One of my predictions for 2011 was validated yesterday. Here is what I wrote last December:
More companies and solution providers will recognize the importance of B2B connectivity. It’s not new, it’s not sexy, but B2B connectivity is coming out of the shadows and becoming an important factor in creating an end-to-end supply chain solution. This year [2010], IBM acquired Sterling Commerce and Highjump acquired TrueCommerce. In recent years, Oracle and SAP have also established partnerships with other B2B connectivity providers (E2open and Crossgate, respectively). I expect some more acquisitions and partnerships related to connectivity to occur in 2011.
Yesterday, SAP announced that it is acquiring Crossgate, a provider of hosted B2B integration services headquartered in Munich, Germany. After investing in the company in October 2008, SAP established a global reseller agreement with Crossgate that allowed it to offer Crossgate’s B2B Content Engine as an SAP solution extension.
Why did SAP decide to acquire Crossgate instead of remaining partners? And why now?
I haven’t talked to anyone at the company yet, but here is what Peter Maier, general manager, head of Line of Business Solutions at SAP said in the press release: “By acquiring Crossgate’s highly differentiated solution, we help our customers extend their end-to-end business processes running on SAP to their customers and partners. As a result, thousands of SAP customers will join the network to exchange information easier, execute transactions faster and collaborate better.”
As I commented after the IBM-Sterling Commerce acquisition, a key reason why B2B connectivity is “coming out of the shadows” is that companies are recognizing that software is not enough. You can have the most functionally-rich software applications within your four walls, but without an adequate B2B connectivity network and associated capabilities, you can’t effectively manage end-to-end supply chain processes.
This is particularly true for transportation management systems (see “An Overlooked (But Critical) Component of Transportation Management Systems”) and global trade management systems (see “Beyond Software: The Role of Content and Connectivity in Global Trade Management”), which are two important solutions for SAP.
Will SAP’s move prompt Oracle and other “traditional” software vendors to get more directly involved in B2B connectivity? It’s been almost two years since Oracle formally partnered with E2open, and based on a recent briefing, the partnership is going well, with several Oracle Transportation Management (OTM) customers using the integrated solution and the two companies have a joint development roadmap. In my opinion, there would have to be a strategic reason or driving force for Oracle to shift gears and acquire E2open or another B2B connectivity provider. SAP’s acquisition of Crossgate might nudge them in that direction, but if it happens down the road, I suspect it would be in response to customer demand.
It’s important to note that many software vendors have been slow or reluctant to expand into areas that fall outside their traditional business model, defined by large license deals, implementation services fees, and the sacred cash cow, maintenance fees. The emergence of software-as-a-service vendors and new business and revenue models (which, to borrow a phrase from Art Mesher, Descartes’ CEO, requires vendors to shift from “a culture of selling” to “a culture of serving”) has disrupted the software industry. Many traditional software vendors have been forced to offer SaaS solutions of their own, and I believe they will ultimately be forced to provide–by their customers and competitors–B2B connectivity too.
It’s also important to note that providing B2B connectivity is just a pre-requisite to what customers really want: business intelligence driven by network data and information. In other words, the value is not in providing the pipes, but in leveraging all of the data flowing through the network to provide customers with timely insights and intelligence that they otherwise couldn’t get (for a transportation example, see “The Missing Link in Transportation Business Intelligence”). I assume SAP recognizes this, but if not, then this acquisition will not deliver its full value potential for customers.
Software is not enough, and neither is B2B connectivity. The holy grail is providing customers with timely, accurate, and complete supply chain business intelligence, powered by data from thousands of companies flowing through a common network, so that they can make smarter decisions faster.
Do you agree? Post a comment and share your viewpoint!
(Note: SAP, Oracle, Highjump, and Descartes are ARC clients).
In addition to sharing your perspective on trading partners wanting their network data delivered/packaged intelligently for their business, I will also add that software companies that offer business solutions will end up driving the direction of the B2B technology at this point rather than the B2B technology itself, which is me suggesting that B2B technology is fairly robust and available at this point … at least enough so to get us to the next level of business and network intelligence, then I assume the deck will get reshuffled again … probably going in the direction of common networks/hubs (assuming a cloud service). What I can’t yet form an opinion around is what company or company-type is best suited for this next step.
Couldn’t agree more.
http://www.onenetwork.com
I agree. I think B2B helps the customers to share their information faster and they can search the information more easily. It helps the companies to manage supply-chain effectively and make the decision quickly. The business is becoming global, there is a lot of information from various areas. B2B will become more important.