When it comes to deciphering ancient Egyptian hieroglyphics, the Rosetta Stone is the key. Similarly, if your company seeks to unlock the mystery of business-to-business electronic commerce, the RosettaNet consortium hopes to help, with a little support from eXtensible Markup Language (XML). RosettaNet is an ambitious e-business initiative that promises to streamline supply-chain processes to benefit technology manufacturers and their partners. With support from virtually all the major computer hardware and software manufacturers as well as others in the computer supply chain, RosettaNet is quickly gaining acceptance. The name RosettaNet refers to both the computer industry consortium and the body of business-to-business standards the consortium has begun to create. The group was formed about a year and a half ago to help computer industry companies build standards for automated business-to-business exchanges of typical documents such as purchase orders. Using a standard format allows computer companies and their suppliers to automate the way they interface with each other–rather than having their employees handle the transactions in a costly and non-standard way.
The company: The RosettaNet consortium (www.rosettanet.org), based in Santa Ana, Calif., was founded by Fadi Chehadé in 1997.
The problem: Chechade felt the IT industry was plagued by waste and duplication of effort in its dealings with supply chain partners.
The solution: RosettaNet, a set of proposed XML-based standards to align business processes among partners in the IT supply chain.
The players: More than 34 industry companies including manufacturers, distributors, resellers, software publishers, and end users (see “Impressive roll call”). The status: Several computer industry companies piloted business transactions with each other based on RosettaNet Partner Interface Processes. Thirty-four companies have committed to being ready to use RosettaNet on Feb.2, 2000.
“We each have so many suppliers and so many customers and they all have their own ways of doing things,” says Charlie Martin, CIO at MicroAge Inc., a technology infrastructure provider in Tempe, Ariz. “Certain things don’t add value. Like how you send a purchase order or receive one.” Computer companies spend a lot of time and money scrambling to master trivial differences in the ways their suppliers do things. For instance, in the computer industry every company generally has its own way of formatting a purchase order. Large companies may have whole departments of employees whose job it is to reconcile and process huge piles of unlike purchase orders. If RosettaNet takes hold–and it will be at least a year before that becomes clear–computer companies will be able to eliminate most of the people from that process and let their computers exchange the information according to the standards developed by the consortium. Picking up where EDI fell down In many ways, the RosettaNet initiative aims to deliver on the promise of paperless, automated, flexible business-to-business commerce that electronic data interchange (EDI) made more than 20 years ago. The acceptance of EDI was hindered by too much variation and its often-prohibitive cost. Companies that want to use EDI to exchange purchase orders and the like must build a custom interface for each partner in order to exchange the data. With the advent of XML-based RosettaNet standards, computer companies will no longer have to spend the time and money building that custom interface (see sidebar, “At the root of it all”). In the near term, the standard will be embodied in the IT supply chain partners’ systems that touch purchasing. “RosettaNet is further along than most standards efforts,” says Frank Gillett, senior analyst at Forrester Research Inc., a market research company in Cambridge, Mass. “What separates RosettaNet from other XML standards efforts [such as cXML, BizTalk, and CommerceOne] is that it goes beyond the XML data standard and has laid out the business process associated with a purchase order, an inventory request, [or] a shipping request.”
At the root of it all
The RosettaNet consortium is hardly the first group to attempt to use XML-based standards to streamline business processes in a supply chain. Many proposed extensions to XML such as Microsoft Corp.’s BizTalk and Ariba Corp.’s cXML are attracting notice from companies interested in e-procurement. RosettaNet is hoping its standards will rise above these vendors’ proprietary efforts and become de rigeur for IT industry companies.
The new business communication: At the highest level, an e-commerce application such as an electronic procurement system is the medium for an e-business interaction. For a traditional business interaction, the telephone is the top medium. Source: RosettaNet
The RosettaNet schema involves more than using XML as its fundamental data structure. Fadi Chehadé, founder and CEO of RosettaNet, compares partner-to-partner e-business interchange with traditional human-to-human business (see graphic above). At the highest level, the telephone is the medium for a traditional business interaction, while for an e-business interaction, the medium is an e-commerce application such as an electronic procurement system. Under the traditional business transaction, employees from two trading partners would establish a dialog (through e-mail, fax or in a conversation) about what was to be purchased and the terms for the sale and delivery of goods. With an e-business exchange within the computer industry, the companies’ computers would automatically initiate the purchase of goods, according to the applicable RosettaNet Partner Interface Process, or PIP, such as one for order management. The RosettaNet framework, which has been defined, establishes the grammar for the transaction, just as in the United States, English grammar would govern the dialog between the parties. The RosettaNet dictionary provides a common vocabulary for the transaction. In the RosettaNet-enabled e-business interchange, XML provides the language the parties’ computers will use to exchange data. Using XML lowers the technical barriers to computer-to-computer communications, but it does not help the parties unless they agree upon the business processes (or the words in the language) that the data defines. That’s where RosettaNet excels over the other proposed XML-based standards such as cXML, says Frank Gillett, senior analyst at Forrester Research Inc. The power of RosettaNet lies in its Partner Interface Processes (PIPs) (42 out of about 100 have been defined so far), which cover a range of common business processes used by companies in the IT supply chain. The fact that RosettaNet defines business processes, as well as the data structure, puts it well ahead of other standards efforts, says Gillett. –L.G.P.
