upon the business vocabulary and process standards. RosettaNet is one such well-established and successful consortium for the high-tech businesses. It has developed standards for the companies in the IT, semiconductor manufacturing and the component manufacturing supply chains to automate inter-business transactions. Companies in North America, Europe and Asia have implemented SCM automation solutions using the standards developed by RosettaNet.

RosettaNet is a non-profit organisation that makes the standards it develops available to the public (not just its members) on a royalty-free basis. The not-for-profit nature of its standards gives them tremendous credibility as non-biased. It is mostly staffed by people on-loan from the member companies. Such vesting motivates the member companies to implement the standards once they are developed.

RosettaNet standards being publicly available has led to their adoption in many unexpected places.

For example, Chemical Industry Data Exchange (CIDX), a consortium of leading chemical companies including Air Products, BASF, BP, DuPont, Eastman Chemical Company, Occidental Chemical Corporation, Rohm and Haas, Shell, Solutia, and The Dow Chemical Company, has adopted the RosettaNet standards as it found these to be useful to <147,1,0>their industry. What is the benefit to the RosettaNet members? The semiconductor manufacturers are also big customers of chemicals. Hence the adoption of RosettaNet by the chemical companies makes it easier for the semiconductor manufacturers to automate their chemical purchases without having to worry about interoperability with a different standard. The American Petroleum Institute's Petroleum Industry Data Exchange (PIDX) is based on CIDX!

How do the end user companies get to implement RosettaNet-based solutions? RosettaNet has a solution providers board that consists of key Internet software vendors. They influence the standards development process from a technical viewpoint and provide solutions. However, any software vendor who may or may not be a member of the solution providers board is free to develop and sell solutions based on RosettaNet standards.

Even RosettaNet has been struggling to gain widespread acceptance, specifically among the small and medium enterprises.

To address this challenge, RosettaNet has started programs aimed at simplifying some of the standards and ensuring that the Web service technical standards are fully leveraged to minimise the cost. These programs have already resulted in solutions that are affordable to medium enterprises. Solutions are just starting to appear that are within the reach of small enterprises.

Certain concepts (e.g., purchase order or invoice) or processes (e.g., order placement or cancellation) are common across almost all industries. Open Applications Group Integration Specification (OAGIS) and BizTalk are examples of standard specifications for such generic concepts and processes.

The e-Market mechanism

e-Markets or online market places are mechanisms for multiple suppliers and customers to pool their merchandise and demands together to obtain market efficiencies using the Internet. Covisint for the auto industry is a well-known example of an e-Market for the auto industry. 01 Markets, run by a Wipro team, started as an IT services market place and has expanded into other product areas in India.

How are e-Markets different from the industry consortia such as RosettaNet? The latter provide only a specification for building online trading applications. It is left to the individual companies or groups of companies to build the infrastructure and the software solutions for carrying out the trade. The consortium, usually, is not involved in any role in the trading except providing specifications to ensure interoperability. The e-Markets, on the other hand, provide the infrastructure and the solutions for multiple businesses to trade. The e-Markets in India mostly provide only a second-generation Internet solution, i.e., the personnel from the buying and selling businesses manually trade using the e-Market Web site. Some of the global e-Markets have started providing for integration with the software applications of the participating businesses.

Business consortia, specifically those that publish the specifications openly, attract multiple software vendors to offer solutions, thus providing sophisticated businesses with a choice of the solution they can implement. On the other hand, e-Markets are hosted by a single business and hence offer no choice; however, they require no elaborate in-house implementation by the participating businesses.

Consortia-developed business standards and e-Markets are not mutually exclusive. In fact, CheMatch, ChemConnect and a few other market places for chemicals have adopted the standards developed by CIDX. Thus, business standards, once developed by consortia, can be either supported by software vendors for businesses to implement their own solutions; or could be supported by e-Markets in the solutions they host for their member businesses to use.

Need for a proactive Indian role

The third-generation Internet facilitating totally automated inter-business interactions has provided unprecedented increases in the efficiency in many sectors of the US economy (e.g., the retail sector). However, these benefits did not accrue automatically. It required groups of companies, sometimes including competitors to work together to create the foundation for realising the benefits. The Web service standards and the business standards can drastically reduce the cost of building Internet solutions. However, many of these standards may not be usable in India as they are today. For example, we discussed how the taxonomies and the identifiers supported by the online business service registries may not suit the Indian businesses. Also, the business vocabulary and process standards need to comprehend the idiosyncrasies of the Indian business practices, tax system and so on. While these core standards are mature enough to use, since they are still evolving, now is the time to influence them to ensure that Indian businesses leverage them and become effective players in the local as well as global supply chains.

There are also opportunities for the Indian IT service providers and software vendors to move up the value chain by focusing on the businesses in the developing nations and the small and medium businesses everywhere as none of the incumbent big players have staked out this market segment.

The IT departments of individual businesses need to consider these standards and technologies and develop strategies for their adoption. Also, groups of companies, the government agencies and the academia need to play an active role in ensuring interoperability. These group efforts require fairly long lead times and hence need to be started at the earliest.

The author manages Web services activities in the Intel Labs and can be reached at krishnamurthy.

srinivasan@intel.com.

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