B2B Integration – past, present, and future

Sami Jauhiainen, Olli Lehtonen, Pasi-Pekka Ranta-aho, Nicolas Rogemond

Abstract. This paper present a literature study made on the subject of B2B in-tegration. The objective of this study is to identify drivers that guide the devel-opment of B2B integration. This problem is approached by examining how B2B adoption has evolved, what the benefits and costs of B2B integration are, and what the technologies used are and what is the role of standardization in B2B integration? At first we examine the definitions for B2B integration. After that, the adoption of B2B integration is studied through different standpoints, which are EDI, e-procurement, SCM, e-hubs, and RosettaNet and ebXML. The benefits and costs are studied from strategic and operational viewpoints. Espe-cially quality of service and supply chain agility are perceived as strategic benefits while operational benefits are more easily measured. Standardization organizations are existing industry standards are gone through. We concentrate especially on EDI ASC X12 and EDIFACT, RosettaNet, ebXML, and Web Services. Technological convergence is recognized as the most important de-velopment path in the field of standardization. The following drivers were found to be the most important: (1) Big companies are the promoters of the chains (2) Globalization has forced the companies to rethink their intra- and in-ter-company processes (3) Legislation is trying to cover also electric interna-tional commerce (4) VANs are still important (5) Significant operational bene-fits from advanced B2B integration which involves business process reengi-neering (6) Role of customer satisfaction important (7) Agility of the whole supply chain important (8) Due to globalization, B2B important in management of geographically dispersed supply networks (9) Convergence of B2B integra-tion frameworks will lead to make trading partners connections easier, to make overall solution cheaper, and to make solution integration /implementation faster.

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Abbreviation Explanation B2B Business-to-business BPSS Business Process Specification Schema BIC Business Internet Consortium CPP/A Collaboration Protocol Profile/Agreement ebXML e-business XML EDI Electronic Data Interchange EDI ASC 12 EDI Accredited Standard Committee EDIFACT EDI for Administration, Commerce and Transportation FTP File Transfer Protocol HTTP Hyper Text Transfer Protocol IT Information Technology OAGIS Open Application Group, Inc. Specifications PIP Partner Interface Process SOAP Simple Object Access Control UDDI Universal Description Discovery Integration W3C World Wide Web Consortium WSDL Web Service Definition Language XML eXtensible Makeup Language

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Table of Contents

1. Introduction .................................................................................................... 1 1.1. Background........................................................................................... 1 1.2. Research Problem and Objectives ........................................................ 1 1.3. Scope of the Study ................................................................................ 2 1.4. Methodology......................................................................................... 2 1.5. Definitions of B2B Integration ............................................................. 3

1.5.1. External integration.......................................................................... 3 1.5.2. B2B Application Integration............................................................ 3 1.5.3. Electronic Commerce....................................................................... 4 1.5.4. Definition for this study ................................................................... 4

2. Adoption of B2B Integration.......................................................................... 5 2.1. EDI and the phases of adoption ............................................................ 5 2.2. E-procurement and the role of B2B integration.................................. 10 2.3. SCM and the strategic dimension of adoption.................................... 11 2.4. Locations as E-hubs - the geographic view on adoption .................... 11 2.5. Business and the attitude to adoption ................................................. 12 2.6. Legislation .......................................................................................... 13 2.7. Discussion........................................................................................... 13 2.8. Section Conclusions............................................................................ 14

3. Benefits and costs of B2B integration.......................................................... 18 3.1. Nature of B2B integration benefits and costs ..................................... 18 3.2. Benefits of B2B integration ................................................................ 19

3.2.1. Operational efficiency.................................................................... 19 3.2.2. Quality of service ........................................................................... 20 3.2.3. Supply chain agility ....................................................................... 21

3.3. Costs and difficulties related to B2B integration ................................ 22 3.3.1. Investment costs............................................................................. 22 3.3.2. Information sharing........................................................................ 23 3.3.3. Technical problems ........................................................................ 23 3.3.4. Effects of organization’s size......................................................... 24

3.4. Discussion........................................................................................... 24 3.5. Section conclusions ............................................................................ 25

4. Technologies and role of standardization..................................................... 27 4.1. Definitions .......................................................................................... 27 4.2. Presentation of the standardization bodies.......................................... 28

4.2.1. Organization for the Advancement of Structured Information Standards (OASIS) ............................................................................................. 28

4.2.2. World Wide Web Consortium (W3C) ........................................... 29 4.2.3. RosettaNet...................................................................................... 30

4.3. Different existing B2B integration framework standards ................... 31 4.3.1. EDI ASC X12 and EDIFACT........................................................ 31

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4.3.2. RosettaNet...................................................................................... 31 4.3.3. ebXML........................................................................................... 32 4.3.4. Web Services ................................................................................. 33 4.3.5. OAGIS ........................................................................................... 35

4.4. How to go through a general standardization? ................................... 36 4.4.1. Convergence between RosettaNet & ebXML................................ 36 4.4.2. Convergence between ebXML & OAGIS ..................................... 38 4.4.3. Convergence between RosettaNet & OAGIS ................................ 40

4.5. Section conclusions ............................................................................ 42 5. Conclusions .................................................................................................. 47

5.1. Discussion on the drivers.................................................................... 47 5.2. View of the future............................................................................... 48

6. References .................................................................................................... 50

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1. Introduction

1.1. Background

B2B integration refers to connecting company's external-facing business processes to the processes of its business partners. This can profoundly change the way business is conducted between companies and their partners, suppliers and customers. The poten-tial benefits of B2B integration do not only include improvement in operational effi-ciency, but also greater strategic flexibility and market responsiveness. However, many difficulties and integration problems exist. There are numerous com-peting technologies and standards, and for business executives it is difficult to predict what is the future direction of B2B integration. Also, it is not clear how well the cur-rently available solutions meet the requirements of the business environment.

1.2. Research Problem and Objectives

Research problem of this study is what are the drivers that guide future development of B2B integration. In the research problem with a driver it is meant a factor that strongly affects the way the future is built. The research problem is further divided into three research questions. This study aims at solving the research problem by providing answers to the research questions and that way making conclusions about the research problem. Research questions are: Research question 1: How B2B integration adoption has evolved and what is its present situation? Research question 2: What are the benefits and costs of B2B integration? Research question 3: What are technologies used and the role of standardization in B2B integration? First research question deals with issues like what kind of B2B has taken place, and how commonly different companies have adopted B2B. This way drivers that have historically affected development of B2B integration can be identified. The second research question deals with benefits and costs of B2B integration that companies are facing. This way business drivers that affect B2B integration are examined. The third research problem studies technologies and standardization, which have also a strong influence on B2B integration. This is how technological drivers are examined.

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1.3. Scope of the Study

This study focuses on inter-company business-to-business (B2B) integration, not internal enterprise systems. Internal computer systems and integration of them can be a prerequisite for B2B integration, but issues related to those internal enterprise sys-tems are not intimately dealt with in this study.

1.4. Methodology

The research approach of our project is literature-based. Our literature study method-ology is based on the Webster and Watson’s model (Webster and Watson, 2002). The main difficulty of this kind of literature study is to find the relevant material, which will allow us to write our paper. In order to do so, we will mainly go through 4 phases, which are

• Data collection phase, • Knowledge acquisition phase, • Analysis phase, and • Writing phase

Data collection phase includes searching for material and articles from electronic databases. In practice, the following databases were used to search for the material: Ebsco, ACM Digital Library, ABI inform, and Elsevier: ScienceDirect. Aim was to select articles that were from prestige journals, relatively new, i.e. preferably pub-lished after year 2000, focused on B2B integration and scholarly by nature. Keywords that were used both alone and jointly when searching articles from the electronic databases included

• business to business integration, B2B integration, B2B, • SCM, supply chain management, • e-commerce, electronic commerce, • benefits, costs, efficiency, • e-business framework, • EDI, • Standard, and • adoption

In the second phase, we go through the material and familiarize ourselves with the subject. When moving to the analysis phase, adequate material and understanding on the subjects of this study should be attained. This phase consists of bringing together findings from the literature. Finally, during the fourth phase, the seminar paper is written. The first two phases and last two phases are iterative in their nature, so that we will have to go forward and backward probably several times in order to obtain the best result possible.

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1.5. Definitions of B2B Integration

At the broadest, B2B integration can be defined to cover all business activities of an enterprise that have to do with electronic message exchange between it and one or of its trading partners (Bussler, 2003). This definition does not have strong technologi-cal viewpoint, it rather defines B2B integration as business activities carried out with electronic message exchange. Bussler also poses another more narrow and technical definition, that is B2B integration refers to technology that is the infrastructure to connect any back-end application system within enterprises to all its trading partners over formal message exchange protocols. According to this definition, B2B integra-tion covers the infrastructure needed to carry out integration effort. In that sense this definition does not take into account the process level integration.

1.5.1. External integration

One definition for external system integration (Markus et al., 2002) states that "exter-nal systems integration refers to IT-mediated transactions between independent busi-ness partners, such as co-producers and banks". This is a very loose definition, and for example making a purchase order using telephone or fax could be considered to be an IT-meditated transaction. Markus states that in this definition, term transaction is defined as a commercial activity, as ordering or invoicing, in contrast to pure in-formation and knowledge sharing. They point out that electronic data interchange (EDI), customer extranets, and online funds transfers are examples of external sys-tems integration. It can be noted that this definition does not presume true system-to-system integration without human intervention enabled by IT-solutions. Also extra-nets can be classified as external integration. Markus et al. define further that inde-pendent business partners can indicate both external companies and parts of the own organization with separate technology solutions and management policies.

1.5.2. B2B Application Integration

B2B application integration is "the mechanisms and approaches to allow partner or-ganizations, such as suppliers and consumers, to share information in support of com-mon business event" (Linthicum, 2001). In other words, B2B application integration indicates the controlled sharing of data and business processes among any connected applications and data sources, intra- or inter-company. Also this definition remarks that integration can be carried out intra- or inter-company. The author presents the following approaches to B2B application integration, which at this context not exam-ined further.

• Data-oriented • Application interface-oriented • Method-oriented • Portal-oriented • Process integration -oriented

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1.5.3. Electronic Commerce

Electronic Commerce (EC) is a concept that is closely related to B2B integration. It can be defined to be an area that encompasses processes directly and indirectly re-lated to the buying, selling and trading of products, services and information via computer networks – including the Internet (Gunasekaran et al., 2002). In that sense, Electronic Commerce is trading by means of new communications technology.

Electronic commerce can be defined also from four perspectives (Kalakota and Whis-ton, 1997). From communication perspective, EC is the deliverer of information, products, services or payments over telephone lines, computer networks or any other electronic means. From business process perspective, EC is the application of tech-nology towards the automation of business transactions and work flows. From service perspective, EC is a tool that addresses the desire of firms, consumers and manage-ment to cut service costs while improving the quality of goods and increasing the speed of service delivery. From online perspective, EC provides the capacity to buy and sell products and information on the Internet as well as other online services. According to the definitions for Electronic Commerce examined, it is a concept that seems to be closely related to B2B integration. It involves IT-meditated transactions which was the basic definition for B2B integration. However, in B2B integration the focus is on integration of companies while Electronic Commerce comprises also business-to-consumers transactions.

