Issue No 10:
ROLE OF E-BUSINESS IN THE INFORMATION ECONOMY
Vs e-Business, XML for Enterprise Application Integration and Growth of Trading
Communities through EAI
The Role of e-Business in the Information Economy
PERTH, AUSTRALIA - June 22, 2000: We
discussed the role of Enterprise Portals (Corporate Portals) as a central
gateway to the enterprise, and the concept of Business-to-Business (B2B) Trading
Communities in previous issues of TEN (see http://www.ies.aust.com/~ieinfo/articles.htm#TEN).
This issue continues the theme. It discusses the role of XML for Enterprise
Application Integration (EAI) within and across enterprises and its role in
e-Business. It also announces
upcoming conferences and seminars that will assist you.
TEN - The Enterprise Newsletter
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are witnessing far-reaching changes to business as the world moves into the new
Information economy. The catalyst is the Internet and the rapid advances in
technology. We are seeing the growth of regional and global trading communities
of buyers, suppliers and business partners in most industries. For example, GM,
Ford and Daimler/Chrysler in the USA - normally vigorous competitors - are
nevertheless working closely together to build a trading network with their
suppliers. This network uses the Internet for procurement of automobile parts
and materials. Its size is enormous: over 60,000 suppliers and around $US240
Billion of purchases each year! Similar activity is happening in most other
industries. At last count the total number of trading networks already
established, or in the process of being formed, exceeded 600!
Internet technologies are contributing to this rapid change: the Extensible
Markup Language (XML); and Corporate Portals (also called Enterprise Portals).
This issue briefly introduces each and discusses the impact they will have on
the future of e-Commerce and e-Business.
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DIFFERENCE BETWEEN E-COMMERCE AND E-BUSINESS
- the sale of products and services to customers over the Internet - is now
relatively easy to implement. There are many software products and solutions
that enable catalogues to be incorporated into web sites for purchase of
products over the Internet by consumers. Yet e-Commerce is not e-Business. An
e-Business not only sells products online (e-Commerce), but also links those
sales tightly to its back-end systems for order processing and delivery
fulfillment. If online sales are not seamlessly integrated with the back-end
systems of an enterprise, those orders must be separately entered into the
normal processing and fulfillment systems. Such enterprises are only doing
e-commerce; not e-business.
the best-known example of e-business is that of Amazon.com, the world's largest
online bookstore with over a million titles. Amazon has succeeded by building a
closely linked e-business value chain for acceptance of orders online and
delivery to its customers wherever they are located, worldwide. As an
e-business, it has also added CDs, videos, toys, electronics and auctions. It
leveraged its infrastructure to move easily into these new sales markets, as it
handles all aspects of sales and delivery with no reentry of details. Different
to established businesses, Amazon had no legacy systems that first had to be
changed for this Business - to - Consumer (B2C) sales environment. While Amazon
still makes a loss at present, its infrastructure is now so well integrated and
its brand is so well known that it is widely expected to become profitable in
far the greater market, however, is the Business - to - Business (B2B) market.
The B2B market potential exceeds the B2C potential - perhaps by an order of
magnitude. The Gartner Group in Feb 2000 projected that the B2B market will grow
from $US145 Billion in 1999 to $US403B in 2000; to $US953B in 2001; and then to
$US2,180B (2002); $US3,950B (2003); and $US7,300B in 2004. Other research firms
predict comparable growth in the B2B market with similar orders of magnitude
businesses are not like Amazon. They do have existing processes and systems for
order entry, credit control, invoicing, inventory and delivery. Many of these
systems are old but still functioning well for the sales environment they were
designed for. But even the latest systems may be considered "legacy"
if they cannot easily be changed to encompass e-commerce and e-business via the
Internet. This is where XML and Corporate Portals offer great benefit.
application systems and databases in an enterprise may be used to carry out
different business processes. XML permits relatively easy integration of
business processes and application systems both within and also across
enterprises. This is called Enterprise Application Integration (EAI).
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ROLE OF XML IN ENTERPRISE APPLICATION INTEGRATION
legacy system was built to operate in a specific application environment, using
the processes and terminology relevant to each separate application. Consider a
hypothetical organization, XYZ Corporation. The Order Entry System was built for
its Order Entry Department to support its processes and terminology and accept
orders from customers. The Credit Control System was built for the Credit
Control Department for its processes and terminology. But distinct from the
Order Entry group, Credit Control assesses credit-worthiness of its
"clients"; they are not called "customers". So the Credit
Control System uses this different terminology. And the Finance Department calls
them "debtors"; so the Invoicing and Accounts Receivable Systems all
use that different terminology. Similar terminology problems arise in the
Shipping Department with the Shipping and Distribution Systems and (to a lesser
extent) with the Warehouse Inventory Systems.
is one reason why it has been so difficult to change legacy systems so that they
can be integrated for use in e-business. Each was built for different
terminology; for different language. Like people from different countries, they
don't understand each other. In the past, the only solution was to throw them
away and start again to build fully integrated systems for order entry, credit
control, inventory and invoicing. Yet that was impractical. XYZ could not throw
its legacy systems away; it had to continue to use these systems also for their
original design purpose.
