Outsourcing could bring big connections to small firms

For decades, since the early days of electronic data interchange, there has been one universal truth about electronic commerce: big companies do it, small companies don't. But a new class of outsourcing providers is hoping to change all that.

Whether they were deploying EDI software in the 1980s or XML software last month, leading-edge companies have consistently struggled to get their smaller customers and suppliers to do business with them online. While larger trading partners have pockets deep enough to invest in e-commerce software - and the IT resources to deploy and maintain those applications - many small companies still do not have the resources and skills to join the supply chain revolution.

The problem, in part, is management and administration. Even if larger companies give their smaller suppliers e-commerce applications at no charge - and a number of large businesses have tried - there still remains the question of training small companies how to use the software, how to upgrade it, and what to do if something goes wrong. As a result, many small partners become frustrated and return to using phone and fax, slowing the e-supply chain to a crawl.

Slowly, however, some application service providers and software vendors are beginning to resolve the problem of how to get smaller suppliers online - and keep them there. Although these vendors offer a wide range of software, services and outsourcing capabilities, their primary goal is the same: to bring small trading partners onboard quickly, at a low cost and with a minimum of administrative demands on the small company.

Comergent Technologies, for example, has developed software that enables companies to create e-commerce Web sites that can be easily accessed by small and large companies alike via a simple Web browser. One of the early users of the Comergent software, Castle Rock Industries, says it has increased its online partnerships by nearly 33% by deploying the Comergent software, and by offering a simple 1% discount to customers who pay online.

Another e-business technology vendor, IPNet Solutions, has developed software that lets companies exchange invoices, purchase orders and other e-business documents via the Internet, without using value-added network services as the underlying infrastructure. This approach is attractive for smaller companies that cannot afford the costs associated with VAN services.

SPS Commerce, a hosted supply chain software provider, last month rolled out several new portals designed to help companies enable their suppliers to do business online. The new portals will augment SPS Commerce's Connection Factory, a service that helps small and midsized businesses enable their partners to transact business electronically.

There are many more examples of supplier-enablement tools and services, and virtually all of them are offered with adjunct professional services, if not outsourced outright. These vendors now recognize the reality that most companies, even the largest and most deep-pocketed, do not have the resources to bring hundreds, even thousands, of small suppliers online. After decades of trying, most companies have now arrived at the conclusion that the only practical and cost-efficient means of Web-enabling so many trading partners is via outsourcing.

If this new class of outsourcing services is successful, one of the great " truths " of e-commerce may soon be turned on its ear. Soon, it may be the smaller partners, not the larger ones, that are first to come online.

Senior Analyst Tim Wilson is with Enterprise Management Associates in Boulder, Colo., an analyst and market research firm focusing exclusively on all aspects of enterprise management. Wilson has over 10 years of experience in covering e-business and enterprise management issues, most recently with InternetWeek, where he was chief of reporters. He can be reached by clicking here.

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