1.5.4. Definition for this study

The definitions above include inter-company integration as part of B2B integration. Inter-company integration can be a prerequisite for intra-company integration, but it is not in the scope of this study. On conceptual level, intra-company integration is often referred as Enterprise Application Integration, EAI (Linthicum, 2001). EAI and B2B integration may use similar approaches and solutions but within most problem domains, EAI should come before B2B integration. We conclude that building a strong definition for B2B integration is challenging since both technological and business standpoints have to be taken into consideration. In this study, we define B2B integration imitating definition by Markus et al. (2002) which stated that "external systems integration refers to IT-mediated transactions between independent business partners”. However, the focus in this study is on true system-to-system integration, even though this is not a strict definition.

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2. Adoption of B2B Integration

In this section we are going to study the adoption of B2B integration. The final objec-tive is to identify drivers that based on studying adoption history of B2B integration are known to guide the development of B2B integration. The adoption of B2B integration is carried out by companies. The adoption always involves at least two companies. But the decision of adoption is considered by each company alone. Is this a good choice for our company, our business? How can we make money out of it? The bubble burst in April 2000 left businesses pessimistic. Experienced managers are wary of large IT investments. They have spent billions of dollars in investment. They have also used huge amount of money to consulting advice. We have seen multiple failures in B2B integration. Is it right for us to adopt B2B integration? That is the right question. While considering, it is good to remember that: what is said about the technology (espoused theories) and how the technology is actually used (theories-in-use) contrast sharply (Coltman, 2002). Here we try to give various views on the adoption of B2B integration. Hopefully these help the decision. The decision is the adoption (if yes) and the reasons are drivers of B2B integration. We begin our adoption inspection with EDI. We introduce possible phases of B2B integration adoption in a big company. The real case illustrates the complexity of factors appearing in adoption. We proceed to the role of B2B integration. Then we describe the strategic opportunities of B2B integration adoption. Considering strategy we see broadening of the B2B integration driver domain. Next we try to gain insight into the meaning of site in the adoption of B2B integra-tion. Can physical place be a driver for B2B integration? Furthermore we clarify the dialog between business and B2B integration adoption. This puts weight on the fact that business drivers are possible B2B integration drivers. The role of legislation is then handled, followed by section discussion and conclu-sions including methodological views with illustrating table.

2.1. EDI and the phases of adoption

In 1990 BHP steel took the initial move to EDI X12. The second phase was in 1995 when company integrated EDI with internals. The third phase was in 1999 when adopting the internet-based e-commerce (Chan, 2000).

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This is a revelatory example. It explains the adoption of the technology itself. On the other hand it represents stages involved. It is a rare example of explicit and rich adop-tion data. It illuminates the adoption and the possible drivers of B2B integration. BHP steel is the biggest steel company in Australia. It is a pioneer in the EDI in-volvement. The company has around 30,000 employees and 240 businesses in 27 countries with annual sales of $7.6 billion. The company trades with more than 2,500 suppliers in any one year and has over 8,000 customers ranging from large corporations with over 20,000 employees, to small businesses having as few as two of three workers. Currently the top 12 suppliers account for some 65 per cent of total invoice numbers and the company trades with approximately 60 suppliers using electronic data interchange (EDI). It views Internet commerce as a vital "new" tech-nology that can be used to satisfy all the company's customers, as well as bringing significant benefits to the company itself and to its smaller trading partners. The company has been an IT user for many years and has been an active user of e-commerce for its business operations for around 15 years, when it began to share information with primary customers. Phase 1. Early implementation This phase had two steps. In the first step BHP begun to establish a trading network in one of its departments. The first published objective for this implementation was to replace the manual pur-chasing system. The system built was a PC-based purchasing system with built-in EDI capabilities, which allowed the company to send and receive business docu-ments. A number of factors and issues were identified as significant impediments to the success of this implementation, including inadequate management support, lack of technical knowledge and support, and lack of understanding of the technology. De-spite these limitations, BHP Steel gained significant advantage from being able to require its trading partners to trade electronically. The project was largely driven by the Australian recession. The steel making capacity was downsized from 9 to 6.5 million tones. Productivity, efficiency, competition and quality were issues confronting the industry at that time. The second step rise from the need for a better supply system to increase the com-pany's efficiency and productivity drove the concept of electronic trading. In April 1988 the SPPD-material supply department formally commenced implemen-tation of an electronic trading system, contracting NEIS (national electronic inter-change system), a value-added service provider, to supply electronic trading services to the steel industry.

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In early stage of step two, technical and software obstacles were identified as the main issues, rather than management of the implementation. As the implementation continued, however, management and business problems such as changing work practices and culture began to emerge as relevant and important issues for the imple-mentation process. Apart from these teething problems, the pilot implementation was declared successful in January 1989. Starting with 12 trading partners, the number of trading partners was increased to 96 to form the biggest electronic trading network in Australia at that time. By December 1990, about 80 per cent of all purchase orders were placed through the EDI network. Implementation of electronic data interchange (EDI) in this department brought sig-nificant benefits and savings:

• Through the supplier rationalization program during 1989-1993, BHP Steel's supplier base was reduced to 12 major partnerships, accounting for 60 per cent of invoices.

• A total of 80 per cent of orders were placed electronically by December 1990.

• 7500 line items were eliminated from the store to be directly sourced by ven-dors, allowing the company to make major cost savings in warehousing.

• Shorter lead times in the day-to-day purchase and supply process were en-abled - from more than ten days to 26 hours for contract lines; and from 42 days to ten days for direct purchase items.

Phase 2. The electronic trading gateway While satisfied with the success of the early electronic trading initiative, BHP Steel believed that much more could be achieved by centralizing and controlling all aspects of electronic trading. The ETG project commenced in April 1990, using BHP IT as its principal contractor. The project's mission was "to add value to trading partner relationships through the introduction of an Electronic Trading Gateway based on international electronic documentation and communication standards". ETG is the biggest e-commerce implementation BHP Steel has ever attempted, in terms of resources and the effort put into the project. Technical issues (such as imma-turity of industry standards) and business issues (such as getting more customers involved) complicated this essentially EDI-based implementation. The company's approach was both multi-disciplinary and inter-departmental - and also involved cross-industry initiatives, such as

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• the BHP Steel Group - involving marketing, sales, finance, purchasing, legal and audit;

• the use of an external project manager to establish and manage the gateway; • the use of external consultants to supply the computer systems as well as to

assist with the mapping and development of standards for business docu-ments; and

• involvement with the EDI Council of Australia (EDICA) to establish the Steel Industry Working Group to develop standard documents in areas where none yet existed.

In this project, BHP Steel provided more support for its trading partners than it had in the earlier implementation, including education awareness programs, distribution of an ETG newsletter, and even developed guidelines for EDI implementation in con-junction with EDICA. The impact of this implementation was quite significant for the steel industry as well as for Australian e-commerce in general, leading to

• the development of common implementation guidelines for the ANSI X12 purchase order by the EDICA Steel Industry Working Party (SIWP) and the Heavy Engineering Mining and Mineral Working Party (HEMMP), in which BHP Steel played a leading role;

• the development of an innovative, standardized steel test certificate which was agreed by the entire steel industry and made available electronically us-ing EDI through the ETG; and

• the integration of EDI with bar-coding in 1996-1997. But the process of getting companies actually involved in the implementation was not easy. After four years BHP Steel still had only three major customers trading electronically; and only one of these customers had an integrated system. Realizing that changes were needed to its approach, BHP Steel expanded the implementation from a purely EDI-based system to include an EDI-to-fax alternative in June 1994. The uptake of EDI applications in BHP Steel slowed around 1994, when EDI began to taper off generally throughout Australia and overseas. The project appeared to have hit a plateau and electronic trading - or e-commerce, as it had then become - did not go much further in BHP Steel until the development of the third phase of the e-commerce project, the move to the Internet. Phase 3. The move toward Internet commerce The company began to discuss using the Internet for B2B transactions in 1995-1996, seeing that it offered the ability to provide a low-cost communications medium, as well as allowing browser technology that permitted a more interactive and easier way to communicate.

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The Internet was expected to provide an alternative to the existing high-cost, VAN-based EDI for small and medium-sized trading partners, although concerns about security, speed and timing of delivery, and message capacity made BHP Steel cau-tious of using this new medium. The company decided once again to take an enter-prise-wide approach to a new technology - and set up a strategy that broadened the use of existing electronic trading technology to include the Internet as an alternative medium. Changing business culture and resistance to change because of the complexity of the applications were issues in implementing the ETG. The use of a Web browser was seen as a more friendly application, which might overcome these problems, in addi-tion to offering a cheaper alternative for small and medium customers. BHP Steel set two main objectives for this new approach to e-commerce implementa-tion, to extend

1. the reach of the e-commerce implementation for BHP globally (not just the Steel division) for small and medium trading partners and institutions, and to gain further penetration in all areas; and

2. the range of e-commerce "transactions", which include customer interaction and communication, catalogue and directory, and freight forwarding.

To achieve the first objective, the company is constantly looking for opportunities and alternative solutions for its current implementation (i.e. VAN-based EDI), which can help to disseminate major applications such as test certificates and barcoding to other business units and trading partners. The second objective is more related to the use of a new and different type of technology and to its incorporation into current systems, e.g. the use of the Internet for business processes and transactions. In the evaluation of this new medium, the e-commerce strategy developed focused on transaction types, to determine which technology medium should be used for con-ducting B2B transactions. The developed strategy divided transactions into categories (strategic, tactical and consumer) and identified the appropriate media for each cate-gory

• For strategic transactions (characterized by high volume, high risk and high return), the use of the electronic trading gateway for gateway-to-gateway or traditional EDI activities, using a dedicated line, is considered most appro-priate.

• For tactical transactions (characterized by medium volume, medium risks and medium return), the use of EDI and e-fax are considered suitable.

• For consumer transactions (low value, low risks and low return), various e-commerce technologies may be used.

Setting up a comprehensive Web site to provide information about the steel industry, products, services, etc. was the first step in the company's plan for an Internet-based e-commerce implementation. Focusing on its customers, the company started the

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implementation by developing information on its Web page which concerned specific issues such as steel test certificates, order status and detailed technical information. The company has also undertaken a related project, which illustrates the range of BHP Steel's facilities to support its customers. This project is called cardboard-cutout and will provide a single point of access for all Web-based e-commerce applications. Although it is still too early to identify the effects of the Web-based e-commerce implementation, a number of early benefits have been claimed by the company, in-cluding reducing the cost of obtaining test certificates from $2.50-$3.00 per docu-ment to 30c per document. BHP Steel believes that further reductions in transaction costs can be expected when the new ordering system is implemented.” In this example we could see how important EDI was and still is. The internet-based solutions were built, but they did not replace EDI. They brought new business oppor-tunities. But the revenue through all NON EDI transactions (1-2trillion dollars is closing the cap to EDI transaction (2-3trillion dollars). The big thing with X12/EDIFACT is the using privately owned networks as the channel, media to interchange. These “Value Added Networks” are a relic from the pre-internet area.