Software and hardware companies are already beginning to build RosettaNet support into their products. For example, SAP AG recently announced that its R/3 enterprise resource planning application will support RosettaNet by the first quarter of 2000.
It’s about business, not technology RosettaNet is the brainchild of CEO Fadi Chehadé, who spent years at giant technology distributor Ingram Micro Inc. prior to founding RosettaNet in 1997. Chehadé had become frustrated with the enormous manual effort it took just for IT companies to do business with each other. Automating suppliers’ procurement of direct goods would save millions of dollars and improve margins for all in the computer industry, he reasoned.
Lessons learned about RosettaNet
Play nice. The RosettaNet initiative requires companies to work closely with their competitors. Check your ego and your doubts at the door.
Business rules. Participating in RosettaNet requires making decisions about a host of business processes. Leave the technology people at home.
The view from the top. RosettaNet is a top-down affair. Only upper-level executives are invited to the board members’ table.
Using RosettaNet Partner Interface Processes (PIPs), which define a range of common business processes used by companies in the IT supply chain, will enable IT companies to be more flexible and thereby offer a broader menu of services to their trading partners. Since they no longer have to build custom interfaces to their partners, computer companies that adopt RosettaNet will find it easier to establish relationships with new suppliers–as well as quickly dismantle them if they don’t work, says Chehadé.
RosettaNet is very much a top-down, as opposed to a grassroots, movement. “RosettaNet has an unprecedented level of executive support. I’ve never seen that with any other standards group,” says Jim Oravec, senior manager in the Mountain View, Calif., office of KPMG LLP, a RosettaNet board member and execution partner. Chehadé set three requirements for membership in the RosettaNet consortium: The company had to send one of its “C-level” executives such as chief executive, chief operating office, or chief information officer to participate actively, it had to pony up $20,000 in dues annually, and everyone had to agree to implement whatever standard the group created. The consortium’s managing board consists of 34 CEOs, CIOs, and senior executives representing computer manufacturers, software companies, resellers, distributors, and even some end-user companies (see “Impressive roll call”). Senior executives had to be involved because implementing RosettaNet concerns business first, and technology second, says Oravec. For example, once a company agrees to use RosettaNet PIPs, it will immediately have to decide whether to move to the standard parts and product classification schemes the consortium has adopted. The company does not have to switch all of its systems, says Oravec, but it will have to provide a way to map from its proprietary parts-numbering scheme to the standard Global Part Identification Number (GPIN) recognized by other industry members. “When you start to look at the implications of this, these are not technical issues. You start to have to change the way you do business,” Oravec says. “Leaving it to their IT managers doesn’t cut it. The business people are going to have to drive this stuff.”
Impressive roll call
Current RosettaNet board member companies include:
Arrow Electronics Inc.
Cisco Systems Inc.
CompUSA Management Co.
Compaq Computer Corp.
Deutsche Financial Services
Federal Express Corp.
GE Information Services
Ingram Micro Inc.
Insight Enterprises Inc.
Netscape Communications Corp.
NEC USA Inc.
Office Depot Inc.
Tech Data Corp.
Toshiba America Information Systems Inc.
United Parcel Service of America Inc.
