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BizReport : Internet : December 07, 2000

Exclusive Interview with Sunny Singh, CEO of Edifecs

As consumer Internet companies continue to endure an excruciating shakeout, pundits are once again focused on B2B markets as the potential savior of e-commerce. Not so fast, says Edifecs, a Bellevue, Wash.-based company that helps businesses get their B2B Internet operations off the ground.

by Michael Grebb, Special Correspondent

Edifecs CEO Sunny Singh says that while B2B will drive much of future e-commerce growth, businesses face hurdles as they attempt to enable their operations for global e-commerce. In fact, a recent study by Edifecs pegs "enablement" (essentially readying operations for B2B e-commerce) to be the biggest immediate challenge for businesses. (Edifecs, of course, offers enablement services).

But consider this: Edifecs estimates that the average global 2,000 company can bring 100,000 distinct trading relationships online, while the typical global 10,000 company will establish between 500 and 5,000 such relationships each. This means that the top 10,000 companies in the world will be faced with the challenge of enabling hundreds of millions of trading relationships. If the average cost to enable just one trading relationship is between $5,000 and $50,000, Edifecs argues, then total e-commerce enablement costs can run in the hundreds of billions of dollars worldwide. And that doesn't even include the costs associated with maintaining those relationships and "tweaking" them as changes in the businesses dictate, which could hit several billion dollars annually. Singh took some time to give BizReport his take on what companies can do to better enable themselves for e-commerce and what it means for the future of B2B.

MG: What's the big B2B bottleneck? Why does it take so long for companies to implement their B2B plans?

SS: The B2B party has been thrown, but everyone's having trouble getting there. Companies are developing major plans for a world in which all business is done seamlessly and electronically, but a critical element is being overlooked-how they're actually going to do the preparation and ramp-up work necessary to implement dozens of electronic processes and conduct millions of transactions with thousands of trading partners. We call this process enablement, and B2B e-commerce managers in our just-completed nationwide survey revealed that manual enablement is the single biggest bottleneck to widespread adoption of B2B e-commerce.

MG: So what's the best solution--short-term and long-term--for companies that want to speed up the process?

SS: B2B e-commerce growth will remain compromised unless companies can find a solution to automate their enablement problem. Enablement encompasses some major steps that must be completed before a company can begin trading electronically, each of which currently requires a significant investment of time and resources by trading partners:

B2B Preparation is the "groundwork" phase that must be done when a company decides to embrace B2B, and includes activities for defining the business issues surrounding B2B, both internally and with one's trading partners. B2B Ramp-up consists of five steps associated with establishing an electronic-trading arrangement for a single process with one trading partner: 1) Defining the trading partner agreement; 2) Setting up internal systems for electronic trading; 3) Developing the specifications that guide the electronic communications between the companies' systems; 4) Testing the systems; and 5) "Going live." Finally, Community Extension involves adding new trading partners to an established electronic-trading community, and analyzing its performance to continuously improve its operations.

MG: Are some industries more at risk of hitting this bottleneck than others?

SS: Our survey respondents in government, heavy manufacturing, and consumer goods have the most experience with e-business, while managers in consulting/business services and healthcare had the lightest. Regardless of how long they've been engaged in B2B, the vast majority of companies in our research plan to dramatically increase their level of B2B participation-not only in terms of numbers of transactions and processes, but also numbers of trading partners.

MG: You note in your survey that more than 50 percent of companies conduct B2B operations with fewer than one fourth of their trading partner base. What's behind that?

SS: We've found that tenure in B2B doesn't play a significant role in how much progress companies have made in bringing processes online. All companies-whether they've been engaged in B2B for fewer than three years or more than 15-are equally far, proportionally speaking, from their goals for electronically enabling their business processes. Penetration of B2B is particularly limited in the government and healthcare sectors. Despite having a large concentration of respondents noting more than 10 years of B2B experience, 71 percent of government institutions participating in the study execute fewer than five processes electronically. In the healthcare industry, B2B is even less pervasive-82 percent of respondents said they operate fewer than five processes electronically.

MG: So how can companies that are constrained by such laggards light a fire under their partners to get more online and reach the economies of scale needed to make B2B operations a success?

SS: Companies must insist on an automated solution to rapidly ramp-up trading partners into their B2B exchanges and Net marketplaces.

MG: You mention in your study that XML [eXtensible markup language] isn't the savior. What is it about XML that makes people think it will solve their B2B problems and how exactly does it fall short?

SS: XML and the Web, which have been touted as the technologies that will finally resolve the shortcomings of traditional EDI [electronic data interchange]-principally, lack of open, fully supported standards and great expense-can only go so far in spurring B2B adoption. As the initial euphoria around the promise of B2B gives way to more practical matters-namely, "How do we do it?"-it's becoming increasingly evident that many companies embracing e-commerce are underestimating the importance of preparing their business operations and those of their trading partners for the brave new world of seamless B2B e-commerce.

That's not to say that XML won't take off. But the fact remains that all those companies will still have to complete each of the enablement activities discussed earlier to take advantage of XML. Manual enablement is an inertial force working against B2B in general and adoption of XML in specific. To meet the demand for XML adoption, the manual enablement bottleneck must be eliminated. Once this inertia is overcome-likely through some sort of automated enablement-XML will literally explode onto the scene. Virtually overnight every B2B player will have the opportunity to re-enable their trading partners to take advantage of this new technology.

MG: With that said, do you buy the lofty projections by research firms that B2B will become a multi-trillion dollar business in a few years? Will it take longer, considering the hurdles you have outlined in your study?

SS: As new technologies and business practices make electronic trading increasingly less costly to implement and more beneficial for all parties involved, B2B e-commerce will become the status quo instead of the cutting edge. To realize this eminently achievable scenario, however, companies must fully understand, confront, and solve the stiff challenge that stands before them-the manual enablement process. Until businesses find a way to dramatically reduce the time, cost, and headaches associated with manual enablement, truly collaborative, widespread B2B e-commerce will remain an unrealized vision defined by marketing hype machines and spinmeisters.

Tags: Edifecs

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