2.2. E-procurement and the role of B2B integration

E-procurement consists of large amounts of information and communication. It offers partnership through virtual means and opportunity to have fewer intermediaries. It streamlines paper intensive tasks in process. Probably that makes it one of the first steps in B2B integration. Other opportunities are the transmission of very complex information and auctions to minimize the purchasing price (Kheng, 2001). Today e-procurement is mostly in MRO domain. IT is used through modem-lines and using operator software like Ariba and CommerceOne. The future is thought to have supplier selection, compliance and performance tracking automations. Broadband is speeding the process and offering chance to interoperability between e-market places. Threats are the investments and the legislation, which is much under way. Adopting e-procurement forces to redesigning business processes and keeping abreast. In Singapore case there is trend towards adoption of B2B integration with cautious approach.

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2.3. SCM and the strategic dimension of adoption

The B2B integration adoption in SCM improves the customer response. Furthermore the created supply chain aggregates to a distinct entity, which is hard to imitate by competitors (Gibson, 2004). The strategic approach elevates the B2B integration adoption to concern an aggrega-tion of companies as a whole. The opportunity lies in the supply chain compared to other companies. The main role of B2B integration is the facilitation of the informa-tion flow - the processes are automated. The key elements of B2B integration in this context are buying and selling, electronic intermediaries, trading platforms, logistics providers, network platforms, protocols of communications and back end integration. The key impact of adoption is its ability to offer rapid, cost effective, asynchronous communication in complex supply chains. Especially the B2B exchange has the po-tential to transform supply chains into a comprehensive connected system. The pre-sent issues to be resolved are cultural and organizational changes as well as the in-vestment in technology at the lower tier of the supply chain. And whilst standardizing will simplify the supply chain problems, B2B integration has the potential to allow greater degrees of complexity. Finally the real network power comes from strong ties among every partner in the supply chain. Enhancing the value of the entire network by adoption of B2B integra-tion could potentially offer competitive advantage. But the value is as difficult to create as it is to duplicate.

2.4. Locations as E-hubs - the geographic view on adoption

Service hubs are locations that are specialized in a diverse set of functions that today include an entrepot function not only for goods (trading centers), but also for capital (financial centers) and information (innovation centers). Service hubs such as Singa-pore and Hong Kong, traditionally dominated by trading and decision-making func-tions, are increasingly drawn by new technologies into other 'enabling' services, and more economies are outlining development strategies predicated on utilizing new technologies to assume e-service hub roles for the global economy. What kind of profile e-hubs can have, whether electronic business activities will rely on established centers, and whether such centers offer any advantages in an electroni-cally driven global economy that can justify their aspirations. It is raising relevant questions rather than claiming conclusions that this paper aims at.

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The world economic geography of recent decades has been characterized by tenden-cies to agglomeration, especially in knowledge- and information intensive sectors, which include various services. While production sector has a trend of decentralizing operations there is a demand for coordination across locations. This means a need for specialized intermediate ser-vices. This is gathering companies in metropolitan areas, service hubs. These are decision-making centers. They also provide expertise, firms and institutions and 'direct the flow of goods, information and capital' with trade services. Offering linkages to and exchange of information (also global) these locations can integrate value chains through information flows. New information and communication technologies (ICTs) enables to access markets electronically. B2B integration makes it possible to exchange (codified) information in real time and interact electronically. This is a new portfolio of services. But these services are basically independent of location. Strong political agendas are built in order realize becoming a e-service hub. (e.g. Hong Kong Digital 21, Singapore Infocomm 21). E-commerce hubs are locations that assume intermediary positions between buyers and producers by applying new technologies. E-commerce is usually distinguished into transactions between businesses (B2B) and transactions between business and customer (B2C). Conditions required to be an e-hub are location factors, telecommunications infra-structure, legal environment, skills and financial sources, mix of new and old ser-vices. The role of local information and interaction is also important. Physical environment and possibly also proximity will still be very important and why electronic transactions are not ignorant of the location conditions other than those that influence production costs. Asian countries have been unable to attain such outstanding positions as IT users as they acquired in IT hardware production. The spatial consequences of such a transformation of value chains require more re-search and the set of data that is available to describe the way companies in different countries and regions use ICT remains very limited. Figures from different institu-tions often vary significantly and are hardly comparable.

2.5. Business and the attitude to adoption

The difference between adopt and adapt is important. The dot.com frenzy was time when these were mixed up. The technology was steering the business. So the business

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adapted to the technology instead of adopting a technology. The whole question about B2B integration and the term itself seems to whirl around these two words: adapt, adopt (Rifkin, 2002). As we look at B2B integration adoption, we must remember that B2B integration is naturally a media for interaction between trading partners. Why and what these are depicted somewhere else than the technology field. The technology itself is not al-ways the acting part there. Technology is in most cases a channel for the interaction. Basically it is about communicating, the media being different than in face-to-face conversation. As we seek further the books of Bussler and Sherif we can see that B2B integration evolvement is carrying it to automate higher and higher levels of interaction (Bussler, 2003; Sherif, 2004). Among e-procurement studies there is a bias towards automation of the bidding and even the supplier choosing. It can be seen that technology is taking more and more ground from human interaction. We can program our methods into the system and then system can do it for us. It is clear (for IT professionals at least) that this is a simple idea but hard to realize. But in the field of connecting businesses together we can see that from the basic mes-sage sending the development is towards systems acting as business stakeholders and making some preprogrammed business decisions on their own. In spite of that we must remember: business is the leader and IT must support transaction and decision making to furnish lasting benefits (Singh, 2003).

2.6. Legislation

One reason for the advent of B2B integration histories was the administration with deregulative acts. The financial world had been very strictly regulated in the Asian nations, but in the 1990 probably a wind of change wisped over the area and econo-mies were all of a sudden working upon new rules. For example in India the adminis-trative actions were taken to free the banks of the regulative control and also enforc-ing money movement by introducing electric monetary markets by state and then also state sponsoring individual consortium and enterprises.

2.7. Discussion

The literature is not typically so specific about the difference between B2B and B2C. Describing e-commerce usually mixes these two areas. Also the distinction between intra-company and inter-company integration is not usually differentiated. This is

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understandable because the problems inside global diversified companies are often close to problems between different companies. This adoption part was supposed to be the history of B2B integration adoption. Going through vast amount of articles mislead the writer to profound thinking without clear literature study perspective. This partly explains limited adoption details presented here. Studies tend to put more weight on available material. B2B integration is not an ex-ception. The vast majority of B2B integration are not so fascinating links between two businesses. But there is not a big interest about them in the studies. They seems not to represent something worth describing, they are just ordinary connections made between two systems when there is obvious benefit not to do the information transfer by hand.

2.8. Section Conclusions

The adoption of B2B integration was studied in this Chapter from different stand-points. The main analysis was performed through reading articles, summarizing most apparent reasons, and collecting some of the articles in Table I. The role of EDI and VANs were examined. Along with Chan (Chan, 2000) almost most writers refer to supply-chains led by a major company. These companies have used and partly still use VAN-based EDIFACT/X12. The role of B2B integration in supply chain man-agement was studied. Like Gibson many articles were scrutinizing SCM, which seems to have gotten the best benefits out of B2B integration and SCM is possible the only area to have strategic point of view concerning B2B integration. E-hubs were a strange finding. But like in the text is described globalisation and diversified compa-nies bring up need for local, centralized services. Watching the B2B integration adop-tion writers and their universities gave faith in E-hubs (Hong Kong, Singapore, Ja-pan). Adoption perspectives of RosettaNet and ebXML were left to other section of the study.

Table I Selected articles relating to adoption of B2B integration

Paper Description Results Reasons Chan, 2000 Longitudinal

study from EDI to Internet com-merce: BHP Steel

A total of 80 per cent of orders were placed electroni-cally by December 1990, Internet com-merce appear sim-pler than EDI-based B2B e-commerce, but is still complex business process

1.phase: replace the manual purchasing system, recession and by poor international commodity markets 2.phase: more could be achieved by centralizing and controlling all aspects of electronic trading 3.phase: low-cost communi-cations medium for small

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and medium-sized trading partners, alternative high-cost, VAN-based EDI , Interactive and easier way, serve the needs of trading partners

Kheng, 2002 The Adoption of Electronic Pro-curement in Sin-gapore

Shows a trend to-wards adoption of B2B integration, Legislation is trying to cover

Streamlines paper intensive tasks, partnership through virtual means

Gibson, 2004

Strategic impor-tance of e-commerce in supply chains

Supply chain man-agement leadership is going to prove crucial

Potential for strategic advan-tage

Heiduka, 2003

E-service Hubs: Paradox or Local Advantage

Physical environ-ment and possibly also proximity will still be very Important and why electronic transac-tions are not igno-rant of the location Conditions

‘e-strategies’ have become an important part of the development visions of many such locations.

Krovi, 2003 Information Flow Framework

Centralized author-ity structure has the potential to congest the decision-making nodes.

Critical node density

Far-hoomand, 2003

(FedEx) an alli-ance with Na-tional Semicon-ductor

NatSemi’s order cycle time was reduced to ap-proximately three days, with corresponding savings in staffing and distribution FedEx consoli-dated… distribution centers into one Singaporebased Global distribution center

NatSemi wanted to reduce its order cycle time from an average of 16 days to three, its distribution costs from 3% to less than 2% of sales, and its 800-plus staff to 180 people. FedEx has strategi-cally positioned itself to provide global physical transportation, “Companies must also redesign their business processes to en-compass the whole business Web”

Far-hoomand, 2003b

The experience of Hong Kong Ex-changes and

Profound impact on HKEx, brokers, service providers,

Seek to build relationships with suppliers, employees, customers, or partners.

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Clearing Ltd. (HKEx),

and the competi-tiveness of Hong Kong as a global financial center.

Hyland, 2002

The Uniform Code Council and RosettaNet alli-ance promotes stardardization accross multiple industries, helping transportation out of a bind

UCC helps trans-portation speed standardization for multiple industries, more energy is now on XML develop-ment

Majority of B2B e-commerce is still done via EDI, but XML will allow the companies operate e-commerce at a lower cost and reach a greater commmunity of trading partners

Power, 2002 Implementation and usage of e-commerce in managing supply chain

Smaller organiza-tions may become more competitive on the basis of their flexibility; growth of other e-commerce related business

Look to derive competitive advantage through manage-ment of total supply chain ; majority were using VANs, but there is apparent trend to move to Internet

Tarafdar, 2002

e-business evolu-tion in India (CFS, largest financial services company)

Similar changes in India

Significant changes in the rules and operations of the financial services industry internationally

Osmonbe-kov, 2002

Enhanced buying center structure and processes

Complaints from automobile parts suppliers that e-marketplace will hurt them because it gives too much bargaining power to the manufacturers

To achieve efficiencies in production and marketing of products and services

Based on our analysis and observations, we state that the following drivers can be identified to be guiding the development of B2B integration. The questions, how these drivers relate to business and technological drivers affecting B2B integration and what their joint impact is, are addressed in Chapter 5.

