The 'uncertainty principle'

The act of connecting to your business partners is profoundly influencing the very nature of those relationships.

The Heisenberg Uncertainty Principle of quantum mechanics says that the act of observing changes the outcome. So it is with the extended enterprise - the act of supporting business relationships with networked systems changes those relationships.

Changing relationships are shaping next-generation technology decisions in areas like portals, the service-oriented architecture (SOA) and integration platforms. As affordable Web services technologies take hold, letting even the smallest of businesses link up, global industry-wide trading ecosystems will emerge. Mega databases run by third-party hubs will store vast amounts of data on global ecosystem operations, enabling forecasting on a scale never before possible. If a virus slows Asian production, for example, Eastern European factories will know immediately that they must compensate to satisfy an uptick in orders from North America.

Where such tight integration eventually will lead the business world in the decades to come remains anyone's guess. But the trajectories of leading-edge extended enterprises offer the industry a glimpse of that path. Today companies have begun shifting their focus from custom external integration efforts to internal rollouts of standards-based technologies. By revamping themselves, they expect to ease the next generation of external integration projects. From this point of tightly integrated operations will evolve new business relationships based on unprecedented trust and instantaneous communication. In the stage beyond, those relationships would grow into new organizational structures, such as the virtual company.

Companies within the aerospace, automotive, finance, high-tech, human resources and retail industries have created some of the most cutting-edge extended enterprises today. They already are seeing new business relationships develop.

For example, in a multiphase, multimillion-dollar project of which the first phase will be completed by year-end, United Airlines has begun building an advanced content management system for its many vendors' plane maintenance documents. Based on the Enigma 3C Platform from Enigma, the content management system will eliminate the last vestiges of paper manuals used by its staff mechanics and contract maintenance facilities while improving content integration. When an engine or parts manufacturer modifies maintenance manuals, the system automatically will update the data for access by any mechanic who needs it. United will tightly integrate and hyperlink maintenance manuals and data from the aircraft parts vendors, allowing mechanics to move from one manual to another regardless of which parts maker created the document, says Greg Hall, senior vice president, maintenance and engineering for United in Chicago.

This is one of the many ways United is integrating systems with its business partners - from the sharing of computer-aided designs via aircraft maker Boeing's portal to chips that offer engine maker Pratt & Whitney a running stream of data on engines as they fly. Such systems are changing the way United views its partners, says Greg Taylor, director of applications development at United, the IT executive working with Hall to implement the Enigma system.

"I view it as creating the virtual company. All your vendors are in effect part of your organization - they are combined through technology and through the exchange of data. You are extending your ability as a business to a much broader spectrum," Taylor says.

Doubling back for SOAs

The trajectory of extended enterprise development is not the bell curve normally associated with technology adoption. After gaining experience interconnecting with their partners, companies have begun doubling back to update their own technology innards to speed and ease their next extensions. This need for standardized end-to-end integration is the true driver of the SOA and why this flavor of it will succeed, some experts say. The Yankee Group estimates that by November 2003, approximately half of Fortune 1000 companies had extended connections to business partners. It further finds that while only up to 10% of the Fortune 1000 will have deployed Web services by 2004, more than 80% will have begun piloting the technology by year-end. Looking globally, Gartner predicts that most of the world's largest companies will have adopted SOAs by 2007.

Frustration over first-phase extended enterprises is driving the interest in end-to-end standards-based integration - the ultimate outcome of Web services and the SOA, says Bob Sutor, director of WebSphere infrastructure software for IBM. Companies are "tired with mucking with the plumbing" every time they need to integrate systems, internal or external, he says. With work in progress for areas such as the enterprise service bus, a connectivity layer and support for workflow of business processes, the SOA movement is busy creating end-to-end standards, Sutor says.

At Pratt & Whitney, the extended enterprise vision hangs on complete integration, says Colin Karsten, manager of IS programs at the East Hartford, Conn., company. Last month, Karsten completed an upgrade of P&W's 4-year-old portal from a basic content aggregator to the Enterprise Web suite from Plumtree Software. To Karsten, the new portal acts much like an SOA, providing a standard Web interface, back end and security mechanism.

"We're touching employees, partners, customers and suppliers all through this interface," he says. "A portal, as defined as nothing more than a security wrapper, gives these really complex enterprises a way to identify themselves." If P&W needs to do "something digital" with its business partners, "there's no question, they go to the portal and do it there," he says.

If all partners are doing Web services together, then "extending yourself to your customers and suppliers is easier," Karsten says. For instance, P&W had long employed electronic data interchange (EDI) to link with its largest partners, such as aerospace metal giant Alcoa, but had no similar way of reaching the small companies making one part in one factory. The new portal solves this problem. "Every supplier is on it; they can't ship until they log on," he says.

Plus, the portal uses Web services to link up with EDI-based processes. "The minute an EDI order hits a system, all customers can log on to the portal and see the status of their parts - which they couldn't do before," Karsten says.

