Complexity and Cost Management is Stimulating Demand for Managed Services to Support B2B eCommerce Operations

We keep hearing about how very digital the global economy has become. And it is certainly true that the amount of business done electronically in the business-to-consumer (B2C) space has been astounding and pervasive. In the business-to-business (B2B) space there has also been a lot of progress…but, frankly, there is still a long way to go.

According to the just published global study entitled: “B2B Managed Services, Business Value and Adoption Trends,” from Stanford University’s Global Supply Chain Management Forum, 96% of respondents stated that they are planning to increase:

• The number of customers they trade with electronically;
• The number of suppliers they trade with electronically; and/or
• The number of business processes they support.

A full 59% of participants plan to expand their use of B2B e-commerce in all three areas. In fact, only 4% had no plans to increase B2B ecommerce in any of these areas.

The planned growth in adoption is great news. But for those of us who have been tracking the electronic data interchange (EDI), just-in-time (JIT) manufacturing, and quick-response sectors, these big numbers show that organizations are still wrestling with how to achieve a critical mass of adoption with their trading partners (on both the customer and supplier side of the equation).

Indeed, Steve Keifer, vice president of marketing at GXS — the organization that commissioned this study — makes this very point.

“Companies both large and small continue to struggle to get return on investment from their B2B programs. One of the key impediments has been the traditional licensed software model, which rewards the technology vendor regardless of whether the B2B projects are successful or not,” he says.

How can this win-lose scenario happen?

I believe it is because the traditional model often tends to pigeonhole an entire trading partner community into a single approach to doing business electronically. That can be a problem if you have trading partners that represent the entire spectrum of technological sophistication. While there are always going to be organizations that have no problem jumping on the EDI bandwagon, or embracing XML, or any other of a dozen digital trading options…it remains a stubborn fact of life that many industries and geographies have a significant percentage of customers and suppliers (who admittedly may represent a small volume of total transactions) that will want to fax or email their invoice or purchase order for manual processing. The challenge this presents is that doing business this way is:

• Time consuming;
• Human resource intensive;
• Expensive; and
• Prone to errors.

It makes dealing with this category of trading partner disproportionately risky and expensive.

Is Managed Services the Answer?

The Stanford study shows that many organizations are responding to this situation by moving trading partner automation initiatives to managed service providers. The report found that 96 percent of respondents felt managed services added significant value to their overall B2B integration programs.

Specifically, respondents cited cost savings as a key benefit, with 74% indicating they received value from shifting up-front capital expenditures on software licenses to monthly operating expenditures for managed services. That makes sense to me. I think the biggest thing a move to OPEX buys is the flexibility to throttle up and down in response to shifts in the market.

However, cost savings or avoidance were not the only important benefit of exploring managed services solutions.

Enhancing the customer experience to accelerate international expansion and improve business process efficiency was also cited as one of the top reasons for choosing B2B managed services. The logic is that managed service providers can afford to allocate resources to meet a wide variety of trading partners at their own electronic trading level because it is their core business.

And it is a value-proposition that more and more executives are buying into.

“Developments in B2B integration technology have ignited a growing interest in B2B managed services. This research aims to gain insight on the latest trends and business value associated with these B2B initiatives,” says Barchi Gillai, lead researcher for the Stanford study. “While it takes time to realize the benefits of B2B managed services, the survey results indicate the market has reached a level of maturity where companies are beginning to see a tremendous return on their investments.”

For those seeking the holy grail of a fully digital trading partner community…this is a welcome ray of hope.  To read the report visit:

http://www.gxs.com/resources/strategic_b2b_tools/stanford_research_study

About lcooper

Lane Cooper has over 20 years of experience as a researcher, reporter and editor analyzing the business and technology industry. On average, Lane meets with 600 CIOs and senior enterprise executives every year to understand the impact of evolving technological developments on organizations of all sizes across all industries. He has organized and moderated many live and online events and works with a variety of high-tech organizations to ensure that information is presented in a context that is useful to an audience of sophisticated technology buyers and implementers. He is a Contributing Content Partner to CIO Magazine, Network World and Computerworld. Other news services and magazines that have carried his by-line include: Voice Report, Network World, Byte Magazine, TechWeb, Optimize, Information Week, Telephony, Communications Week, ComWeek International, and Enterprise Systems Journal. He lives in Washington DC, where he is the Editorial Director of BizTechReports, an independent reporting agency that analyzes user trends in business technology.

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