1. Big companies are the promoters of the chains. They use their power to inte-

grate the chains. Small companies have to adapt. On the other hand small companies are more agile to respond to changes.

2. Globalization has forced the companies to rethink their intra- and inter-

company processes.

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3. Legislation is trying to cover also electric international commerce. In many

countries monetary deregulation has evolved.

4. VANs are still important. Internet based connections using e.g. VPN or SSL are closing the cap to VANs.

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3. Benefits and costs of B2B integration

The aim of this chapter is to analyze the benefits and costs of B2B integration. At first the nature of the benefits and costs is discussed, i.e. what types of different implica-tions emerge from B2B integration, and how the impact of these can be measured. Also, a classification for both the benefits and costs is presented. Subsequently, the benefits and costs observed in previous empirical literate are thoroughly analyzed. The final objective is to identify what drivers guide the development of B2B integra-tion based on the business benefits that are seen achievable and the costs that are hindering the development.

3.1. Nature of B2B integration benefits and costs

A good understanding of the true benefits and costs of B2B systems is very important in supply chain formation, even though identifying and measuring these benefits is not straightforward (Lu and Antony, 2003). By nature the implications of B2B inte-gration are relatively complex, and not merely operational as the common misunder-standing states. Typical approach in literature is to classify the benefits of implementing B2B integra-tion being either operational or strategic by nature (e.g. Mukhopadyay and Kekre, 2002; Kaefer and Bendoly, 2004; Markus et al., 2002; Seidmann and Sundararajan, 1997). Operational benefits deal with cost reduction, whereas strategic benefits relate to issues such as competitiveness, quality of service, flexibility and accessibility. The complexity of the benefits is evident in many ways. As Hunter et al. emphasize, the benefits of B2B vary significantly between different types of business situations and industries (Hunter et al., 2003). Also, the benefits are clearly different for cus-tomers and suppliers, as the reasons why they engage in B2B vary. Some of the bene-fits are visible quite fast after implementing B2B integration, but some accrue over an extended period of time (Mukhopadhyay and Kekre, 2002). For the purposes of this study we find it necessary and justified to further elaborate the nature of strategic benefits. Therefore, we adopt the approach to classify strategic benefits under topics quality of service and supply chain agility. Quality of service covers all issues other than operational efficiency that provide value to customers in B2B. Supply chain agility on the other hand covers benefits that deal with improved managerial information on the business processes of supply chain network partners and the resulting ability to respond promptly to changes in external environment and manage geographically dispersed supply chain network. By costs of B2B integration we mean all issues that reduce the achievable benefits of B2B integration and hinder the adoption of B2B technologies. The nature of these

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costs is also relatively complex and they come in many other forms than easily ob-servable investment costs. Other categories of B2B integration costs that we have identified from the literature include costs that emerge from sharing of information between business partners, technological problems and the effects of organization’s size on applicability of B2B integration. Measuring the impact of different B2B integration benefits and costs is difficult due to various reasons. First of all, the use of IT in supply chain management is closely related to process changes and most of their benefits are overlapping and interlinked. Thus, it is hard to specify the origin of benefits explicitly (Auramo et al., 2005). This problem is further increased by the fact as some benefits accrue over a relatively long period of time. Also, especially strategic benefits are relatively abstract by nature, which makes them difficult to quantify to any measurable units. Typically the benefits and costs of B2B integration are analyzed by using accounting based measures. Examples of these include transaction costs, lead times, inventory turnover etc. However, as these are somewhat insensitive to the strategic nature of B2B integration investments Subramani and Walden for example measured the value of B2B integration initiatives through abnormal returns on company stock prices (Subramani and Walden, 2000). Mukhopadhyay and Kekre on the other hand meas-ured the impact of strategic benefits through increased sales per customer (Muk-hopadhyay and Kekre, 2002).

3.2. Benefits of B2B integration

As stated in Chapter 3.1, the benefits of B2B integration are studied in this Chapter under three categories, which are operational efficiency, quality of service, and sup-ply chain agility. This way the nature of strategic benefits can be elaborated further than in the typical way of dividing B2B integration benefits to operational and strate-gic.

3.2.1. Operational efficiency

In narrow form operational efficiencies mean transactional efficiency gains through using B2B integrations as a vehicle to eliminate paper works associated with business transactions and consequently eliminating errors caused by entering data manually. Other savings typically seen resulting from B2B integration include shorter order cycle times and the subsequent inventory reduction (Min and Galle, 2001). The possibility to gain operational efficiencies has been verified in numerous studies. For example McKinsey reports that companies that already have a high level of EDI and Internet capability can extract considerable cost savings and in some cases reve-nue increases from joining large B2B exchanges. According to their calculations most large suppliers would see a bottom-line benefit from participation, and in over 50

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percent of cases investment would be recouped in less than 18 months (Economist Intelligence Unit, 2002). Auramo, Kauremaa and Tanskanen have stated that adoption of IT in supply chain management has made it possible to streamline logistics flows and reduce inventories (Auramo et al., 2005). Mukhopadhyay and Kekre have found that establishing advanced EDI capabilities with customers significantly improves the performance of the order-processing system as measured by both the accuracy of order processing and timeliness of payments. (Mukhopadyay and Kekre, 2002). However, it is important to note that according to some studies firms are not able to achieve significant benefits from basic B2B e-commerce, where B2B is used only as a tool to automate business document exchange and management. Lee, Pak and Lee have shown that B2B electronic networks offer dramatic performance improvement only when the B2B network is used to create new collaboration with channel part-ners. Based on the survey they conducted in the grocery industry, Lee, Pak and Lee state that the real source of performance improvement in the B2B electronic com-merce is not an electronic linkage itself, but the collaboration enabled by the elec-tronic network. In grocery industry this collaborative B2B can e.g. mean that retailers no longer place orders with manufacturers, but instead transmit information on retail sales and inventory levels at their warehouses through B2B network. In practice this means that retailers outsource their procurement and impound logistics functions to manufacturers, which would be difficult without IT. (Lee et al., 2003) Also, Auramo, Kauremaa and Tanskanen claim that the efficiency benefits of IT in B2B integration remain limited, if IT is used merely as an automating force, without process changes. They emphasize the importance of bundling business process reengineering and B2B integration decisions. (Auramo et al., 2005). Another important question related to efficiency gains is, which of the parties in-volved in B2B typically collect these benefits. Often stated claim in literature (e.g. Seidmann and Sundarajan, 1997) is that buyers are the ones that truly benefit from B2B e-commerce in the form of price reductions, whereas suppliers might end up worse off. These questions are covered in more detail in Chapter 3.3.2.

3.2.2. Quality of service

Term quality of service covers in this study all issues other than operational effi-ciency that provide additional value to customers in B2B. These are aspects that make customers perceive doing business with B2B network partners more valuable than with other companies. The added value can come in many forms, depending e.g. on the industry in question. According to Auramo, Kauremaa and Tanskanen the B2B solutions are commonly tailor-made for the company’s situation and they focus on improving customer ser-vice elements that are most important in that specific business. They use Kone Eleva-tor as an example. Kone has an e-procurement system for modernization projects. When a customer places an order it is immediately visible for suppliers, and major

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suppliers receive directly an EDI message (Auramo et al., 2005). Grey, Olavson and Shi claim that B2B integration can have value for buyers in the form of risk manage-ment through improved availability of products, which enables companies to reduce inventories (Grey et al., 2005). According to literature the role of buyers is especially important for the success of B2B integration. Mukhopadhyay and Kekre have observed that the existence of stra-tegic benefits in the form of additional sales in B2B systems that have been initiated by customers in comparison with supplier-initiated systems (Mukhopadhyay and Kekre, 2002). Often the case seems to be that B2B integration has become a competi-tive necessity to many suppliers, because their larger business partners require its use. Min and Galle show based on empirical evidence that especially small firms often see electronic commerce and B2B as a way of building long-term partnerships with their trading partners rather than as a way of reducing paper work. They suggest that small firms should not view B2B as a new way of doing business, but instead as a cost of maintaining long-term relationships with their trading partners. (Min and Galle, 2001). The significance of satisfying customer specific needs together with the general im-portance of customers for the success of B2B integration implies that customer rela-tionship management (CRM) and B2B integration have to be intertwined. Integration of B2B and CRM strategies have been studied by Zeng, Wen and Yen. They suggest that the integration of CRM and B2B will benefit all related parties in business proc-esses, including sales, marketing, customer service and information support. These benefits include for example increased reach and reduced cost of quality manage-ment, more efficient marketing campaigns, increased customer responsiveness, im-proved service e.g. through ability to track the status of orders in supply chain (Zeng et al., 2003).

3.2.3. Supply chain agility

With supply chain agility we refer to B2B integration benefits that arise from im-proved information on processes of supply chain partners. These benefits are the ability to respond promptly to changes in external environment and the ability to manage a geographically dispersed supply chain network. Flow of information is the fundamental factor behind the implications of B2B integra-tion on supply chain management. B2B integration improves the timeliness of infor-mation, as information is transferred much more quickly from one computer system to another. In addition, the quality of information can also be improved due to B2B integration, as the amount of typographic errors reduces when manual work is less needed (Hsieh and Lin, 2004). Especially, improved information reduces demand uncertainties among supply chain partners. Due to advanced B2B collaboration e.g. manufacturers can make production and inventory decisions based upon information on retail sales and inventory levels, which are provided by retailers on daily bases

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(Lee et al., 2002). According to Ovalle and Marquez, the use of B2B collaboration tools can contribute to achieving faster and more flexible supply chain processes. B2B integration can thus enable faster information flow through multiple intermediar-ies between the consumers and raw material sources. As a result, supply chain proc-esses are more responsive to market changes (Ovalle and Marquez, 2003) Bruce and Daly use textile industry as an example when illustrating the importance of information sharing among supply chain partners for supply chain development. Tex-tile industry, which is characterized by volatile markets, short product lifecycles and high product variety, has recently undergone a great deal of change, particularly with global sourcing and high levels of price competition. In order to meet the require-ments set by the business environment, the supply chain in textile industry needs to be both lean and agile. According to Bruce and Daly, lean means elimination of all waste, including time, and agility means ability to thrive in an environment of rapid and unpredictable change. Bruce and Daly state that sharing of information between business partners is essential for reaching agility in supply chain (Bruce, Daly 2004). In addition to the general supply chain’s ability to respond to changes in external environment, we find it necessary to include the ability to manage geographically dispersed supply chain network under the topic of supply chain agility. Globalization has recently been the single most important factor shaping the distribution of indus-trial production around the globe. Similarly as the markets and production of major international companies are dispersed all over the world to different continents, so are also their suppliers. As a result, management of global supply chain networks is be-coming increasingly important. An example of a successful, globally functioning B2B exchange is the defense aviation exchange Exostar, supported by Rolls-Royce and Bae Systems in Europe, along with Boeing, Lockheed Martin and Raytheon in the US. Exostar includes a large dynamic inter-company communications system that allows suppliers in Asia, Europe and the Americas to use the same channel for de-signing as well as selling products on projects (Economist Intelligence Unit, 2002).

