SAP White PaperInformation Interchange OnDemand

The Changing Face of Business NetworksHow On-Demand Solutions are Revolutionizing B2B Collaboration

Table of Contents

5 Executive Summary

6 The Changing Face of Business Networks

7 Enterprise Business Collaboration Challenges

8 Addressing the B2B Collaboration ChallengeWhat Industry Leaders Are DoingGetting a Handle on CostsSimplification and Consolidation

9 Simpler and More Flexible B2B Collaboration with On-Demand Solutions in the Cloud

10 SAP Information Interchange OnDemand (IIOD) – Revolution-izing the B2B Network

12 Customer Success— Artoni Transporti

13 Conclusion

14 Glossary of Acronyms and Terms

Frank RulandSiddharth Taparia

Enterprises are responding to the challenges of globalization by transforming business networks and improving B2B collaboration with customers, partners, and suppliers. Organizations that adopt on-demand B2B process transactions in the cloud will realize the greatest benefits in the form of reduced IT cost, lower compliance risk, and a distinct competitive edge.

5SAP White Paper –The Changing Face of Business Networks

EXECUTIVE SUMMARY

Executive Summary

Globalization, competitive pressures, and the increased speed of business mean that organizations must have the necessary automated systems and pro-cesses in place to address supply chain complexity and quickly create a collab-orative partner community. While the benefits of e-business initiatives are clear, enabling business-to-business (B2B) integration using point-to-point EDI translators is time intensive and cost-prohibitive because of IT resource requirements and ongoing operational expense barriers. Manual approaches and legacy technologies such as B2B converters can no longer keep pace

with the requirements for greater oper-ational efficiency and lower cost. How-ever, new solutions are emerging which simplify the B2B landscape by eliminat-ing point-to-point integrations. They enable a rich repository of partners and facilitate the rapid growth of a process-integrated partner network. Further-more, B2B enablers which employ a ca-nonical messaging approach to process structuring can result in dramatic cost savings, increased business agility, ac-celerated decision-making, and lower compliance risk—while providing part-ners, customers, and suppliers with a distinct competitive edge.

The Changing Face of Business Networks

Business networks have been around since the late 1970s, when the era of electronic data interchanges, or EDIs, began within the automotive industry. Before EDI, the only way to move docu-ments between businesses was by mail or courier. There were no electronic op-tions, and fax technology was not yet a practical solution. While B2B transac-tions have now been automated for over three decades, the high cost of estab-lishing these networks has made them prohibitive for all but the largest of com-panies. Those organizations realized tre-mendous savings by linking electronical-ly with large suppliers or key customers. Early EDI was originally based on private networks, requiring large capital outlays to implement. Adding incremental busi-ness partners was costly because the network architecture consisted of point-to-point connections. Savings achieved in these first-generation digital market-places focused almost entirely on lower-ing the cost of procured goods. Because traditional procurement systems and processes remained largely unchanged,

procurement process cost reductions were minimal.

EDI demonstrated the substantial sav-ings opportunity from connecting buy-ers and suppliers over networks and au-tomating business-to-business transactions. More recently, pervasive, low-cost connectivity to the Internet has lowered the barrier to entry for enter-prises of all sizes, enabling them to con-nect electronically with counterparts for a fraction of the cost of a traditional EDI system. This has fueled the boom in B2B marketplaces, portals and net-works. New systems now automate the procurement, sales process, and inven-tory management, as well as tighten the relationship between buyers and their suppliers in the supply chain. The days of EDI message formats dominating the B2B world are past. Online Survey re-sults from the February, 2011 Forrester Re search, Inc., report “The Future of EDI” indicated that the most common message format (42% of the total) has become spreadsheets and other text documents. That percentage continues

to increase. EDI comes in a close second (41%); followed by industry standard XML like PIDX, CIDX, ACORD, and HL7; financial formats like ACH, SWIFT and FIX; flat files; proprietary XML; and Ro-settaNet PIPs.

