XML is a hot favorite for e-commerce transactions, but universal usage standards remain elusive
A pianist can rely on hours of practice and his own neural and physical processes to communicate with his audience in the language of music. Pity those who are stuck with the mundane but monumental task of communicating business information. Routing information between businesses is the greatest challenge in today’s wired world, a task to rival interpreting Beethoven in its complexity.
From the initial placement of an order to its delivery to a customer, information regarding a product crosses many internal boundaries within an organization and ultimately travels across more to reach external trading partners. The process is notoriously neither foolproof nor even understandable to all parties involved. Electronic data interchange, or EDI, the exchange of digital information across enterprises in a standardized format, has been used since the 1970s to establish interfaces among the participants in a business model. To integrate this information into its own software systems, a company using EDI needs to hire a software development team and most likely invest in expensive systems. Traditional EDI also locks manufacturers into doing business with the same suppliers, since they have established mutually compatible software systems. This tradition of facilitating business-to-business (B2B) transactions, however cumbersome, is still a widely used method, especially in the direct-to-customer industry. Today, EDI has grown to include the Internet. Conducting the new EDI on an Internet platform requires creation of new prodecures for clear communication between the various partners in a business framework.
Up to standard XML (eXtensible Markup Language), created by the World Wide Web Consortium (W3C), is the latest solution to smooth data interchange. XML is a translator of sorts, using tags to sort data and simplify the process of B2B interaction. XML processes information so that everyone involved in the business equation, despite having different computer hardware, can understand what is happening with a product from start to finish. The challenge of XML, however, is the establishment of worldwide standards of usage, or “dictionaries,” so that companies can communicate with their business partners globally. EDI, in contrast, already has such standards for most business transactions.
XML standardization has not yet reached the point where specific tools for the fulfillment industry exist. Now is the time for leaders in direct-to-customer fulfillment to join standards-setting groups such as ebXML; the Open Applications Group; Collaborative Planning, Forecasting, and Replenishment in the retail industry; and RosettaNet to create the standards for successful, streamlined e-communications.
“Because XML can use inexpensive or even free tools, it enables the exchange of business data with even the smallest companies,” says Alan Kotok, director of education and information resources at the Data Interchange Standards Association (DISA). “The Open Travel Alliance’s customer profile specification shows clearly how this is possible. [See www.opentravel.org/opentravel/DemoPage.htm. If you have an XML-enabled browser, such as IE 5.0 or higher, you can actually create, view, and manipulate XML documents.] Even the smallest travel agency can update customer travel profiles stored by travel services, such as airlines or hotels, with these tools.”
All together now Another great challenge of XML is whether it will actually live up to the hype of making EDI more economical and acceptable to the mass market. XML can be used to build on the EDI structure and can bring small and medium-sized businesses to communicative par with large corporations. “XML makes it much easier to search, move, and display data from disparate Internet applications,” says Mike Rogers, e-business development manager at SynQuest, Inc., an Atlanta-based company. “It eliminates the need for custom-written programs and offers the flexibility required to meet Internet standards.”
Even though XML has achieved rapid, broad acceptance, and has been welcomed by software vendors who are including XML in their browsers, this new system of processing information can be most successful when used alongside traditional EDI methods. For Rogers, whose company has recently developed an order processing software engine that helps “find the lowest total delivered cost of products across the supply chain to fulfill orders while meeting planned delivery dates,” XML and EDI are complementary. According to Rogers, SynQuest e-business engines leverage XML and a Java-based component architecture for ease of use and integration with other applications. One of SynQuest’s biggest customers is Nordstrom.com, which uses the software to enhance the store’s collaboration with shoe manufacturers by tracking customer orders based on cost and material availability.
“SynQuest’s e-business engines will help us rapidly model and stimulate alternative supply chain designs with our vendors to minimize back-orders, balance inventory against varying supply and demand on a continuous basis, and address seasonal and promotional assortment variations,” says Kurt Whitesel, COO and CFO of Nordstrom.com.