3.3. Costs and difficulties related to B2B integration

The costs of B2B integration are classified to four categories, which are investment costs, information sharing, technical problems and effects of organization’s size.

3.3.1. Investment costs

Investment costs are the most easily visible type of B2B integration costs. The major cost components of B2B include additional hardware, software development and maintenance, joint testing of transaction sets, and training of operating personnel. (Mukhopadyay and Kekre, 2002). These costs are typically seen to be quite substan-tial in B2B integration. For example a study of customer-owned private B2B ex-changes conducted by consultants McKinsey showed that the estimated launch cost of

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such an exchange for a single large company is around $60m-80m and annual operat-ing costs of around 20% of the launch cost. For suppliers joining such exchanges, the annual cost is likely to be in the region of $50,000-100,000 for each customer served. (Economist Intelligence Unit, 2002) Subramani and Walden emphasize that investment costs form a significant difference between B2B and B2C commerce. B2B involves adoption of similar standards, ex-tensive inter-firm communication and collaboration, and joint information technology investment. In contrast, B2C electronic commerce is characterized by arms-length relationships. The only investments required by the customer are often a PC and an Internet connection, which are both completely general tools. Subramani and Walden claim based on incomplete contract theory that due to these investments, there exists underinvestment in B2B integration among firms that don't perceive that they have significant ex post bargaining power over the resulting benefits of the B2B integra-tion. (Subramani and Walden, 2000)

3.3.2. Information sharing

As noted in Chapter 3.2.3 information sharing among supply chain network partners is the fundamental factor contributing to the benefits of supply chain agility. How-ever, it is important to note that inter-company information sharing in B2B integra-tion involves competitive implications, which emerge because shared information affects the bargaining powers of business partners conducting B2B. Anecdotal evi-dence suggests that suppliers fear that B2B participation will give competitors an open window onto their pricing structures and operational capabilities. (Economist Intelligence Unit, 2002) Seidmann and Sundararajan have conducted theoretical research on the competitive implications effects of information sharing. They claim that the impact of inter-company information sharing can alter the marketing and sales strategies of suppliers and consequently shape competition in supplier markets. In their study Seidmann and Sundararajan show based on game-theoretic models of strategic interaction that sup-pliers typically end up worse of due to information sharing as retailers and buyers benefit (Seidmann and Sundararajan, 1997) Another problem of information sharing is that there are risks associated with elec-tronic trading that can result in increased vulnerabilities to fraud. Examples of this include the creation of unauthorized checks, manipulation of records and creation of invoices regardless of their physical location. (Smith, 2005)

3.3.3. Technical problems

When discussing inter-organizational technologies, compatibility among business partners is an important issue (Kaefer and Bendoly, 2004). According to Nurmilaakso problems arise, because companies do not have (1) the same meanings of terms in

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business documents, (2) the same modes of operations in business processes and (3) the same kinds of messaging interfaces between their information systems. Due to interoperable information systems human work is required to exchange business documents between business partners. (Nurmilaakso, 2005) The question whether these problems could be tackled through emerging technologies and standardisation is discussed in Chapter 4. However, a fact is that even though e.g. XML based technologies may offer significant benefits in B2B integration, they do not remove all integration problems. Also, when using XML technologies a shared understanding of business document and business processes is still a necessity. (Nurmilaakso and Kotinurmi, 2004)

3.3.4. Effects of organization’s size

Inability of small organizations to adopt B2B integration is commonly identified as a problem, especially in few years old literature concerning EDI. Typical argument is that small firms are lacking organizational readiness in adopting B2B electronic com-merce due to their less sophisticated information technology infrastructure, limited financial resources and weak market positions (Min and Galle, 2001; Gosain et al., 2003) However, new Internet and XML based technologies are seen lighter than EDI. Ac-cording to Kaefer and Bendoly, an important aspect of the evolution from traditional EDI to Internet-based EDI is that a relatively small investment is required and this enables small- and medium-sized businesses to participate in the electronic market-place (Kaefer and Bendoly, 2004). Consequently, it good be that the impact of this cost factor is reducing as impending technologies become more commonly adopted.

3.4. Discussion

Benefits and costs of B2B integration are especially challenging area of study, be-cause many of them are not easily observable. Strategic benefits, and costs that e.g. result from implications of B2B integration on companies bargaining powers are difficult to measure, which makes it demanding to evaluate their impact of compa-nies. This Chapter has presented and classified benefits and costs of B2B integration that have been identified by earlier research. However, through the means on literature review it is not possible compare the significance of different benefits and costs, nor to rank them in a reliable way. This would require empirical research.

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3.5. Section conclusions

The examined literature shows that there clearly are benefits that can be achieved through B2B integration. These benefits are not merely operational, but instead they are also strategic by nature. At the moment there are few significant factors that re-duce the benefits of B2B integration and hinder its adoption. Table II summarizes the identified benefits and costs of B2B integrations, and also some literature supporting these findings.

Table II Some relevant literature related to the identified benefits and costs of B2B integration

Paper Description Benefits Costs Auramo et al., 2005

Empirical study of benefits from IT in SCM

Operational effi-ciency, Customer service, Supply chain agility

Bruce and Daly, 2004

Agility in supply chain management in textiles industry

Supply chain agility

Kaefer and Bendoly, 2003

Effects of technologi-cal compatibility and operational capacity on B2B integration suc-cess

Technical prob-lems, Effects of organization’s size

Lee et al., 2002 Analysis of differences between basic and collaborative B2B

Operational effi-ciency (through advanced B2B collaboration), Supply chain agility

Min and Galle, 2001

Study of perceived differences between small and large pur-chasing organizations in B2B use

Customer service (especially for SMEs)

Investment costs, Effects of or-ganization’s size

Mukhopadhyay and Kekre, 2002

Strategic and opera-tional benefits of elec-tronic integration in procurement are as-sessed

Operational bene-fits, Quality of service

Investment costs

Ovalle and Marquez, 2003

Use of e-collaboration in SCM

Supply chain agility

Seidmann and Sundarajan, 1997

Interorganizational information sharing from game theoretic perspective

Information sharing

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Smith, 2005 Accountability of EDI systems and risk of fraud

Information sharing

Subramani and Walden, 2000

Empirical study on economic returns of B2B initiatives

Strategic benefits in the form of abnor-mal returns

Investment costs

Zeng et al., 2003

Integration of B2B and customer relationship management (CRM)

Quality of service

The above listed literature shows that there is evidence of operational efficiency gains through B2B integration, but to large extent these gains do not arise from automation of business document transfer but instead from creating new collaboration through B2B integration and from reengineering business processes. The role of big customer companies, who handle their procurement through B2B e-commerce, is important in the development of B2B integration, because systems initiated by them seem to out-perform other solutions. B2B integration also supports supply chain management. Agility of supply chain is important because of the market environment, which is getting highly competitive, and because of globalization, which forces companies to place emphasis on capabilities to manage global procurement and supply chain net-works. On the other hand, literature shows that there are substantial costs and difficulties in B2B integration. Investment costs are relatively high and it is difficult to allocate costs between B2B networks partners because the benefits are not necessarily divided equally. In addition, information sharing has implications on companies bargaining power, technological difficulties arise e.g. from wide variety standards, and SMEs find it often too difficult to engage in B2B collaboration. However, the significance of these problems could potentially decline in the future due to emerging technolo-gies, standardization and possibly also third party solutions that could reduce the impact of some information sharing related problems. Based on our analysis of B2B integration benefits and costs, the identified drivers thus are the following.

1. Significant operational benefits are achievable primarily from advanced B2B integration, which typically involves business process reengineering

2. Satisfaction of customer’s individual needs is important in B2B collabora-tion and successful B2B systems are often customer initiated

3. Agility of the whole supply chain important in intensifying competition, where it is essential to be able to respond promptly to changes in external environment

4. Due to globalization, B2B integration is important in management of geo-graphically dispersed supply networks

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4. Technologies and role of standardization

According to Nurmilaakso "there would be no problems in e-business if all compa-nies would use (1) the same meanings of terms in business documents, (2) the same modes of operations in business processes and (3) the same kinds of messaging inter-faces between their information systems." (Nurmilaakso, 2005) Starting from this point of view and in order to understand how it is possible to go through a global standardization, we will define first some concepts in order to agree on what we will deal with. In a second part we will present the main standardization bodies. Then, we will introduce the different B2B integration standards used nowa-days. And to illustrate how it works, we will go through two case studies in order to present how is it possible to merge several standards in order to go towards a general convergence of the existing standards.

4.1. Definitions

In this part, we will define several concepts, which are the key concepts of this chap-ter in order to understand what is exactly meant when using these terms.

Standards are produced by many organizations, some for internal usage only, others for use by a groups of people, groups of companies, or a subsection of an industry. A problem arises when different groups come together, each with a large user base doing some well established thing that between them is mutually incompatible (Wikipedia.org).

As you can notice, standards are developed by the industry to fill some needs and which can be used internally or externally. Because of the methodology applied to produce standards, it happens that several standards overlap. That is the case in B2B integration market, that is why, in order to clarify the mess around all these standards, a global standardization is needed.

Standardization, in the context related to technologies and industries, is the process of establishing one technical standard among competing entities in a market, where this will bring benefits without hurting competition (Wikipedia.org).

The definition of standardization emphasizes the fact that when the standardization has occurred, only one standard stays in use on the market. Standardization has as main consequence to decrease the number of existing standards when going through it. An other important point is the fact that the standardization establishes one stan-dard but without hurting competition. The goal is not to kill the other standards but to chose the one which will provide the most benefits when being implemented.

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Technological convergence is the modern presence of a vast array of different types of technology to perform very similar tasks (Wikipedia.org).

Unlike standardization, the technological convergence does not pick and promote one and only one standard but merge the specifications of several of them in order to enrich each others. Convergence is mainly used between standards which are more complementary than competitors. At the end of the convergence process, all the stan-dards are still used but have been complemented by the others’ specifications. The main goal of convergence is to ensure interoperability between the standards by bringing them closer from each other.

Vertical integration is the fact to develop a B2B integration process with your sup-pliers and customers within the same supply chain.

Horizontal integration is the fact to develop a B2B integration process with compa-nies whom activities are at the same level of the value chain as yours but in a differ-ent field of the industry.

These two concepts are mainly used and have been created by micro economists to define the process in the supply chain. In B2B integration, these two terms are used to define if a standard is oriented towards the integration of players from the same sup-ply chain (vertical B2B integration standard) or if it is dedicated to integrate players from the same level of the supply chain but acting in different field of the industry (horizontal B2B integration standard).

4.2. Presentation of the standardization bodies

In this section, three standardization bodies related to defining standards used in B2B integration are examined. For each of them, we study first its background, then its mission and to end, its orientation, which can help to better understand the way it goes in the future.