XML, which provides a solution to this dilemma. Released as a recommended
standard in Feb 1998 by the W3C (one of the standards bodies of the Internet),
XML is a language that takes the metadata (or terminology) used by different
applications and systems and uses it to describe the relevant data.
our example, XYZ must manage all sales orders, credit control, invoicing,
inventory and receivables activity by each of its customers (clients, debtors
etc). Now consider the case of two enterprises that buy products and services
from XYZ. These are ABC, Inc and DEF Enterprises.
manages its business with ABC and DEF by allocating unique account numbers. But
for reference to ABC in XYZ Corporation, for example, XML shows sales orders as
<Customer>ABC, Inc</Customer>, where <Customer> is called an
XML start tag and </Customer> is an end tag. As XML tags, they surround
and identify the relevant data; clearly ABC, Inc is a customer. But Credit
Control sees this as <Client>ABC, Inc</Client>. And similarly
Finance sees <Debtor>ABC, Inc</Debtor>.
ability of XML to identify relevant data according to its meaning to each part
of the business enables the previously non-integrated (disintegrated?) systems
of XYZ - its Order Entry, Credit Control, Invoicing and Accounts Receivable
systems - to be integrated throughout the enterprise. Of course, this is a gross over-simplification of what is
indeed a very complex undertaking - application integration. Yet it illustrates
the power and potential of XML. Each application system (legacy or otherwise)
can continue to perform the processing for which it was originally designed. But
the terminology - the metadata - used by application systems and databases of
XYZ can also be used with XML for application integration.
Corporation thus has the best of both worlds: it can realize enormous benefits
from e-business if it can achieve application integration. And by using XML it
does not have to throw out still-valuable legacy systems. XML enables it to add
a transformation front-end to each system for application integration. Many
software tools and products to assist this integration using XML are becoming
consider the problem now from the perspective of ABC. We saw that ABC is a
customer of XYZ. So XYZ is a supplier to ABC. The ABC Procurement System in its
Purchasing Department produces Purchase Orders to send to XYZ - which are in
turn received by XYZ as Sales Orders. Mailing, faxing or emailing Purchase
Orders as documents from ABC to XYZ is presently used for this inter-enterprise
communication. XYZ sends back an Order Acknowledgement document, then a Delivery
Advice and finally a Supplier Invoice.
each document sent and received, the receiving organization presently must
reenter the relevant details into its own systems. It can then progress the
order through its relevant procurement or order entry process. But XML also
allows this reentry step to be bypassed. The data in each physical document is
transformed using XML into self-describing electronic documents, sent
automatically as messages between systems.
XML in this way also overcomes the terminology problems that exist between
different enterprises. The ABC Procurement System can thus communicate
automatically and seamlessly with the XYZ Order Entry System. Relevant XYZ
systems can then respond and send appropriate acknowledgement, delivery and
invoice documents in XML as messages back to ABC. Thus XML permits relatively
easy integration of business processes and application systems within and across
enterprises. This is Enterprise Application Integration (EAI).
is more complex than the application integration described above within each
enterprise. But when EAI can be realized, its benefits and cost-saving
opportunities far surpass those of application integration within a single
enterprise. Typical cost reductions per transaction from $100 - down to less
than $10 - are common.
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GROWTH OF TRADING COMMUNITIES THROUGH EAI
is through XML and Enterprise Application Integration (EAI), as discussed above,
that B2B e-business has the greatest potential. EAI can save enormous processing
costs in most enterprises and industries. It bypasses many error-prone and
costly manual steps; it replaces them with XML document messages for automated
B2B streamlined processes within and across enterprises. These cost savings go
straight to the bottom-line of most enterprises. This is a compelling reason for
the growth of B2B e-business. We discussed the use of XML for EAI using Commerce
One, RosettaNet and Microsoft BizTalk in TEN #9 (see http://www.ies.aust.com/~ieinfo/ten09.htm).
We earlier saw the impact of XML in the B2B Market Potential from 1999 - 2004,
as released by the Gartner Group.
example we discussed above of XYZ and ABC is repeated also between XYZ and DEF.
Each pair of businesses can agree on the relevant XML metadata tags for document
messaging. In turn, each of these enterprises can also use XML for document
messaging between them and their respective customers and suppliers. But then
another problem arises. Each enterprise has its own terminology - its own
metadata - and each pair of enterprises must use XML to translate to and from
the unique metadata used by each trading partner. Great complexity arises from
these multiple enterprise interactions.
address this problem, buyers and suppliers in each industry are coming together
in trading communities with agreed XML document tags for intercommunication and
B2B e-business. For example, in TEN #9 (http://www.ies.aust.com/~ieinfo/ten09.htm)
we saw that RosettaNet defines XML messaging and Partner Interface Processes (PIPs)
between enterprises in the Information Technology and Electronic Components
industries. Commerce One uses its Common Business Language (CBL) to define
interaction within many different industries through its Market Site trading
communities. Microsoft is developing BizTalk as an XML document messaging
protocol. There is increasing activity in the growth of trading communities, and
products and services, to support them.
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PURPOSE OF CORPORATE PORTALS
now brings us to the topic of Corporate Portals (or Enterprise Portals). A
Corporate Portal provides a single gateway via corporate Intranet to relevant
workflows, application systems and databases - integrated using XML and tailored
to the specific job responsibilities of each employee. In this form, the
Corporate Portal is called an "Employee Portal". With appropriate
security and firewall protection, it also can allow employees to access relevant
processes, systems and databases via the Internet from anywhere in the world.
Corporate Portal can also provide a single gateway across the Internet, or via a
secure Extranet, to details about products and services, catalogues, and order
and invoice status for customers. This is a "Customer Portal" -
integrated using XML and tailored to the unique requirements of each customer.
This offers opportunities for one-to-one customer personalization and management
that is the intent of most Customer Relationship Management (CRM) systems.
Corporate Portal can provide a single gateway to purchase orders and related
status information for the suppliers of an enterprise. This is a "Supplier
Portal". Or it can provide a gateway for business partners or shareholders
in a "Partner / Shareholder Portal".
Corporate Portal is all of these. It represents a single point of access to an
enterprise, with systems and databases integrated using XML and tailored to the
specific interests of each individual. This is how we can expect the
e-businesses of the future will interact with each of their internal and
external stakeholders (employees, customers, suppliers, partners and
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