Mapping out computer industry business processes is a major undertaking, but one the RosettaNet consortium already has well in hand. In June, RosettaNet completed a 3,600-word dictionary that will form the foundation of its common business language. Previously, every distributor and manufacturer had its own proprietary dictionary of terms resulting in redundant, overlapping efforts by individual companies as well as confusion in the procurement process due to each company’s unique terminology. The RosettaNet consortium has agreed to adopt the GPIN system to standardize part numbers across the industry and to implement a company identification system designed by Dun & Bradstreet Corp. Computer industry companies that agree to implement RosettaNet will have a variety of methods to choose from, such as adding extensions to their databases. The consortium has also defined six “clusters,” or high-level business interactions such as product introduction, marketing management, order management, and inventory management. Each cluster is broken down into segments, or business processes. Drilling down further, each segment contains about six PIPs. The group has defined about half of these PIPs, and several member companies are in the midst of pilot projects–collectively called eConcert–to exchange data in PIP format. This summer, Microsoft Corp. and IBM Corp. were the first companies to complete a test exchange of PIP data. This initial test allowed the manufacturers to add new products–including standardized technical specifications and part numbers–into their partners’ catalogs. Other pilot results are beginning to roll in. MicroAge just completed an eConcert pilot with American Express, one of its customers. And giant electronics distributor Marshall Industries began trading data with manufacturer Solectron Corp. using RosettaNet PIPs embodied in webMethods Inc.’s B2B product suite. According to RosettaNet, chip manufacturer Intel Corp. of Santa Clara, Calif., and computer and component distributor Arrow Electronics of Melville, N.Y., have also successfully used the specification to send and receive data over the Internet. These companies are ahead of their fellow RosettaNet members, 38 of which have agreed to implement their PIPs by “eConcert Readiness Day,” which is Feb. 2, 2000.
The proof’s in the payoff
So far, member companies have been satisfied their enormous effort to adopt RosettaNet standards processes will be justified based on a study Chehadé did in conjunction with Holosofx Inc., a business process reengineering provider in El Seguendo, Calif. The study determined it cost Ingram Micro an average of $30.50 to enter one new product SKU number into its systems. In contrast, the study found that using RosettaNet PIPs, Ingram Micro’s cost per SKU dropped to $13. But the hard data won’t stop there. At the board members’ insistence, the RosettaNet consortium plans to document cost savings associated with RosettaNet compliance in a series of detailed case studies, the first of which will appear in October 1999. Done in partnership with the University of Southern California Business School, the study will document a variety of business interactions between Hewlett-Packard Co. and Ingram Micro. This data will allow Chehadé to begin to quantify the total cost impact on the computer industry supply chain. Many vertical industries such as financial services, automotive, and utilities would like to get a piece of that cost savings, too (see “Spawn of RosettaNet” below). But the question remains whether any other industry will be able to garner the nearly universal support that RosettaNet currently enjoys in the computer industry. RosettaNet member companies understand how to collaborate with their competitors, but it’s uncertain whether any other industry will be able to pull off the same trick. IJ
Why should the PC industry have all the fun? Other industries are looking at RosettaNet–and they like what they see. IT is far from the only industry plagued by duplication of effort and waste. Most industries today use manual processes to deal with their trading partners. And that creates the very situation RosettaNet was designed to alleviate. RosettaNet strictly defines document data and the conduit through which that data will flow–no inter-company systems connections are necessary. Most vertical industries already have a variety of proposed standards for data exchange on the table. For example, the financial services industry has the Open Financial Exchange, the Financial Information Exchange, and the Financial Products Markup Language, just to name a few. That’s the problem: Most every industry is plagued by a surfeit of standards, with no universal support for any particular one. The unprecedented support behind RosettaNet is turning heads in industries as diverse as automotive, petroleum, consumer electronics, grocery, retail, and utilities. Many frustrated people in the vertical space are wondering why they couldn’t adopt RosettaNet as their own–with some modifications, of course. Other industries wishing to adopt RosettaNet would have to create their own Partner Interface Processes (PIPs), says founder and CEO Fadi Chehadé, in Santa Ana, Calif. For example, the automotive industry does not place much importance on purchase orders, which are at the heart of the PC industry. So the automotive industry would have to create a new set of PIPs for its particular business documents. RosettaNet has already begun to spill into other industries. Earlier this year, the consortium created an Electronic Components board to serve the electronics industry. “We will have a core entity and then we will create a number of different RosettaNet organizations in vertical industries,” says Chehadé. Automotive, petrochemicals, utilities, and paper and office products will be the next to adopt business-to-business e-commerce, according to a recent report by Forrester Research. For example, Forrester forecasts the automotive industry will generate $213 billion in business-to-business online sales by 2003, up from $3.7 billion in 1998. By 2003, online business-to-business trade overall will surge to $1.3 trillion–accounting for 9.4% of total business sales–from $43 billion in 1998, according to the report. Despite exploring other verticals where RosettaNet might apply, Chehadé has reservations about other industries’ ability to succeed with the standard. “When I get the telephone call [from someone in another industry], I always say, ‘Yes, of course you can copy [RosettaNet].’ But then I ask if they can go get the people who make up at least half of their industry and get them all to agree to one standard. And that’s when I get silence,” says Chehadé. After all, having been a one-person evangelist for RosettaNet in the early days, Chehadé should know how difficult it can be to get widespread support. He counts himself lucky for being able to get most of the top computer industry players to commit so quickly. –L.G.P.
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