4.2.1. Organization for the Advancement of Structured Information Standards (OASIS)

Background OASIS was founded in 1993 under the name SGML Open as a consortium of vendors and users devoted to developing guidelines for interoperability among products that support the Standard Generalized Markup Language (SGML). OASIS changed its name in 1998 to reflect an expanded scope of technical work, including the Extensi-ble Markup Language (XML) and other related standards.

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OASIS has more than 4,000 participants representing over 600 organizations and individual members in 100 countries. OASIS is distinguished by its transparent gov-ernance and operating procedures. Members themselves set the OASIS technical agenda, using a lightweight process expressly designed to promote industry consen-sus and unite disparate efforts. OASIS has so far developed and certified over 35 e-business related standards among whose, the most widely known are the ebXML framework and UDDI. Mission OASIS defines itself as “a not-for-profit, global consortium that drives the develop-ment, convergence and adoption of e-business standards” (www.oasis-open.org). Orientation OASIS’s main characteristic is to be more e-business oriented than many other stan-dardization bodies. OASIS concentrates all its resources on developing e-business standards. Thanks to this focus, on e-business, OASIS is nowadays one of the most powerful and influential bodies in this field of studies. One other reason for its suc-cess is the very strong support from the industry. This support is used in a good way by giving companies a lot of power in order to choose which standards fit the best to their needs. OASIS is also known for its very effective process in developing stan-dards thanks once again to the strong support and commitment of the industry. The way OASIS works is the key point to explain the effectiveness of its processes.

4.2.2. World Wide Web Consortium (W3C)

Background The World Wide Web Consortium, also known as W3C, has been founded by Tim Bernes-Lee in 1994 in MIT (Massachusetts Institute of Technology). Tim Bernes-Lee has invented the World Wide Web in 1989 and five years later, with the help from CERN and from his Laboratory for Computer Science at MIT, he has decided to found the W3C in order to lead the World Wide Web to its full potential by develop-ing protocols and guidelines that ensure its long-term growth.

Since then and after more than 10 years of existence, the W3C has published over 80 specifications for the Web’s infrastructure. W3C operations are supported by a com-bination of Member dues, research grants, and other sources of public and private funding. W3C operations are jointly administered by the MIT Computer Science and Artificial Intelligence Laboratory (CSAIL) in the USA, the European Research Con-sortium for Informatics and Mathematics (ERCIM) headquartered in France and Keio University in Japan, which provides it an international status. Mission "By promoting interoperability and encouraging an open forum for discussion, W3C commits to lead the technical evolution of the Web.” (www.w3c.org)

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Its main goal is to make Web benefits available to all people, whatever their hard-ware, software, network infrastructure, native language, culture, geographical loca-tion, or physical or mental ability. Orientation The main difference between the W3C and the other B2B standardization bodies is the fact that the W3C is not especially e-business oriented. Its research about stan-dardization covers a large scope. This versatility, does not allow the W3C to be as focused as the other bodies on the development of B2B integration standards. Never-theless, the W3C is one of the main players on the B2B integration market thanks to a strong support from both academic and industry partners.

Another feature of the W3C is that it is more technical oriented than many other stan-dardization bodies and it is much more committed to open source software to develop its solutions. The key focus of the W3C is mainly the Web and XML, which are the bases of all its research concerning B2B integration. Thanks to its activity, its experi-ence and its support from both academic and industrial partners, the W3C is one of the most influential bodies.

4.2.3. RosettaNet

Background RosettaNet was founded in June 1998 by 40 Information Technology companies and joined by a collection of Electronic Components companies in mid-1999 and Semi-conductor Manufacturing companies in October 2000. Since then, RosettaNet oper-ates with the collaboration of around 600 consortium partners from around the world, including many of the technology industry's largest and most influential companies, representing more than $1 trillion in annual revenue. Mission RosettaNet defines itself as "A self-funded, non-profit organization, RosettaNet is a consortium of major Information Technology, Electronic Components, Semiconduc-tor Manufacturing, Telecommunications and Logistics companies working to create and implement industry-wide, open e-business process standards". Its main mission is to drive collaborative development and rapid deployment of e-business standards and services, and to create a common language and open processes that provide measur-able business benefits for global trading networks. (RosettaNet.org). Orientation RosettaNet creates and leverages existing open e-business standards, guidelines and specifications for cross-platform, -application and -network communication. The main focus of RosettaNet research is on providing a common basis for the implemen-tation of RosettaNet PIPs, which define business processes between trading partners.

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RosettaNet works closely with other bodies as OAGIS or BIC (Business Internet Consortium) in order to create converging standards to clarify B2B integration framework standards’ market.

4.3. Different existing B2B integration framework standards

In this section, we have decided to present the most used B2B integration framework standards. We have decided to focus on B2B framework more than on data format because the B2B frameworks are higher-level standards. Before XML, standards for e-business were usually called EDI standards. Since the late 1990s, there are a num-ber of papers discussing such standards. Shim et al. (2000) call these standards B2B e-commerce frameworks, Gosain et al. (2003) B2B interface specifications, Medjahed et al. (2003) B2B interaction standards, and Nurmilaakso, (2005) e-business frame-works. In this paper, we use the term B2B integration framework standards.

4.3.1. EDI ASC X12 and EDIFACT

EDI ASC X12 and EDIFACT are EDI-based B2B integration frameworks. EDI Ac-credited Standard Committee (ASC) X12 has been developed by the American Na-tional Standard Institute (ANSI) in 1979 while EDI for Administration, Commerce and Transportation (EDIFACT) has been released by the United Nations Economic Commission for Europe (UNECE) in 1987. Even if these standards start to be quite old, they have created a basis for a large num-ber of industry-specific B2B frameworks and are still widely used in the industry (Nurmilaakso, 2005). By consequence, they have to be taken into consideration when dealing with the current existing standards, especially because ASC X12 is still pre-vailing in the North America and EDIFACT in the rest of the world. (Westarp et al, 1999)

4.3.2. RosettaNet

RosettaNet is a vertical B2B integration framework standard dedicated to a certain type of industries (Information Technology, Electronic Components, and Semicon-ductor Manufacturing). Because it is a vertical standard, its scope is quite narrow.

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Figure 1 RosettaNet standard framework’s layers

RosettaNet focuses on three key areas of standardization to automate B2B interac-tions as defined on Figure 1.

• First, the vocabulary needs to be aligned. In order to do so, RosettaNet stan-dard framework is based on two dictionaries. The RosettaNet Business Dic-tionary contains vocabulary that can be used to describe business properties. The RosettaNet Technical Dictionary contains properties that can be used to describe characteristics of products and services.

• Second, the way in which business messages are wrapped and transported must be specified. To respond to this point, RosettaNet standard framework uses the RosettaNet Implementation Framework (RNIF) which specifies content of messages, transport protocols for communication, and common security mechanism used for the transfer of the data..

• Third, the RosettaNet’s PIPs (Partner Interface Processes) which are pre-defined XML-based conversations are used to harmonize and specify the in-terchange of the business messages. A conversation consists of a set of busi-ness documents and message exchange sequences. A PIP is defined using a combination of textual and graphical representations (UML-based). At the communication layer, common Internet transport protocols are used by Ro-settaNet standard framework to exchange data. At the content layer, Roset-taNet is based on an XML-based schema as document content model. The integration of PIPs with internal business processes is performed by partners. (Medjahed et al., 2003)

4.3.3. ebXML

Unlike RosettaNet, ebXML is a horizontal B2B integration framework standard which can be applied to all kind of industries. ebXML is one of the 120 standards (Webster, 2001) that extend XML actually in use but it is the most used nowadays. The basic part of the ebXML infrastructure is the repository. It stores important in-formation about businesses along with the products and services they offer. At the communication layer, businesses exchange messages through the messaging service. One important feature of the ebXML messaging service is that it does not rely on a specific transport protocol. It allows the use of any common protocol.

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At the content layer, companies interact through business documents. A business document is a set of information components that are interchanged as part of a busi-ness process. Business documents are composed of three types of components:

• Core components are stored in the core library, they are information compo-nents that are re-usable across industries

• Domain components are stored in the domain library • Business information objects are stored in the business library

Core components are provided by the ebXML library while domain component and business information objects are provided by specific industries or businesses.

At the business process layer, ebXML provides a set of common business process specifications that are shared by multiple industries. These specifications, stored in the business library, can be used by companies to build customized business proc-esses. Interactions between business processes are represented sequences in which the ordering and transitions between business transactions occur. Theses sequences are called choreographies. To model collaboration in which companies can engage, ebXML defines collaboration protocol agreements (CPAs). A CPA is an agreement between two trading partners which specifies in advance the conditions under which the trading partners will collaborate. In order to improve the security during exchanges of data and to make them more reliable, the ebXML infrastructure enables the use of emerging Internet security stan-dards as SSL and S-HTTP. In addition, to guarantee authenticity, ebXML provides the possibility to apply digital signatures to messages. The initial goal of the ebXML initiative was to support a fully distributed set of re-positories, which is an interesting feature for improving scalability. However, to date, only a single repository is specified. (Medjahed et al., 2003)

4.3.4. Web Services

The precise definition of Web services is still evolving. As a consequence, we can found several definitions in the literature. One of them is that a Web service is a “business function made available via the Internet by a service provider, and accessi-ble by clients that could be human users or software applications” (Casati et Shan, 2001). It is also defined as “loosely coupled applications using open, cross-platform standards and which interoperate across organizational and trust boundaries” (Tsur et al., 2001). The W3C (World Wide Web Consortium) defines a Web service as a “software application identified by a URI (Uniform Resource Identifier), whose inter-faces and binding are capable of being defined, described and discovered by XML artifacts and supports direct interactions with other software applications using XML-based messages via Internet-based protocols”. All the definitions look complementary because each of them emphasizes one point of what are the Web Services.

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In this paper, we will focus on the three major standardization initiatives, which have been submitted to the W3C. These three initiatives, which are UDDI, SOAP and WSDL are used to define the Web Service reference model (Figure 2).

Figure 2 The Web Service reference model

WSDL (Web Services Description Language) is an XML-based language for describ-ing operational features of Web services. WSDL descriptions are composed of inter-face and implementation definitions. The interface is an abstract and reusable service definition that can be referenced by multiple implementations. The implementation describes how the interface is implemented by a given service provider. (www.w3.org/TR/wsdl)

UDDI (Universal Description, Discovery, and Integration) uses APIs to define a programmatic interface. The APIs used for publishing Web Services is called publi-cation API when the one used for discovering Web Services is called inquiry API Web services. The core component of UDDI is the business registry which is an XML repository where businesses advertise services so that other businesses can find them. Conceptually, the information provided in a UDDI business registration con-sists of white pages (contact information), yellow pages (industrial categorization), and green pages (technical information about services).(www.uddi.org)

SOAP (Simple Object Access Protocol) is a lightweight messaging framework for exchanging data among Web services. The data are XML formatted. SOAP can be used with different transport protocols such as HTTP, SMTP, and FTP. The structure of a SOAP message is very simple structure: it is composed by an XML element which is called envelope and which has two child elements. The first element named the header includes features such as security and transactions. The second element named the body includes the actual exchanged data. (www.w3.org/TR/soap)

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4.3.5. OAGIS

OAGIS is fully XML Schema compliant and at the same time the only XML lan-guage that is technology framework independent, supporting multiple, evolving tech-nical frameworks, including Web Services and ebXML (OAGIS White Paper, 2005). The independence towards the framework, allows OAGIS to be widely used.

