BizReport: Edifecs CEO on "Breaking the B2B Bottleneck"
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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
2. 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-
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)
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?