B2B integration is evolving at a faster rate than ever before, and is influenced by the emergence of cloud-based social networks such as LinkedIn, Xing, and Facebook. These types of networks use a common cloud-based platform, along with consistent interfaces and process-es that every member can easily access and use. The cost of entry is minimal, and the value of the network for individ-ual members increases as the network adds new participants and expands in diversity and coverage. Now B2B inte-gration is not just about exchanging documents, but about fostering a col-laborative community. As a result, in-creased collaboration between compa-nies and their customers, partners, and suppliers has become a critical require-ment for business success.

Are you ready to compete in a global economy? SAP Information Interchange OnDemand can help you connect, transact and collaborate better with your business network.

7SAP White Paper –The Changing Face of Business Networks

Enterprise Business Collaboration Challenges

Despite investments in EDI and the ad-vent of newer B2B marketplaces, an Ab-erdeen research study of 191 supply chain executives found that only 14% of respondents indicated that they could perform online trading partner collabo-ration1. At the same time, supply chain complexity is rising due to globalization. For the enterprise, this means working with more global suppliers, reaching out to more global customers, and dealing with truly global competitors. In a cost-constrained business climate, compa-nies are continuing their journey to-wards outsourced supply chains from a manufacturing and logistics standpoint. In such an environment, it has become difficult for companies to stay informed and in control of every stage of their supply chains. Businesses are now more

reliant on their network of partners than ever before, and are being challenged by two major trends.

Increasing Complexity of Business Networks - In most business networks today, the amount of data transferred between network partners has grown exponentially. Business processes now span companies, industries, and geo-graphic boundaries as businesses reach out to new markets in the quest for con-tinued growth. The increasing number of business partners as well as mergers and acquisitions on both the supply and buy side adds further complexity. IT and the business must establish interfaces to each of these partners and maintain them over time.

Accelerated Speed of Business - The rapid pace of globalization and market

0% 10% 20% 30% 40% 50%

Rising logistics costRising raw materials/manufacturing costs

Rising complexity of managing an increasingly global

business networkEscalating customer

service demandsThe need to consolidate B2B

integration platforms and create a single B2B integration platform

Percent of Respondents

Figure 1: Multiple business challenges are driving global enterprises to examine new approaches to B2B collaboration with partner and customers. Source: Aberdeen Research, May 20112

Top Business Challenges Driving New Approaches to B2B Collaboration

changes provide only a short window of opportunity for adopting successful net-working strategies. Companies that have operated for generations without competition are realizing that they must rapidly and dramatically transform their business strategies now if they want to retain existing customers and attract new ones. Shorter innovation cycles mean that new products and services are being introduced at more frequent intervals. Dynamic market conditions re-sult in regular and sometimes unexpect-ed changes in partner relationships. This accelerated cycle has an influence on the number of interfaces that must be established, maintained and eventually retired during the relationship lifecycle.

WHAT INDUSTRY LEADERS ARE DOING

According to Aberdeen Research, “best-in-class” companies lead the way in the percentage of transactions re-ceived electronically. A “best-in-class” company is defined as one that follows practices that are the best currently be-ing employed and are superior to the in-dustry average, resulting in the top in-dustry performance. They share more information electronically with partners, especially critical transaction informa-tion such as purchase orders and pay-ment status (by a factor of two to three times). Their suppliers are more likely to share electronic information such as purchase order acknowledgements, ad-vance shipping notices, and invoices. In addition, 40% of the best-in-class are even willing to share some of their more sensitive information, such as manufac-turing plans and release schedules. When asked about the top challenges that these companies are facing to im-prove integration and collaboration, 42% of companies cited rising logistics costs, 40% cited rising raw material and manufacturing costs, and 38% also cit-ed the rising complexity of managing an increasingly global business network3.