The OAGIS’ model contains:

• An application architecture • Business software component definitions • Component integration scenario diagrams • Detail definitions of the APIs necessary to integrate business software com-

ponents • A full data dictionary describing the individual elements of the APIs

OAGIS is building a content based virtual business object model that enables an enterprise business application to build a virtual object wrapper around itself through the use of OAGIS’ compliant API's. This interoperability is achieved with object-oriented advantages without the requirement to implement a software application in a specific object oriented technology. To communicate with a business software component in this model, events are com-municated through the integration backbone in the form of an OAGIS compliant Business Object Document (BOD) to a virtual object interface. The integration serv-ers provide services such as publish and subscribe, request and reply, transport mechanisms, data mapping tools, integration routing and logging capabilities.

Figure 3 Integration of two applications using a BOD

In its last version (the 9.0) which is a major release, OAGIS provide new features

and improvements. The improvements concerned essentially the BOD. Among these, we can notice:

• The support of 434 Business Object Document (BOD) • New BOD for CRM and Logistics

But also, the enhancements to provide better Web Services support, which is im-portant from a standardization point of view.

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4.4. How to go through a general standardization?

In this second part, we will deal with how to go towards a global standardization of the different B2B integration framework standards. This standardization is possible by a merging of different standards. The objective of convergence is to bring together different standards to eliminate duplication of work and inconsistencies. (Kok, 2002) In order to know how to proceed, we will study two examples of convergence be-tween existing B2B integration standards.

4.4.1. Convergence between RosettaNet & ebXML

Goals The main goal of this convergence was, to improve the interoperability between the two existing standards and also to enrich each one with the other’s specifications. Another objective of this work on convergence between RosettaNet framework and ebXML is to show how a standard from one organization can be adapted to meet the requirements of another (Kok, 2002). In order to obtain the better result possible, they have decided to create a convergence between a vertical standard (RosettaNet) and a horizontal one (ebXML). This idea came from the fact that the use of Business Proc-ess Specification Schema (BPSS) to describe RosettaNet PIPs was an area in which ebXML could complement RosettaNet.

Implementation The B2B conceptual model (Figure 3) released by the Business Internet Consortium (BIC) is the one which is mostly used to discuss differences between framework standards.

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Figure 3 B2B conceptual model

Following this model, the standards published by ebXML and RosettaNet can be categorized as in the respective layers.

• Business Content: RosettaNet PIPs and Dictionary • Process Description: ebXML BPSS • Registry, Repository: ebXML Registry/Repository • Messaging: RNIF 2.0, ebXML Messaging Specification • Trading Partner Agreement: ebXML Collaboration Protocol Pro-

file/Agreement

The convergence of these two B2B integration framework standards concerns the process description layer and the trading partner agreement layer in which ebXML specifications are added to the RosettaNet framework.

Instead of developing and optimizing a process to provide a way to read the process configurations from a RosettaNet PIP in a machine-readable form, RosettaNet framework has chosen to adopt the ebXML’s BPSS which fits perfectly for this task. As a consequence, a normative specification for the use of ebXML BPSS to Rosetta-Net is being undertaken by the RosettaNet PIP Specification program (Kok, 2002). In the same idea, the configuration of system connectivity, which is an implicit re-quirement for RosettaNet but which is done in an informal manner (by exchanging email mainly) can be replaced by the use of ebXML’s Collaboration Protocol Profile and Agreement (CPP/A). By implementing this solution, the exchange of information

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is easier and do not require the intervention of an employee which is often the main source of error when exchanging data.

Conclusions The convergence between ebXML and RosettaNet frameworks show that the differ-ent B2B integration standards can be complementary from each other and by merging some of their specifications, we can produce more reliable and more efficient frame-work standards. In this case, the convergence of these two standards has not lead to the creation of a new standard and the death of the two existing ones but has enabled to enrich one of them (RosettaNet) which support now some of the ebXML’s specifi-cations and to move theses two standards closer and more interoperable.

4.4.2. Convergence between ebXML & OAGIS

Goals The goal of this convergence project was to use the implementation architecture pro-vided by ebXML framework in order to transfer OAGIS set of business messages. The OAGIS policy is to be technology sensitive but not specific, and to use existing open standards when possible. The ebXML framework fills theses requirements and that is why this standard has been chosen to converge with OAGIS. (OAGIS ebXML White Paper, 2001)

Implementation As you can see on the Figure 4, when comparing the two frameworks, it is quite ob-vious that OAGIS has nothing equivalent to ebXML’s CPP/A. That is the main inter-est of this convergence, providing to the OAGIS model, the trading partner agreement feature existing in the ebXML framework.

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Figure 4 Specification-level comparison between ebXML and OAGIS

Here is how basically, the convergence has been done between theses two standards.

• The Communication Layer will use the ebXML framework to ensure the transport of the data from one partner to the other..

• The Partner Agreements will be negotiated using the CPP/A feature of the ebXML framework

• Process Definitions will be done using BPSS for the format of the defini-tions but will use OAGIS’ features for defining the content of these defini-tions.

• The Syntax will be defined using the OAGIS Tags • The Meaning of Information will be analyzed using OAGIS Dictionary

Conclusions In this convergence between two standards, ebXML provides the “transportation part” using its Messaging Service to specify how messages are communicated over a particular transport medium (for example, HTTP) and to enable infrastructure-level interoperability among different vendor solutions. It will also enable the specification

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of Collaboration Protocol Profiles (CPPs), which provide a process understandable by a machine to describe the capabilities of a particular company. OAGIS will provide a broad set of Business Object Documents and integration scenarios that can be used in different business environments. To summarize, we can remember that OAGIS is the payload when ebXML is its envelop.

4.4.3. Convergence between RosettaNet & OAGIS

Goals There are many industry efforts developing XML messages, transport mechanisms and business processes for application integration and B2B integration. The Open Applications Group has developed the largest set of business messages and integra-tion scenarios for enterprise application integration and B2B integration (OAGIS White Paper, 2005). OAGIS does not define process specifications or a message transport framework. RosettaNet has developed process definitions targeted solely for B2B supply chain integration. The RosettaNet specification consists of process defi-nitions, message definitions and industry specific content. RosettaNet also defines an implementation framework for message exchange, which is essential for interopera-bility among different vendor solutions. The OAGIS’ policy is to be technology sen-sitive and to use existing open standards when possible. Because of these differences, RosettaNet and OAGIS are complementary and they have decided to converge in order for each other to enrich its standard with the other’s specifications. (OAGIS-RosettaNet White Paper, 2001)

Implementation

As you can notice on the Figure 5, the RosettaNet et OAGIS standards differ essen-tially concerning the last two points studied in the table i.e. Implementation frame-work and the use of an API. This can be explained by the fact that RosettaNet defines its own framework for message exchange when OAGIS prefers using open standards which require an API in order to adapt to different existing frameworks. The conver-gence between these two standards is mainly focused on the field in grey on the table. Now we will see, how they manage to take advantage of one an other’s specifica-tions.

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Figure 5 Specification-level comparison between RosettaNet and OAGIS

PIPs define how Action Messages are exchanged and are rigid definitions that must be adhered to in order to be compliant. PIP transactions are low-level process ex-changes; they are not long running transactions such as that defined by OAGIS’ Ven-dor Challenge scenario. RosettaNet Action Messages identified in the PIP specifica-tion are directly analogous to an OAGIS BOD. PIPs also define message exchange requirements for secure transport, non-repudiation of origin and receipt, message response times and number of message transmission attempts. OAGIS defines general scenario diagrams that suggest how BOD are exchanged. The main difference between these two standards and the big challenge to resolve in order to go through a convergence concerns the structure of the messages exchanged (Figure 6).

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Figure 6 Message structure comparison

Both RosettaNet and OAGIS messages are XML based, however, there is significant implementation differences. RosettaNet separates its messages into separate XML documents consisting of a Preamble, DeliveryHeader, ServiceHeader and Service-Content, which are packaged as a MIME encoded message. The header documents define explicit infrastructure level content that is used for all message exchanges. This is roughly analogous to OAGIS Control Area section.

The ServiceContent document, synonymous with the Action Message, contains appli-cation level data that varies based on the particular business context. It is analogous to OAGIS Data Area. The ServiceContent document is also used to carry the Signal Response message. In addition, RosettaNet supports sending attachment documents of any type, as part of the message. In contrast, OAGIS defines a single XML mes-sage that contains a message header.

Conclusions

Through this third example of convergence between two existing standards, we have seen how different standards can complement themselves with the other’s specifica-tion. In this case, the main challenge concerning the convergence concerned the struc-ture of the message exchanged. Once this challenge solved, the interoperability be-tween RosettaNet and OAGIS is much bigger and it contributes for one more steps through the general standardization of the B2B integration framework standards.

4.5. Section conclusions

After studying different standardization bodies and the standards they have published, it appears that nowadays, even if the EDI ASC X12 and EDIFACT B2B integration framework standards are still widely used, RosettaNet is the most active standardiza-tion body which tries to push standards forward in order to go to a convergence of several existing B2B integration framework standard.

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This activity from RosettaNet helps to make the B2B standards market more dy-namic. The fact that RosettaNet does not want to replace all the other existing stan-dards by its own solution but prefers to enrich its standard with the others specifica-tion is an important point. This policy, accepted and understood by the other player of the market, can lead to a clarification of all the standards by the improvement of the RosettaNet framework which will take into account the specification of the other standards as it has already started to do with ebXML.

The RosettaNet framework, based on the PIPs seems to be ready to be widely adopted by a various number of industries thanks to its convergence with ebXML which is a horizontal standard.

The convergence of standards has been occurring in related organizations. The suc-cess of RosettaNet has already caused several industry organizations to adopt the RosettaNet framework as an industry standard. The two main examples are the Chemical Industry Data Exchange which is based on RosettaNet and RNIF1.1 and the Petroleum Industry Data Exchange based on RNIF2.0 specifications. (Kok, 2002)

As a result, it appears that the three main drivers, which are likely lead to a global convergence of B2B integration frameworks are:

1. To make trading partners connections easier 2. To make overall solution cheaper 3. To make solution integration /implementation faster

In order to obtain these results, several convergence principles have to be applied to the B2B conceptual model (Figure 3).

• The lower the layer, the bigger the impact of deviation and duplication. It means it is better to converge from the bottom up, concentrating the effort first on the lower level in order to determine common principles for trans-portation

• Divide and conquer, each layer supports all those above it. In order to have an efficient convergence, it is needed to identify common functionalities and to converge layer by layer in order to be sure that no interoperability occurs.

