Trading at Internet speed
- Article 5 of 7
- iSight, April 2006
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When venture capitalists invested millions in companies during the dot com boom, the promise many saw was of a new way of doing business using the Internet. Most envisioned a new channel for selling goods to consumers, but others could see potential in B2B marketplaces, application service providers and through improved collaboration. The dotcom bubble eventually burst but those ideas lived on. Now, with improved business models and better technology, the Internet revolution is ready to begin again in business as part of Web 2.0.
Of the survivors of the Web 1.0 revolution, companies that use the Internet for trade with consumers were the most obvious winners. Amazon, eBay, Apple and Dell among others have all managed to turn the Web into a powerful sales channel, with Amazon alone doing $8.49 billion of trade via the web last year. But as well as being a way of selling their own goods, Amazon and eBay’s web sites allow partner companies to sell their own goods.
Amazon’s zShops, for instance, complement Amazon’s own range with products that Amazon doesn’t sell. They can also sell competing items, and if they make the sale, Amazon still takes a percentage, making it a win-win situation. The zShops get access to Amazon’s customers, the trust that Amazon has built up with those customers and Amazon’s payments and sales infrastructure. For small companies that don’t have the marketing budgets to create a successful online brands or the infrastructure necessary for online trading, it’s a way to piggyback on Amazon’s investment to create their own e-presence.
With brand awareness a major factor in online shopping, it’s no surprise that small companies are gathering together to create similar online “shopping centres” in other markets which don’t yet have an Amazon or an eBay. Many collaborate to create portals that can be used to advertise their goods, with only a few of these portals having the infrastructure necessary to sell goods. However, this needn’t be an obstacle, using web services, a standardised interface for transferring information over the web. It’s now possible to chain together third-party services such as WebPay’s credit card processing facilities using web services and other standard Internet technologies to create all the necessary infrastructure.
Primelocation is a UK portal for house-buying. Formed in 1999 by a group of estate agents, Primelocation allows participating companies to post details about their properties online. Potential purchasers can then click through to the individual estate agents’ web sites for further information.
So far, 4,000 offices have signed up for the site, which derives its income from both advertising and subscriptions. At the moment, though, the site is purely a portal and sells no properties itself. But, says chief executive Ian Springett, the portal generates a large number of clickthroughs for the offices’ own sites.
In common with Amazon, Primelocation is not fully automated for all the processes involved in dealing with suppliers, with much collaboration coming through manual entry. But in other markets, automated collaboration is much further advanced.
In the UK, life assurance and pensions brokers are already using the Internet to interface their systems during sales processes to request and provide information about the various parts of the total package customers require. Origo, which worked with many of the companies involved to create a workable messaging standard for the process, is now working on a similar standard for mortgages.
Explains MD Paul Petitt, “There are a number of interfaces that need to be supported: calls to extranets, products sourcing systems, credit reference agencies, money laundering checks, life assurance applications… At the moment, there’s not much integration.” Using the knowledge and systems created for the life assurance and pensions industry, Origo aims to devise a single XML standard that will allows these processes to happen without human intervention.
It’s this lack of a simple yet flexible single standard that has stalled many previous efforts at automated collaboration. The long-established yet under-used EDI collaboration system was both expensive to implement and too limited and inflexible to react to a rapidly changing marketplace. B2B marketplace vendors such as Commerce One and Ariba failed to achieve anywhere near their original promise because they each had their own proprietary interfaces that forced suppliers to work on the company’s terms, rather than the suppliers’ terms.
The recent emergence of web services and XML for messages has provided a “standardised” system of sorts for collaborating companies. But XML’s flexibility means that there are now many different ways of defining data – even within the same company data may be described differently by different systems. Oasis, RosettaNet and other competing standards bodies have devised BPXML, ebXML and other mark-ups for business data that are both incompatible and complicated, which has led many companies to use their own cut-down versions of the standards when dealing with known suppliers.
Yet this prescriptive state of affairs – where one company or group of companies dictates how a new company should interact with it – is still an obstacle to collaboration, as IT systems need to be reconfigured to output messages in particular ways. A new breed of IT suppliers is working on this problem, however. Magenta Technologies has developed analysis software that learns using neural networking algorithms how messages are composed. Users provide the software with examples of the messages they send and receive and the software adapts, translating the messages so they can be used by other systems without the need for reconfiguration of any software.
OmPrompt has similar technology but provides it as a service – a new business model for the Internet age (see box, “ASP lives on as SaaS”) – and across a wide range of messaging formats, including EDI, fax, voice and email. The company says that it takes just a day of analysis to accept a new format into the system, compared to the 90 days typical of many message-analysis exercises. “It allows you to build rapidly,” says president and CEO Brian Bolam. “It makes you independent from any one supplier and you can change very rapidly. It’s non-invasive, technology agnostic and future proof – if you change the message format, it learns and adapts.”
But for true automated collaboration, simple message exchange is not enough: there needs to be a way for events to occur automatically in response to messages. For that, business process management systems that automate software are necessary. Languages that can describe business processes, such as BPEL, JBIL and UML, will need widespread adoption and incorporation into standards.
But truly automated collaboration that requires no human intervention may well be some way off. There will always be exceptions that a human being needs to make decisions about. BEA, which recently bought workflow management company Fuego certainly believes so. Martin Perceval, senior European technology evangelist at BEA, says “There are some things that can’t be made better by using a computer. There’s always going to be someone who needs to say yes or no.”
Certainly, the issue of trust remains big on most companies’ agendas when selecting new partners for collaboration. “There’s a world of a difference between calling on a company for a computing service versus calling on them to turn up with a truck full of parts for your supply chain,” argues Perceval.
Wariness of unknown potential business partners stalled the adoption of UDDI repositories for partner discovery when Web services became a hot technology several years ago, and was also one of the factors in the initial failure of the ASP business model. It’s likely to remain a major inhibitor to many new Internet business models as well.
While companies are developing new business models for the Internet age, some of the obstacles to automated collaboration are still present. New technology and standards are removing them and making the majority of business processes automatable. But the human factor – and distrust – are still going to be elements in any business model for some time to come.
ASP lives on as SaaS
One of the most notorious business models of the dotcom boom was the application service provider (ASP) model. This asked companies to hand over management of their own in-house applications to a third-party who would host the application and deliver it to the companies over the Internet. In return, the new hosts would charge for usage, either via subscription or “per click”. Theoretically, this meant ASPs’ customers wouldn’t need to have the infrastructure or expertise to run their applications and could benefit from a reduced expenditure on licences as well. In practice, the pricing models weren’t flexible enough, reliability wasn’t high, few companies wanted to be early adopters and many were resistant to the idea of trusting an external company with mission-critical applications and enterprise data.
Most of the famous ASPs disappeared, but many never went away. A whole new generation of providers is emerging, including Salesforce.com and even Microsoft with its Office Live service. This time they’re calling it Software as a Service (SaaS).
The main difference between ASPs and SaaS is six years of experience for provider and customer alike: CIOs are more willing to outsource IT functions and application hosting is now considered a mature technology in most cases; providers have improved their charging models and addressed concerns over security and reliability. Adoption is still slow, but the ASPs look set to stay this time.
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