E-Commerce Is Here Today

Imagine your business in 2001. Your ERP systems identifies an expected inventory shortage based on your latest iteration of the plan and sends an encrypted purchase order over the Internet to your supplier. The supplier’s ERP system (from a different vendor) acknowledges the order and sends your system periodic status updates.

Let’s explore how this level of automation will become reality for mid-range companies-who won't have to spend millions of dollars to get it- using standard programming tools and operating systems. And let’s start from be beginning. In September 1998, Microsoft hosted a conference called Business Applications (or "BizApps") to show live, Internet based, business to business integration. It wanted to demonstrate the exchange of information between two virtual companies using existing technologies. The conference was meant as a laboratory that would give more than 3,000 developers the tools and code needed to create the bridges.

Though the actual interface executed just one transaction (purchase order) and that transaction failed during the keynote address (ouch!), the conference did succeed in revealing the types of tools midrange enterprises will be relying on in the months and years ahead. The tools themselves are mainly of interest to the cubicle denizens of your IT department, but the ramifications of their implementation impacts every level of your organization.

The number of Microsoft partners involved gave the conference an interesting overtone. One virtual company ran SAP while it trading partner used Baan. Both of these ERP heavyweights are making their business layer open to all developers. This is powerful because the business layer is the part of the ERP system that processes transactions, makes decisions, enforces rules, and creates plans.

When a product’s business layer is open, developers and third parties can more quickly and inexpensively develop tools that interconnect systems. Connecting systems together today requires the risky and expensive process of either breaking or duplicating the functions of the software’s business layer. When interconnections bypass the business layer, the result can be incomplete, inaccurate, or stray transactions, no matter how carefully the interconnections were written (or how much you paid). At best, this forces you to hire extra people to watch the system; at worst, the data in your system becomes unreliable.

Let me illustrate the potential of open interfaces with one of the partner demos from the BizApps conference. The demo went like this: a sales force automation (SFA) tool allowed the network systems salesperson to use Visio to draw a proposed computer network for a customer while on-site. Programming in Visio tested feasibility of the design and seamlessly populated the SFA order entry screen. The SFA tool then created a Microsoft Word document complete with boilerplate, network diagrams (from Visio), and pricing. The handoffs between these applications from three different vendors were seamless and fast, enabled by the adherence to open interfaces standards by each vendor.

The real message from Microsoft at the BizApps conference, however, was not to demonstrate that these interfaces exist, but to show how they translate into Internet business transactions. Explaining how this works requires a detailed description of all the new tools that Microsoft is wrapping into the upcoming release of NT5 (a.k.a. Windows 2000), which is outside the scope of this column. There was, however, one tool in the NT5 suite that deserves special consideration: the Commerce Pipeline.

The commerce pipeline concept is very simple and mirrors a physical pipeline. Transactions enter the pipeline and are sent to the appropriate destination. Within the pipeline, transactions can be modified, packaged, or acted upon using standard programming tools (Java or Visual Basic). Actions that can be taken in the pipeline include encryption and decryption, data translation, submitting data via the Internet or email, or handing off data to a standard interface. The result is that developers can link systems together quickly even if they require several integration steps, require use of a third-party business layers, or must be passed across the Internet.

The electronic pipeline’s potential is enormous. If trading partners can agree to an interchange format, they can quickly create a pipeline to exchange information. Take this one step further and assume that their ERP vendors provide standard interfaces so these ERP systems can reside at the ends of the pipeline. This means that one system could initiate a transaction (purchase order) that is translated into an agreed format, encrypted, posted to the partners Internet site, decrypted and decoded by the partner and finally automatically posted into its system. The partner's system would reverse the process for the acknowledgement and invoice.

This hypothetical pipeline is what Microsoft actually demonstrated at the BizApps conference. While this is supposed to be standard fare for a typical EDI transaction, the concepts behind the Internet business transaction use standard programming tools, current operating systems, and open networks. People may balk at the idea of using the Internet for secure business in today’s environment. But even without the Internet, this type of cross-system interaction between systems within your company offers tremendous benefits.

Microsoft, SAP, and Baan are not the only companies that see the potential here. Smaller players are employing in this technology also. Lilly Software Associates, maker of Visual Manufacturing, is investing in standard interfaces that are compatible with these tools. Microsoft competitor Netscape offers a similar set of tools. According to an interview in Sm@rtRellser magazine, Netscape is betting on major growth for their Internet ERP companion tools. These tools fill a niche for the big name ERP vendors to improve inter-company connectivity dramatically. Once again, big-name companies are not the only players. Small Internet startup WebMethods has already won the support of several vendors and integrators for their version of these tools.

I have heard statistics touting an explosion of business-to-business commerce over the Internet in the coming years. The current wisdom is that 40 percent of your future business transactions will be electronic. If you include you email, groupware, videoconferences, and virtual private networks (VPNs), the number soars past 60 percent. I would also expect that at least 25 percent of those transactions might be initiated automatically by your ERP system.

Even if you distrust the numbers, expect the growth will be faster than linear. If a business finds electronic commerce more economical than traditional transactions, it will demand it from its trading partners and offer use incentives to those who use it. Do you doubt this? I can already name dozens of companies that offer discounts for web purchases (Delta, Avis, and Holiday Inn). Also, think of how EDI has been pushed down from the big players.

I don’t expect any multinational companies to dump their EDI systems in favor of Microsoft’s loosely grouped bag of tools. As the tools and Internet infrastructure quickly mature, however, they will allow firms in the $1 million to $50 million range to enable true electronic commerce. Where does this leave your company? If you have been looking for cost-effective ways to leverage your ERP investment with the Internet, then you finally have some manageable alternatives. On the other hand, if you think that the Internet cannot be leveraged to expand your business, then I hope you don’t have any competitors.