Microsoft and GXS Alliance
The Fast Track to Supply Chain Innovation
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Executive Summary
Integrating disparate applications and automating business processes among trading partners are no longer “nice to have,” but essential to doing business in virtually every industry today. Only the largest companies have the resources to create and maintain point-to-point connections with their major trading partners. For years, midsize companies have had to make do with integrating only a few trading partners or business processes, gaining some cost efficiencies but missing out on the benefits of robust business process integration with an entire trading community.
Recently, the situation has gotten even more difficult for midsize manufacturers and their suppliers. As a March 2006 article in the McKinsey Quarterly points out, sharing supply chain data has become even more complex because outsourcing has stretched supply chains around the globe, from North America to Asia and back again.
Companies increasingly buy more of their raw materials, components, design services and manufacturing services from far-flung third parties and rely on contractors to coordinate the manufacture and movement of their goods, noted in the article, “Recapturing Your Supply Chain Data.” These challenges have fallen ever more heavily on the backs of smaller to midsize businesses, which do not have the resources required to completely integrate their supply chains with trading partners and customers.
To solve the challenges, software and service vendors promoted dramatically new technologies and encouraged customers to discard existing systems. But those offerings failed to accommodate the real needs of the market. A new generation of solutions more closely fits the needs of the industry, though.
According to an October 2004 report, "B2B Gets Real," from independent technology and market research firm Forrester Research Inc., B2B software and service vendors have adjusted their offerings to better reflect the needs of midsize companies. Vendors of B2B integration solutions have learned from their past failure of overemphasizing the need for superior XML technology and now focus on adding value to existing data exchange infrastructures such as EDI, according to analysts Ken Vollmer and David Metcalfe (see chart, “Pragmatic B2B Solutions Reflect Customer Needs”).
Pragmatic B2B Solutions Reflect Customer Needs
| • | Coexistence with EDI. B2B vendors today are not recommending firms rip out the EDI connections they have used for decades. Many new B2B offerings coexist peacefully with preexisting EDI applications. |
| • | Universal interoperability. The payback from B2B integration depends on large message volumes; as a result, many B2B offerings today offer the ability to handle any data format, not just XML. Universal interoperability will increase the message volume. |
| • | Low-cost B2B integration. Low-cost, subscription-based B2B integration that provides near-real-time capabilities solves the “last-mile” connection problem among trading partners. Vendors like GXS and others tackled this cost and complexity problem by creating EDI Web forms for small and midsize businesses, and these have been widely adopted in the past five years. |
| • | Hosted applications. Reliable messaging on its own doesn’t convince firms to implement new B2B networks. To add value to B2B transactions, vendors embed applications in their messaging hubs. |
Source: Forrester Research Inc.
Indeed, a new partnership between Microsoft Corp. and GXS Inc., a leading provider of global B2B e-commerce solutions in Gaithersburg, Maryland, puts supply chain integration within reach of midmarket businesses for the first time. It does so by giving them a flexible platform on which to build future B2B relationships.
Like their larger counterparts, many midsize companies have invested in internal automation and productivity systems such as Enterprise Resource Planning (ERP) software and EDI. But unlike the biggest companies, midsize firms have not had the resources to forge deeper electronic connections to their suppliers and customers. Connecting a company’s ERP and other business systems with those of its suppliers and customers will help midsize firms maximize the return on investment (ROI) of existing systems.
Thanks to the Microsoft/GXS alliance, midsize companies can use Microsoft BizTalk Server to connect to the GXS Trading Grid, bringing up new trading partners and automating business processes with ease. The advantage of this solution lies in the ability to leverage a unified platform--BizTalk Server along with the GXS Trading Grid--to forge electronic communications with many trading partners, rather than having to do point integrations.
Gartner Inc, a leading technology research and analysis firm, considers GXS to be a leader in the B2B integration market, according to the recently published “Magic Quadrant for Product Information Management, 2005.” Similarly, Microsoft moved into the leadership quadrant in Gartner’s February 2006 report, “1Q06 Magic Quadrant for B2B Gateway Providers.”
Microsoft and GXS Team Up
| Key details of the Microsoft/GXS Alliance | |||||||
| Action | Outcome | ||||||
GXS embeds Microsoft BizTalk Server 2006 and Microsoft SQL Server 2005 in the GXS Trading Grid |
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Microsoft BizTalk/GXS Trading Grid ‘Grid-Ready’ solution available to businesses worldwide |
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Microsoft names GXS Trading Grid the recommended global B2B network for BizTalk Server |
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Microsoft and GXS will collaborate to enable and improve integration between the desktop and the supply chain |
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Sources: Microsoft Corp.; GXS
By emphasizing integration with existing systems and simplicity, the Microsoft/GXS alliance seems well matched to market reality. “In today’s fast-paced business environment, all companies need an easy, efficient, low-cost way to streamline business processes and collaborate with partners and suppliers around the world,” says Steven Martin, Microsoft’s director of product management for BizTalk Server. “But traditional integration solutions can be too complex and expensive for many midsize businesses to adopt. With BizTalk Server 2006 and the GXS Trading Grid, midsize companies now have an affordable, simplified B2B solution to help improve operational productivity, reduce costs and react quickly to changing conditions. This levels the playing field for everyone.”
The more than 6,000 existing BizTalk users and over 40,000 companies that use the Trading Grid will find the partnership particularly fruitful.
Business Benefits of the Alliance
The BizTalk “Grid-Ready” solution allows midsize companies to begin trading and managing their supply chains electronically while building a platform they can leverage for future business relationships.