To become successful players in e-commerce, companies of all sizes need to employ some type of electronic commerce solution, which in the future may be complemented by some form of XML. Henry Bruce, vice president of corporate marketing for Optum, Inc., an e-commerce software company headquartered in White Plains, NY, believes an e-commerce presence helps companies extend their reach and lower their costs. XML, according to Bruce, is Optum’s preferred method for connecting its clients’ trading partners to their fulfillment process, although they use various e-commerce technologies – EDI, the Internet, bar coding and radio frequency, and intelligent alerts. Optum clients include B2B businesses and high-tech, electronics, automotive, and industrial products companies.
Size no object Bruce feels that Optum’s XML-incorporated software is compatible with the systems of small, medium-sized, or large companies. “Some of our largest clients, such as W. W. Grainger, have both large and small warehouse operations with varying degrees of automation and order volumes,” Bruce says, adding that they are able to use the same software with equal efficiency and effectiveness throughout their distribution network.
The complement of XML and EDI has the potential to become the new generation of EDI, incorporating the latest Internet technology with existing standards. The companies that already have back-end systems in place need to get in the e-commerce game. Those companies hesitant about the new technology may be left behind, unless they rethink their priorities and make an extra effort to understand their customers’ needs.
“Costs are a function of project scope and the number of sites a given client wishes to automate,” says Bruce. Optum software, for example, starts at $200,000 for an initial site and scales up accordingly. But whether it’s Optum software or some other type of XML-based order fulfillment software, the success of a company’s e-fulfillment strategy, according to Bruce, depends on connectivity to all trading partners, dynamic deployment of inventory across the network, and sourcing customer order needs to available inventory in real time.
Aside from cost concerns and the general hesitance to incorporate the not-yet-standardized XML into e-business solutions, the biggest challenge for companies faced with the upgrade to e-commerce is how to connect information between applications. An average company may have around 50 internal business applications to work with. And even though major application and database vendors are incorporating XML into their packages, given the lack of global standards, each version will be a little different.
To `e’ or not to `e’ GartnerGroup statistics show that since 1994 the proportion of companies involved in e-commerce has risen from 1% to nearly 50%. This means more and more companies are finding that whatever system they use today – EDI or some other interchange format – is not keeping up with the evolving dynamics of their businesses. XML can enable complex business documents, forms, and messages to be exchanged in real time, allowing all parties involved in a business model to view information simultaneously. But in order for everyone to be on the same page, so to speak, the various standards groups and associations involved in ironing out the details of XML operability have to come to a consensus on how this new language can be used and understood by all.
Dean Riley, vice president of implementation for Go Figure Technology in Dallas, TX, feels that as XML schemas become more accepted in the industry as the de facto standard, EDI-based systems and other expensive technologies will migrate to XML. “This will mean billions of dollars of operational cost reductions, not only for e-commerce solutions, but in all solutions where disparate systems must interact,” Riley says. According to Riley, Go Figure uses XML and other emerging technologies “to provide the means necessary for a selling organization to completely control the marketing of their products as well as the interface to their customers” – a concept to which many other companies pay little attention in an e-commerce relationship.
It’s already a truism that e-commerce customers are more demanding and expect orders to be filled instantly. The trick for distribution centers and fulfillment houses in today’s e-market is to distinguish themselves in customer satisfaction and monitor the sale of a product from the customer’s initial request to delivery of that product.
Is XML worth investing in? “There’s no doubt in the technical community that XML is a technology that has the potential to increase the speed and convenience of e-business interaction,” Riley continues. “The question is, will this technology, however hot, become a universal standard?” As groups of experts work on defining standards for applying XML to electronic commerce, the business issue to understand, according to Riley, “is that technologies come and go like the wind, but standards are something you can hang your hat on through the duration of a three-year business plan.”