Getting a Handle on CostsA recent Forrester Research study

asking participants to identify the main business drivers influencing the require-ment to improve interactions with their external partners provides additional validation and confirms that cost is a key motivator. Forrester identified two

closely related business drivers that tied for first place. 82% of respondents cited the need to reduce rising costs for the business, as well as the need to ex-change electronic documents with busi-ness partners4.

Why is cost a major issue? Manual document exchange is still prevalent in many firms, bringing higher operational costs. Moving to electronic documents saves both time and money. Point-to-point electronic business interfaces are expensive, with an estimated internal cost of $15,000 per partner interface. Most enterprises still have to exchange standard business documents with large numbers of trading partners via manual methods, including email. Aberdeen conducted a survey of over 191 supply chain executives where only 14% of re-sponents indicated that they had the ability to perform onine trading partner collaboration5. While the need to ex-change electronic documents with busi-ness partners is cost-related, enterpris-es achieve other benefits from doing business electronically. Electronic docu-ment exchanges enable enterprises to respond faster to changing business needs, reducing process cycle times. For example, using electronic documents in supply chain inventory scenarios can re-duce cycle times resulting in cost sav-ings. Other business issues that rank highly are the needs for real-time visibil-ity into business processes, increased business agility, and better solutions for supporting compliance and risk man-agement for B2B exchanges. Enterpris-es are finding it increasingly important to view an up-to-date status of particu-

lar business transactions involving trad-ing partners. Modern B2B tools can pro-vide a web-based portal for tracking the status of B2B transactions as they flow between enterprises.

Simplification and ConsolidationEnterprises also face technical chal-

lenges when considering new B2B pro-cess exchange solutions. The most sig-nificant technical problem, affecting 66% of respondents, is the difficulty that organizations face when they have to integrate their inbound/outbound EDI transactions with other applications. The main reason for this is that so many organizations use separate tools for EDI integration and application / process in-tegration. The second biggest issue is effectively responding to new business requests, which arises from difficulty in creating, testing, and implementing new partner or transaction sets. Other issues include difficulty in managing a partner community (especially as it grows), sup-porting smaller, non-EDI-capable part-ners, and the inability to support pro-cess improvement efforts.

Companies that resist change and continue to operate at the status quo cannot keep pace with the speed of business today. In a highly competitive environment with ever-expanding glob-al supply chains, businesses must in-crease the efficiency of their processes without impacting profitability. So how should enterprises address the issue of improving business process integra-tion? How can organizations avoid the business and technical pitfalls some-times associated with adopting a new way of operating?

Addressing the B2B Collaboration Challenge

9SAP White Paper –The Changing Face of Business Networks

A state-of-the-art on-demand B2B so-lution should include the capabilities of a business process management (BPM) solution with its collection of natively in-tegrated business objects, empowering individual companies to optimize core operations and work together as a busi-ness network. A service-oriented B2B solution tightly integrated with backend systems facilitates improved collabora-tion, with active sharing of information among customers and partners. This so-lution provides all participants with in-creased visibility into processes, en-abling partners to accelerate the pace of innovation. They can then take advan-tage of evolving business opportunities quickly, while improving operational effi-ciencies and reducing risk.

By eliminating point-to-point interfac-es with trading partners and reconfigur-ing IT systems to employ a cloud-based B2B solution for faster and easier adapt-ability, companies can service-enable enterprise resource planning (ERP), cus-tomer relationship management (CRM), and supply chain management (SCM)

applications to function like web servic-es that anyone in the network can use. This approach simplifies change man-agement, integration, and information sharing with the partner network, as well as delivering cost benefits to the enter-prise. The benefits to organizations that deploy B2B integration solutions extend beyond cost savings as illustrated in Fig-ure 2. While the highest benefit, reduc-tion in manual processing and adminis-trative work, is cost-related, a large percentage of companies have made significant hard metrics improvements in other areas, including higher levels of customer satisfaction and increases in perfect order fulfillment.

