Modernizing Business-to-Business Data Exchange
Keep pace with evolving data and data management technologies, plus the evolving ecosystem of firms with whom you do business.
By Philip Russom, TDWI Research Director for Data Management
Earlier this week, I spoke in a webinar run by Informatica Corporation, along with Informatica’s Daniel Rezac and Alan Lundberg. Dan, Alan, and I talked about trends and directions in a very interesting data management discipline, namely business-to-business (B2B) data exchange (DE). Like all data management disciplines, B2B DE is modernizing to keep pace with evolving data types, data platforms, and data management practices, as well as evolving ways that businesses leverage exchanged data to onboard new partners and clients, build up accounts, improve operational efficiency, and analyze supply quality, partner profitability, procurement costs, and so on.
In our webinar, we answered a number of questions pertinent to the modernization of B2B DE. Allow me to summarize those for you:
What is business-to-business (B2B) data exchange (DE)?
It is the exchange of data among operational processes and their applications, whether in one enterprise or across multiple ones. A common example would be a manufacturing firm and the ecosystem of supplier and distributor companies around it. In such examples, many enterprises are involved. However, large firms with multiple, independent business units often practice B2B DE as part of their inter-unit communications within a single enterprise. Hence, B2B DE scales up to global partner ecosystems, but it also scales down to multiple business units of the same enterprise.
B2B DE integrates data across two or more businesses, whether internal or external. But it also integrates an ecosystem of organizations as it integrates data. Therefore, B2B DE is a kind of multi-organizational collaboration. And the collaboration is enabled by the transfer of datasets, documents, and files that are high quality, trusted, and standardized. Hence, there’s more than data flowing through B2B data exchange infrastructure. Your business flows through it, as well.
What are common industries and use cases for B2B DW?
The business ecosystems enabled by B2B DE are often industry specific, as with a manufacturer and its suppliers. The manufacturing ecosystem becomes quite complex, when we consider that it can include several manufacturers (who may work together on complex products, like automobiles) and that many suppliers are also manufacturers. Then there are financiers, insurers, contractors, consultants, distributors, shippers, and so on. The data and documents shared via B2B DE are key to establishing these diverse business relationships, then growing and competing within the business ecosystem.
The retail ecosystem is equally complex. A retailer does daily business with wholesalers and distributors, plus may buy goods directly from manufacturers. All these partners may also work with other retailers. A solid hub for B2B DE can provide communications and integration infrastructure for all.
Other examples of modern business practices relying on B2B DE include subrogation in insurance, trade exchanges in various industries, and the electronic medical record, HL7 standards, and payer activities in healthcare.
Why is B2B DE important?
In the industries and use cases referenced above, much of the business is flowing through B2B DE; therefore users should lavish upon it ample resources and modernization. Furthermore, B2B DE involves numerous technical interfaces, but it also is a metaphorical interface to the companies with whom you need to do business.
What’s the state of B2B DE?
There are two main problems with the current state:
B2B DE is still low-tech or no-tech in many firms. It involves paper, faxes, FedEx packages, poorly structured flat files, and ancient interfaces like electronic document interchange (EDI) and file transfer protocol (FTP). These are all useful, but they should not be the primary media. Instead, a modern B2B DE solution is online and synchronous, ideally operating in real time or close to it, while handling a wide range of data and document formats. Without these modern abilities, B2B relationships are slow to onboard and inflexible over time.
B2B DE is still too silo’d. Whether packaged or home-grown, applications for supply chain and procurement are usually designed to be silos, with little or no interaction with other apps. One way to modernize these apps is to deploy a fully functional data integration (DI) infrastructure that integrates data from supply chain, procurement, and related apps with other enterprise applications, whether for operations or analytics. With a DI foundation, modernized B2B DE can contribute information to other apps (for a more complete view of partners, supplies, etc.) and analytic data (for insights into B2B relationships and activities).
What’s driving users to modernize B2B DE?
Business ecosystems create different kinds of “peer pressure.” For example, if your partners and clients are modernizing, you must too, so you can keep doing business with them and grow their accounts. Likewise, if competitors in the ecosystem are modernizing, you must too, to prevent them from stealing your business. Similarly, data standards and technical platforms for communicating data and documents evolve over time. To continue to be a “player” in an ecosystem, you must modernize to keep pace with the evolution.
Cost is also an important driver. This why many firms are scaling down their dependence on expensive EDI-based legacy applications and the value-add networks (VANs) they often require. The consensus says that systems built around XML, JSON, and other modern standards are more feature-rich, agile, and integrate-able with the enterprise.
Note that some time-sensitive business practices aren’t possible without B2B DE operating in near time, such as like just-in-time inventory in the retail industry and outsourced material management in manufacturing. For this reason, the goal of many modernizations is to add more real-time functions to a B2B DE solution.
Self-service is a driver, too. Business people who are domain experts in supply chain, procurement, material management, manufacturing, etc. need self-service access, so they can browse orders, negotiations, shipments, build plans, and more, as represented in B2B documents and data. Those documents and datasets are infamous for data quality problems, noncompliance with standards, and other issues demanding human intervention; so domain experts need to remediate, onboard, and route them in a self-service fashion.
Why are data standards and translations key to success with B2B DE?
The way your organization models data is probably quite different from how your partners and clients do it. For this reason, B2B DE is regularly accomplished via an exchange data model and/or document type. Many of these are industry specific, as with SWIFT for financials and HL7 for healthcare. Many are “de jure” in that they are adjudicated by a standards body, such as the American National Standards Institute (ANSI) or the International Standards Organization (ISO). However, it’s equally common that partners come together and design their own ad hoc standards.
With all that in mind, your platform for B2B DE should support as many de jure standards as possible, out of the box. But it must also have a development environment where you can implement ad hoc standards. In addition, translating between multiple standards can be a critical success factor; so your platform should include several pre-built translators, as well as development tools for creating ad hoc translations.
What are some best practices and critical success factors for B2B DE?
- Business-to-business data exchange is critical to your business. So give it ample business and technical resources, and modernize it to remain competitive in your business ecosystem.
- Remember that B2B DE is not just about you. Balance the requirements of clients, partners, competitors, and (lastly) your organization.
- Poll the ecosystem you operate in to keep up with its changes. As partners, clients, and competitors adopt new standards and tools, consider doing the same.
- Mix old and new B2B technologies and practices. Older low-tech and EDI-based systems will linger. But you should still build new solutions on more modern platforms and data standards. The catch is to integrate old and new, so you support all parties, regardless of the vintage of tech they require.
- Build a business case for B2B data exchange. To get support for modernization, identify a high-value use case (e.g., enterprise integration, real time, pressure from partners and competition), and find a business sponsor who also sees the value.
If you’d like to hear more of my discussion with Informatica’s Daniel Rezac and Alan Lundberg, you can replay the Informatica Webinar.
Posted on April 29, 2016