Though many companies are jumping on the XML bandwagon, without clear standards it’s difficult for companies to make decisions about becoming e-commerce enabled. “Most industrial companies don’t have herds of in-house Web gurus to guide them, and furthermore, they don’t want them,” adds Riley. “With all the noise and distortion in the industry, it’s impossible for the leaders of these companies to feel confident about the direction they should take – but they know that the clock is ticking.”
`Significant overhead’ Since there is a lack of content and management of XML standards, it may take at least five years for XML to actually replace EDI, says Tim Cronin, director of Avicon’s B2B/EDI integration. “XML standards will need to cover semantics, audit and control concerns, security, and reliability, not just content,” Cronin adds. Avicon, a Massachusetts-based global provider of e-business services, employs a range of tools in advising clients on e-business solutions: internal application integration, workflow, message management, and a general data transformation tool (EDI, XML, HTML, Flat File, ODBC). Cronin says that “many e-commerce initiatives have concentrated on the presentation and connection aspects and grossly underestimate the amount of back-end and partner integration issues that must be overcome.”
ClearCommerce Corp., an Austin, TX-based e-commerce software company, provides more than 20,000 merchants with online order processing programs. Some clients include Cabela’s, Cooking.com, HP Shopping Village, Apple Computer, and E-Stamp. Julie Fergerson, CTO at ClearCommerce, says clients are often overwhelmed by the amount of information they need to know to make good decisions. ClearCommerce’s Web-enabling of a client’s existing infrastructure does not include XML. “A lot of people are talking about XML, and at the interface level people are begging to adopt XML, but back-end infrastructure needs to be fast and reliable,” says Fergerson. “XML has significant overhead. SOAP [Simple Object Access Protocol - an XML-based protocol that enables applications to communicate with each other over the Web] is trying to address this, but it’s still bleeding-edge technology, which is not usually adopted by infrastructure players. That’s not to say that we might not some day, but reliability and scalability are critical components of any infrastructure play, so it’s not currently included.”
What’s in store So far, the consensus is that to succeed in e-commerce, companies need inventory, order fulfillment, and logistics systems. Like most of the companies discussed above, SeraNova, the e-business services unit of Intelligroup, Inc., in Edison, NJ, utilizes XML technologies extensively. According to Senthil Kumar, associate director, “SeraNova does not specialize in the traditional EDI solutions, although we work in conjunction with them.” Kumar thinks that XML is the key to integrating buyers and suppliers seamlessly, eliminating all manual interactions. “XML is the state-of-the-art solution for EDI; traditional EDI solutions will exist in conjunction with XML for the next few years,” he adds. “Traditional EDI solutions will not be replaced immediately, as large organizations have invested heavily in these solutions. XML solutions will be initially used to communicate with small and medium-sized companies that cannot afford traditional EDI. Once XML technologies and standards have matured, they could eventually replace traditional EDI solutions.”
Consultants at SeraNova determine whether a client needs XML by finding out if the client has a well-defined e-commerce strategy. Then they hammer out individual requirements. “Any requirement that involves integration with suppliers, customers, or B2B marketplaces would potentially require an XML solution,” Kumar says. “Most organizations with order fulfillment operations need to look at XML even if they are using EDI today, since XML can help them integrate with smaller customers and suppliers and also to B2B marketplaces.”
Adam Messinger, vice president of applications at Richmond, CA-based QRS Corp., says his company is committed to supplying whatever industry standards are or will be in the future. QRS clients include everyone from retailers to manufacturers to dot-coms. Although most large companies have gotten used to EDI, Messinger believes that XML has the ability to become the standard because of the flexibility it offers.
XML is in an early stage of standardization, but in combination with traditional EDI, it has the potential to implement a company’s e-commerce strategy with great ease. To decide whether to implement XML, a company needs to ask whether it has the necessary back-end systems in place and what goal its e-commerce initiative means to accomplish.