On-demand B2B solutions take a ho-listic approach to addressing application integration, process integration, and B2B integration using a common tool

set which creates a level of network in-terface standardization. Not only does an on-demand solution provide a more flexible approach to integration, but it also reduces overall maintenance costs. Having a common infrastructure and standard interfaces for handling enter-prise integration needs reduces mainte-nance efforts, as one vendor assumes the responsibility for ensuring the func-tional integration of all system compo-nents. Specialized legacy point-to-point B2B tools require labor-intensive inte-gration work to obtain internal data and transform it to match the document type and format that meets the needs of each trading partner. New on-demand B2B solutions reduce this effort by using more productive integration techniques to support the transfer of data between internal applications.

Simpler and More Flexible B2B Collaboration with On-Demand Solutions in the Cloud

0% 10% 20% 30% 40% 50% 60% 70% 80%

Reduction in manual processing and

administrative work

Increased customer satisfaction

Reduced data errors

Increase in perfect orderfulfillment percentage

Reduction in costs to process a customer order

Percent of Respondents

Figure 2: Benefits associated with B2B customer collaboration efforts include increases in customer satisfaction as well as operational cost savings. Source: Aberdeen Research 6

Top Benefits Derived from B2B Customer Collaboration

SAP Information Interchange OnDe-mand (IIOD) is a B2B integration solu-tion that provides a simpler, more af-fordable way to connect with customers and suppliers for B2B e-commerce. Us-ing pre-configured profiles, an enter-prise can make changes within its sup-ply chain without time- and resource-intensive point-to-point inte-gration. Process collaboration allows trading partners to exchange richer data more frequently, increasing forecast ac-curacy, hastening planning velocity, im-proving workload balancing, and stream-lining cash flow management. SAP IIOD is focused on deep integration with key enterprise applications and eliminates the need for multiple point-to-point links by moving business process translation to an integration cloud. SAP IIOD pro-vides a consistent foundation that en-ables businesses to connect, transact,

and collaborate with partners. While other B2B vendors with cloud-based of-ferings optionally translate between two trading partners for a fee, SAP IIOD does the translation as a core service.

SAP Information Interchange OnDe-mand provides a B2B content engine, combined with a package of partner pro-files. This combination enables a com-pany to establish a connection with a business partner just once for each pro-cess—and instantly exchange related electronic documents, such as purchase orders, forecasts, invoices, and delivery notes, using existing SAP applications. Because the solution supports collabo-ration with partners for all types of ma-terials, goods, and services—not only in-direct goods—it can broaden the scope of a company’s B2B commerce initia-tives for even greater return on invest-ment. The SAP IIOD software content

engine integrates directly with back-end SAP software using SAP NetWeaver Pro-cess Integration (PI) or other enterprise application integration (EAI) tools, translating documents into a universal meta format and then into the appropri-ate partner format. The content engine leverages pre-built partner profiles rep-resenting the business logic, formats, and protocols of specific trading part-ners for different business processes.

The SAP IIOD interface architecture was developed using a unique, canonical approach to messaging. By definition, something which is canonical provides the simplest form possible, based on a consistent and standardized approach. Canonical messaging deploys a reusable interface that can communicate be-tween different data formats and appli-cations. All data in this messaging archi-tecture, regardless of origin or format,

REVOLUTIONIZING THE B2B NETWORK

SAP Information Interchange OnDemand (IIOD)

SAPIIOD

CURRENT POINT-TO-POINT APPROACHB2B/EDI INTEGRATION 1.0

CENTRAL B2B CONTENT REPOSITORY: INTEGRATE ONCE

B2B/EDI INTEGRATION 2.0

• 3rd party integration for EDI• Not scalable• Need for internal resources

SAP Information Interchange OnDemand• Faster implementation• Bigger flexibility• Lower TCO

Figure 3: The canonical messaging approach used by SAP IIOD significantly reduces interface development time, simplifies interface asset management, and reduces integration and maintenance costs.

The content repository allows SAP customers to integrate once and re-use standard interfaces across the Business Partner Network.