• Not all layers are converge-able, however, broad agreement at lower layers allows effective diversity at the top layer. Even if the convergence can not be applied to all the layers, it is not so important because only most of them have to converge in order to have compatible frameworks which are inter-operable

• Look for convergence opportunities, driving toward more converged hori-zontal standards, while allowing flexibilities to meet diverged business needs. This is typically, the point of view adopted by RosettaNet which his-torically developed vertical standards and which nowadays, turns its research projects towards more horizontal standards.

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• End-to-end solution is the key – interoperability between multiple current standards is needed. A global standardization between several of them is needed to clarify the B2B integration market by narrowing the range of product offers to companies and to help them to understand better the stakes of the B2B integration.

Based on the Figure 7, we will analyze how standards are related to each other and how they can complement and substitute the others. For this comparison, we will use six standards : ebXML, RosettaNet, OAGIS, ASC X12, EDIFACT and Web Ser-vices.

Table III How standards are related to each other

Standard 1 Standard 2 1 completes 2 2 completes 1

1 RosettaNet ebXML Business documents Business processes, registry

2 ebXML OAGIS

Trading partner agreement for trans-fer of data Registry

Syntax defines with OAGIS tags Meaning of Data ana-lyzed using OAGIS dictionary

3 RosettaNet OAGIS

Message transport framework, Process definitions Message definitions

OAGIS’ Vendor Chal-lenge scenario which allow long running transactions

4 ebXML Web Services

Top-Down approach of messaging Use of ebMS Complete solution

Bottom-Up approach of messaging

5 ASC X12 EDIFACT Specific Segment Data elements Time elements

Short segments Composite elements

As we can see, each standard can enrich an other one with its own specifications. 1) The use of the Business Process Specification Schema (BPSS) to describe Roset-taNet PIPs is an area in which ebXML can complement RosettaNet. The BPSS speci-fication is ideal for describing choreography between two partners. Instead of an error prone manual configuration effort, RosettaNet software can now install BPSS sche-mas and be configured correctly with the first try. The configuration of system connectivity is an implicit requirement for RosettaNet. It contains information about the identity of their partners, the necessary certificates for security purposes, as well as the network endpoints. The exchange of this information is currently informal - for example, by exchange of emails, or softcopy documents.

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The use of ebXML's Collaboration-Protocol Profile and Agreement (CPP/A) can be applied to this scenario. The Collaborative Partner Profiles and Agreement (CPP/A) specifications define machine-readable configuration files that provide automated Trading Partner Agreements for RosettaNet connections. 2) The concept of a Business Collaboration is at the core of the design of ebXML and has been formalized as a “Business Process Definition,” which is also known as a Collaboration Definition. ebXML is the first specification to provide the capability to model complete OAGIS scenarios in a machine-processable Collaboration Definition (OAGIS ebXML White Paper, 2001). OAGI scenarios can be published as Collabora-tion Definitions that can then be used in CPPs and CPAs. These Collaboration Defini-tions could even be used with document formats that are not specified by OAGIS, providing a new level of reuse for the work done by OAGIS. In addition to the concept of Collaboration, ebXML introduces the notion of Regis-tries. Registries enable Business Partners to publish the capabilities of their systems and applications, and to let other Business Partners discover this information in order to configure their own systems. 3) OAGIS will benefit from the use of RosettaNet as an “implementation frame-work”. The OAGIS BOD structure defines message control information that is deemed sufficient for application-to-application integration. OAGIS lacks a precise definition of how to exchange OAGI BODs over an HTTP based communications infrastructure and how to use the BOD message control information. The RNIF ex-plicitly defines a mechanism for secure exchange of XML messages over an HTTP based infrastructure using the Internet standard MIME based encoding and related technologies. RosettaNet PIPs define Action Messages and transactional exchange sequences. An Action Message in RosettaNet terminology is analogous to an OAGIS BOD. The RNIF was designed to support the exchange of third party content such as OAGI BODs. 4) ebXML and Web services technologies have many things in common. Both tech-nologies provide solutions in the integration problem domain. However, ebXML is a complete solution, focused on B2B integration scenarios, whereas the Web services ebXML and Web Services ebXML is a complete solution, focused on B2B integra-tion scenarios, whereas the Web services problem domain is broad and includes ap-plication and B2B integration, along with traditional Web interactions. Further, the architectural concepts of ebXML and Web services largely overlap. Both architec-tures include several fundamental concepts: public contracts for processes and ser-vices, contract publishing and discovery, and standard message exchange patterns for application-node communication. Finally, ebXML and Web services have the same foundational technologies. Both solutions use XML for process definitions, service contracts, business data, and so on, and both use SOAP for message packaging. They also both recognize the importance of Internet transport protocols such as HTTP, SMTP, and FTP, and provide substantial specification support for them. The primary differences between the two technologies are in how they approach the solution and

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the scope of functionality. In some respects, we can view ebXML specifications as requirements on Web Services as it is extended from the bottom up. 5) UN/EDIFACT (through its “EWG” Group) and ANSI ASC X12 have joined forces to develop a single set of XML compliant core components. This will be the basis for future development of internationally standard EDI messages. The initiative will allow developing economies to afford global, cross-industry, electronic com-merce standards, and more easily participate in global e-commerce. The two stan-dards now being used for the electronic transmission of commercial data, UN/EDIFACT- the world-wide standard of the United Nations Economic Commis-sion for Europe (UN/ECE) - and the ANSI ASC X12 standard used mainly within the United States, should eventually be replaced by this new international approach. Both organizations have formally committed to join forces and prepare a common lan-guage for the 21st century. This language will include the best features of the two existing standards by mixing the advantages of the specific segments of ASC x12 with the short ones of EDIFACT and the Data elements and Time elements of ASC X12 with the Composite one’s from EDIFACT.

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5. Conclusions

This Chapter provides a discussion of the drivers that have been identified in the earlier chapters, as well as some remarks of the future of B2B integration as we see it based on our analysis.

5.1. Discussion on the drivers

The research problem of this study was to find out what are the drivers that guide future development of B2B integration. This was approached through three research questions. The first research question was, how B2B integration adoption has evolved and what is its present situation. We found out that the history of B2B integration dates back to 1960’s and a lot of development has taken place since that. Evidently, the whole history of B2B integration could not be covered in our study, but the most important trends were recognized. Based on the examination on the historical adop-tion of B2B integration, drivers that have guided the development of B2B integration were observed.

Big companies are the promoters who initiate B2B integration in supply chains. They can use their bargaining power to integrate the chains and smaller companies often have to adapt to the changes. This is an observation how development has taken place, and even though it seems a bit harsh approach, it has some advantages. As has been recognized, development of industry standards is difficult and time consuming. Therefore, a model with one dominant party deciding on standards is practical. In addition, small companies are more agile in responding to changes. Globalization has forced the companies to rethink their intra- and inter-company processes. Efficient communication and transportation solutions have made the world smaller which has toughened competition even at a local level. Therefore, outsourc-ing of production to cheap labor countries in order to gain competitive advantage is not only an option to make – it might be a requisite to survive. Distributed processes and outsourcing pose their own requirements for supply chain management and in-formation management practices. B2B integration seems to be one enabler for effi-cient management of a global supply network. Legislation is trying to cover also electric international commerce. In many countries monetary regulations have deregulated and enabled e-commerce. However, in inter-national B2B integration the legislations of the both countries have to be taken into consideration. The second research question was to determine what the benefits and costs of B2B integration are. The benefits of B2B integration can be divided into operational and strategic benefits. Operational benefits come from cost reduction as reduced invento-

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ries and streamlined processes. These are typically more easily measured than strate-gic benefits that come from improved quality of service and supply chain agility. Service quality reflects to customer satisfaction while supply chain agility means improved information availability and also long term partnerships. All in all, measur-ing of the impacts of B2B integration is hard since the implications are linked to other areas too, as process improvements. The costs of B2B integration come from hard-ware, software, maintenance, training and set-up of the systems. There are many costs and risks related to the adoption of B2B integration. In particular, costs of EDI have been reported to be such big that only the bigger enterprises have been able to adopt it. Smaller companies have thus been unable to adopt B2B integration but more agile technologies have already changed this situation. The third research question was to find out, what the technologies used are, and ,what is the role of standardization in B2B integration. We examined some standardization bodies and the most important standards and frameworks for B2B integration, which were RosettaNet and ebXML. Also Web Services were found as a means to arrange B2B integration. We claim that the most important development that is taking place in the field of technologies and standards is convergence. In addition, the drivers which will lead to a global convergence of B2B integration frameworks are to make trading partners connections easier, to make overall solution cheaper, and to make solution integration /implementation faster.

Convergence is taking place also between EAI and B2B integration. Enterprise Sys-tems (ES), or Enterprise Resource Planning (ERP) systems, have enabled companies to exploit EAI and inter-company integration. But in the future, enterprise systems will focus more to enable inter-company B2B integration. "It is becoming clear that the greatest impact of, and payback from, ESs is in SCM (Supply Chain Manage-ment)" (Davenport and Brooks, 2004). The authors argue that in the future enterprise systems will integrate companies seamlessly with their suppliers and customers. This proves B2B integration is seen as an important future development path of enterprise systems. The same issue is recognized by the leading enterprise system provider SAP as well. "In the future, the most successful companies will be those who know how to build and manage customer-oriented networks with business partners and suppliers" (Kagermann, 2005). SAP states the need to network with partners and suppliers, but it also emphasizes the upcoming need to restructure the supply network in a flexible manner. That requires ability to integrate with partners and suppliers without need for heavy integration efforts.

5.2. View of the future

As this study has been carried out as a literature review, the observations are only based on the existing and reported experiences on the B2B integration. However, when taking into consideration the limitations of the chosen research method, this study has given a wide extending view on the drivers that determine the future devel-opment of B2B integration. We claim that B2B integration has become an important

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part the modern business life and it has both operational and strategic implications to the companies. In the future, B2B integration will gain more ground especially among the small to medium sized enterprises, but the initiative to adopt will be driven by the big companies, the supply chain champions. The focus will move more strongly from technological solutions to standards and e-business frameworks that will enable seamless integrations with several organizations. Another trend that has been recog-nized in several areas of evolving technologies is the convergence of the standards. When various supply networks are integrating with each others, the de-facto stan-dards driven by big companies will not be enough and thus the role of standardization organizations will be important also in the future. The operational costs and benefits of B2B integration are more easily measured and thus have been the drivers and explications of B2B integration. A natural develop-ment path is that also the strategic issues will be more and more taken into account. Especially improved supply chain agility can be attained with efficient B2B integra-tion, but it requires that the focus will be changed from measuring a single company’s performance to measuring the whole supply chain’s performance. However, agility and adaptability are characteristics that can determine a company’s or the whole sup-ply chain’s success in the future. They have also been recognized as important factors by a major enterprise system provider, and we assume that in the future, the internal enterprise system integration (EAI) will support also external B2B integration.

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