Most smaller to midsize companies by now have invested in computing infrastructures that enable information to be exchanged freely and easily within the four walls of the organization, says John Radko, chief technology strategist for GXS. “Here, for example, using our Microsoft infrastructure, I can post Office documents in my Internet Explorer browser and I can share them via Microsoft Office SharePoint and Microsoft Office Communicator,” he says. “But for many companies, sharing information externally is much more primitive as opposed to what you can do internally because everyone has disparate systems.”
By using BizTalk Server 2006 to connect to the GXS Trading Grid, professionals can incorporate trusted partners into the realm of robust electronic communications, getting them ramped onto the Grid within a few days. Using an established platform like the Trading Grid removes the need to perform point-to-point integrations, which is too costly and time-consuming for midsize companies. “We make it very easy to deploy, maintain and use” B2B integration, Microsoft’s Martin says.
According to a report from Forrester Research, many of the B2B integration services and solutions on the market now better reflect midsize companies’ needs. Coexistence with EDI and legacy software, near-universal interoperability and lower cost hosted applications reflect the realities of stretched time and money resources in the midmarket. Trading Grid customers from a variety of different verticals can benefit from applications such as product data synchronization, joint forecasting, electronic accounts payable and receivable, and domestic and international shipment tracking.
How BizTalk Connects Systems
Microsoft BizTalk Server 2006 eases integration with legacy ERP systems by including more than 20 application and technology adapters at no extra charge; among them are those for popular applications such as SAP, Siebel, PeopleSoft, and JD Edwards. Using these adapters, companies can streamline business processes, enhance collaboration among employees and trading partners, and resolve the time-consuming clerical errors that go with manual processes, Martin says.
“Midsize companies spend so much time fixing manual process errors. This is going to reduce or eliminate those errors,” he adds. “BizTalk Server will verify the transaction before it hits the Trading Grid and the rest of the supply chain.”
Streamlining manual and error-ridden processes helps midsize companies get the most out of their technology investments. In addition to reducing errors, companies can improve customer service by connecting to their customers electronically on the platform. This makes it simple, for example, to place and track an order and manage shipments. Ultimately, using the Trading Grid and BizTalk Server 2006 will help companies enhance their business performance by consolidating their internal and external integration projects on a single global integration platform. From here, users will be able to maintain centralized control from one application and avoid problems associated with searching multiple systems. This will save time, increase efficiency, improve the quality of information and remove the expense of costly multiple platforms.
Next Stop: Business Intelligence
The Microsoft alliance is strategic for GXS, Radko says, because BizTalk Server gives a richer connection to the Trading Grid than other types of technology. “For example, before, you could see that a transaction went through. BizTalk Server gives you much richer information downstream, where you can also verify that the numbers and prices of the items you ordered are valid or analyze which trading partners are performing best.”
“BizTalk is great for helping you figure out and manage what’s going on in your supply chain,” Radko adds. “We’re very attracted to the business activity monitoring and business process management capabilities inherent in BizTalk Server”--one more reason the alliance makes sense. Microsoft and GXS are currently working on fine-tuning the business intelligence aspects of the alliance. And although the solution already makes it possible to provide critical time-dependent information to key decision-makers, GXS is looking to take the value of that information even further by leveraging the business intelligence capabilities in SQL Server.
GXS is currently implementing several key parts of the Microsoft application platform on its Trading Grid, including Microsoft Windows Server 2003, BizTalk Server 2006 and SQL Server 2005. This migration will better position GXS to serve companies that are also heavy users of Microsoft technology, Radko says.
Integration Without the Operational Overhead
The ultimate goal of automating processes in a supply chain is to make it so that you interact with external companies in the same way you would with your internal departments. “We have some sophisticated customers who aren’t drawing a line between their internal business processes and external business processes,” Radko says. “Their partners are as integrated as if they were departments in their own company.”
Most midsize companies are not yet at this point. In the meantime, they can use the Microsoft BizTalk Server 2006, along with the GXS Trading Grid, as an affordable, quick and efficient way to establish an electronic connection with a potentially limitless number of trading partners. Says Radko, “Midsize companies need the ability to have a top-grade e-commerce infrastructure but at a reasonable cost without a huge operational burden. That’s what this alliance is about.”
About the Analysts
Gartner
Gartner is one of the world's leading providers of research and analysis about the global information technology industry. Gartner provides data, advice and opinions to 45,000 clients worldwide representing 9,000 distinct organizations, delivers 2,000 consulting engagements a year and holds more than 50 annual events that draw in excess of 31,000 attendees. Gartner clients include chief information officers and other senior IT executives in corporations and government agencies as well as technology companies and the investment community. For more information, visit www.gartner.com.
Forrester Research Inc.
Forrester Research is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology's impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events and peer-to-peer executive programs. For more information, visit www.forrester.com.
About the Partner
GXS
GXS is a leading global provider of B2B e-commerce solutions that simplify and enhance business process integration and collaboration. Organizations worldwide, including 75 percent of the Fortune 500, leverage the GXS Trading GridSM to achieve the perfect balance of supply and demand. Active in the global standards arena, GXS enables customers both large and small to connect with global partners, synchronize product information, optimize inventory levels and demand forecasts, and accelerate the execution of supply chains.
Headquartered in Gaithersburg, Md., GXS provides sales and support to businesses and their partners worldwide. For more information, visit www.gxs.com.
Lauren Gibbons Paul is a senior writer for Triangle Publishing Services Co. Inc. and has more than 15 years of experience as a writer and editor for leading business and technology publications, including eWEEK, CIO, Managing Automation and Network World. She has also done research assignments for a number of well-known analyst firms.