11SAP White Paper –The Changing Face of Business Networks

conforms to a common set of defini-tions, enabling SAP IIOD to function as an intermediary between a source appli-cation and a target application. Conse-quently, the SAP IIOD solution can sig-nificantly reduce the operational complexity for enterprises that ex-change information between multiple applications and multiple B2B partners. In contrast, older point-to-point mes-saging approaches require considerably more time and resources to deploy, since a unique data interface must be created for each new application ex-change. Used appropriately, canonical messages will streamline application in-tegration and SOA initiatives, and have the potential to substantially reduce in-tegration development and mainte-nance costs.7

New SAP IIOD pre-built partner pro-files can be purchased as relationships

are established with new customers, suppliers, and logistics service provid-ers. After activation by SAP, the profiles enable business to be conducted with them electronically. If SAP does not have a pre-built profile for a trading partner for a specific process, SAP will provide one.

With SAP Information Interchange On-Demand, companies of all sizes gain full, flexible B2B functionality, quickly and cost-effectively, as well as the ability to scale operations up to millions of trans-actions per year through automation. The benefits are compelling: • Reduced IT costs and business part-

ner onboarding time: SAP IIOD elimi-nates the need for mapping trading-partner formats and constantly investing in new time-and-material IT services to integrate with your value chain. Plus, you get well-defined inter-

faces into your operating system environment.

• Increased business agility: SAP IIOD simplifies and streamlines the process of adding new trading partners, and making changes to partners and appli-cations, to meet evolving business needs.

• Lower compliance risk: Now you can comply with any customer or partner B2B or EDI request without having to build point-to-point integration and stay compliant over time. SAP keeps partner profiles up-to-date for you.

• IT simplification: With no mappings to constantly manage and configure, SAP Information Interchange OnDemand frees up crucial IT resources currently under-utilized so they can be rechan-neled to higher-value initiatives.

REVOLUTIONIZING THE B2B NETWORK

SAP Information Interchange OnDe-mand has been a catalyst in the trans-formation of Artoni Transporti S.p.A. from a regional European transportation company to a leader in global supply chain logistics. Established in Italy in 1933 to provide goods delivery, the com-pany was an early adopter of informa-tion technology beginning in the 1970s. Artoni has always pursued a customer-centered philosophy which has been fundamental to its growth and success. As the new millennium approached, Ar-toni observed the effects of globaliza-tion first-hand on the transportation in-dustry. Many customers had expanded into international markets and adopted longer and more complex supply chains. The industry was changing quickly, and Artoni recognized that these customers would require a much higher level of ser-vice as they expanded globally. The company also knew that synergies could be achieved by integrating transport, warehouse management and interna-tional forwarding services into a single comprehensive logistics solution. As a result, Artoni Transporti became one of the first 3PL (third-party logistics) providers.

The emergence of 3PL providers re-quired a structured, highly collaborative approach among all of the players in the extended supply chain, with the goal of improving efficiencies and driving down costs. The entire process was supported by information technologies capable of facilitating communication with the cus-tomer, as well as integration between the various players in the extended lo-gistics chain. The initial business-to-business network required the creation of point-to-point electronic interfaces to each partner, one at a time. This time and resource-intensive process took ten years to complete. While this was an im-

portant development, Artoni realized that a point-to-point business network lacked flexibility and could never scale fast enough to provide the competitive advantages required for success in the global economy.

Artoni Transporti sought a simpler and more efficient way to build a business collaboration network which took a standardized and repeatable approach to logistics management. The objective was clear: improve customer relations by enabling Artoni and its partners to more easily share growing volumes of information. This goal led to an evalua-tion of the SAP Information Interchange OnDemand (IIOD) solution in the con-text of the implementation of SAP Trans-portation Management. The SAP B2B content engine, combined with a pack-age of pre-built partner profiles, elimi-nated the need for time-consuming point-to-point integration and standards enforcement. Leveraging the flexible and streamlined approach to business col-laboration provided by SAP, Artoni was able to create a B2B network of 600 partners, customers, and suppliers in less than five months.

“It used to take days, sometimes weeks, to add new partners to our net-work”, says Artoni Director of Worldwide Channel Partners, Giacomo Coppi. “With the SAP solution, the same process now only takes a few hours to accomplish.” Standardized interfaces from SAP en-able Artoni to more readily exchange or-ders, invoices, and payments with global partners in the U.S., China, and Latin America. The solution has helped Artoni realize improved sales, customer ser-vice, and cash flow, while reducing oper-ational costs. Customers, partners, and suppliers today expect more than just cost efficiencies from a logistics and transport service provider. With the SAP IIOD solution, Artoni Transporti can also deliver improved automated business processes that sharpen their competi-tive edge in the global marketplace.

Customer Success—Artoni Transporti

SHARPENING THE COMPETITIVE EDGE FOR ARTONI TRANSPORTI

“It used to take days, sometimes weeks, to add new partners to our network. With the SAP solution, the same process now only takes a few hours to accomplish.”Giacomo Coppi, Director of Worldwide Channel Partners, Artoni Transporti

13SAP White Paper –The Changing Face of Business Networks

In today’s dynamic e-commerce envi-ronment, businesses must have the nec-essary automated systems and process-es in place to address supply chain complexity, accelerate the speed of business, and create a collaborative partner community. Manual approaches and legacy B2B technologies such as point-to-point EDI connections can no longer keep pace with the requirements for greater operational efficiency and lower cost. Cloud-based, on-demand B2B networks simplify the landscape by eliminating point-to-point integrations, easily enabling a rich content repository of partners, and facilitating the rapid growth of a process-integrated partner network.

SAP Information Interchange OnDe-mand helps increase visibility and con-trol over B2B transactions, optimizes decision making, and simplifies access to the transactional information outside the four walls of your business. SAP IIOD automates business transactions and eliminates manual and paper-based pro-cesses within your business network to deliver greater flexibility and efficiency. The result is dramatic cost savings, in-creased business agility, accelerated de-cision-making, and lower compliance risk—while providing a critical competi-tive edge for partners, customers, and suppliers.

Conclusion

LEARN MORE

Contact SAP today to learn how SAP Infor-mation Interchange OnDemand can help you connect, transact and collaborate better with your business network. More information is available at www.sap.com/b2b

FOOTNOTES

1. Aberdeen Research: Strategies for Building an ROI Business Case, June 20112. Ibid3. Ibid4. Forrester Research, Inc.: The Future of EDI, Feb. 20115. Aberdeen Research: Strategies for Building an ROI Business Case, June 20116. Ibid7. Gartner Group: How a Canonical Messaging Approach Can Help You Simplify and Reduce Interface Assets, May 2011

CRM—Customer Relationship Man-agement—a business process for man-aging a company’s interactions with customers, clients and sales prospects

EAI –Enterprise Application Integra-tion - a framework that enables integra-tion of systems and applications across the enterprise

EDI—Electronic Data Interchange—the structured transmission of data be-tween organizations by electronic means (from one computer system to another computer system)

ERP—Enterprise Resource Planning—a business process which integrates in-ternal and external management infor-mation across an entire organization, embracing finance/accounting, manu-facturing, sales and service, and cus-tomer relationship management

Glossary of Acronyms and Terms

B2B—Business-to-Business— describes commerce transactions between businesses

BPM—Business Process Manage-ment—a holistic management approach focused on aligning all aspects of an or-ganization with the wants and needs of its partners and customers

Canonical messaging - A canonical message is an intermediary. An inter-face that employs canonical messaging transforms data from the format, struc-ture and semantics native to the source application to that of the established ca-nonical intermediary, and from the ca-nonical intermediary into the format, structure and semantics that the target applications require.

IIOD—Information Interchange OnDe-mand—the leading cloud-based B2B solu-tion from SAP

SOA—Service-Oriented Architecture—a set of principles and methodologies for designing and developing software in the form of interoperable services

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