While P&W now offers this integrated view to many customers, the first implementation took place about a year ago for United Parcel Service, for which P&W builds and maintains airplane engines, Karsten says. "We deliver all of the UPS engine overhaul records through the portal out to UPS - thousands of pages of documentation. Now, what's beautiful, is it all gets archived, so UPS now has all its records from birth of engine to redesign - and doesn't have to worry about record keeping," he says.

Karsten sees the extended enterprise platform built on Web services as the road to "federation," meaning data is stored, managed and accessed at the point where it is created, no matter which business partner creates it. "There should be no reason you ever have to replicate the stuff. Web services is essential as we move forward."

Many routes

Even as enterprises work to standardize on middleware and application layer connection technologies, network executives will continue to face several design choices for the physical connection: 1) provide direct connections, 2) build custom supply-chain hubs or 3) use outsourced hubs. Most will use all three, and this connectivity piece will remain a primary focus for IT expenditure, research suggests. In 2003, a year when technology spending growth was squeezed to 3.7%, 75% of that new spending was dedicated to the extended enterprise in initiatives to "connect, synchronize, coordinate and collaborate with other enterprises across the global supply chain," says The Yankee Group in its report, "Application and Integration Technology Battle Moves to Enterprise Edge and Beyond." Most of those initiatives involved building individual connections.

Kevin McGee, business-to-business systems technical lead for Borders Group in Ann Arbor, Mich., knows all about building individual connections. Borders, which owns 850 Waldenbooks stores and roughly 900 Borders retail outlets, is expanding at a rate of 25 to 50 new stores per year, mostly internationally, McGee says. Although Borders acquired Waldenbooks some 10 years ago, merging the mainframe/EDI back ends of the two operations has been slow going, in part because of rapid expansion, McGee says. While the retail industry - led by Wal-Mart - is among the most advanced in extended enterprise adoption, Borders' primary trading partners - publishers - are among the slower adopters.

McGee estimates Borders has some form of electronic data exchange with about 500 of the thousands of suppliers - such as tiny boutique publishers, music labels and gift product vendors - that do business with it. For decades, EDI has made up the bulk of the connections, but over the last three years, he has extended to partners via far more flexible Web technology. He has supplemented EDI connections by building out what he describes as "peer-to-peer, real-time" links with his most strategic suppliers, about 50 all told.

His extended enterprise platform for these links uses IBM WebSphere and Cyclone Commerce software. The extended enterprise has let the bookseller offer its customers new services not possible in the batch-mode EDI environment. For instance, an employee can check availability from publishers and distributors in real time for an out-of-stock book, and then place an order for delivery to a customer's home. Such a transaction moves from the store over the WAN to the WebSphere server in Ann Arbor, then over the Internet to the suppliers' systems in a matter of seconds, McGee says.

For its double-back move, Borders is rolling out an ERP system to allow it to better integrate the Waldenbooks' and Borders' back ends, and support even more widespread real-time transactions.

When inside becomes outside

The day when the extended enterprise becomes a giant interconnected global trading marketplace is also the day no perimeter exists. During the interim, the perimeter will be moving steadily inward, so that network executives will begin viewing less technology as being mission critical to their business, envisions Jonathan Schwartz, COO of Sun.

Click here for more

But to achieve the fully connected ecosystem, McGee is encouraging the smaller suppliers to link up through a trading hub run by a third-party value added network (VAN) such as Global eXchange Services (GXS). "We literally have thousands [of suppliers] in various segments that we are dealing with in the mode of fax and paper or snail mail," he says. "In terms of our medium- to small-business [suppliers], we intend to go through a VAN or a hub, or a hub to hub."

VANs are readying themselves for the role. GXS recently rolled out Trading Grid, a real-time trading hub that supports Web services. While GXS will continue performing VAN services like data translation, Trading Grid lets trading partners connect their ERP systems to the hub, and also lets partners monitor transactions, mine data and handle workflow exceptions.

McGee expects such hubs to act as extended enterprise application service providers, allowing smaller companies affordable connectivity because they can purchase the infrastructure as a service. "Here's where the GXS comes into it: Even though the business will decide, 'Yeah, we want to connect,' sometimes it doesn't have the infrastructure or the integration skills to do it," he says.

Rowland Archer, CTO of GXS, contends that smaller businesses have begun to realize the need for joining the extended enterprise. He offers the auto parts industry as an example. Whereas thousands of specialized parts makers exist for after-market auto upgrade products - rims, steering wheels, roll bars - prior to the extended enterprise, only the largest of them could afford to invest in electronic connections. With standardized technology and big retail partners wanting all suppliers to connect, hubs will implement workflow rules - such as requests for bids - for all suppliers, regardless of size, "and that becomes a level playing field which allows wide participation," he says.

The extended enterprise principle

No matter the progress of the last few years, the extended enterprise is still in Phase 1. The next phase is leading to far greater changes than cheaper, speedier communications. It is leading to new business organizational systems, says Erik Brynjolfsson, professor and director of the Center for eBusiness at MIT. Industries that always have operated under traditional business hierarchies will become virtual companies. In a virtual company, people join on a project-by-project basis and, through outsourcing, might work for different entities, even if they sit side by side.

1 2 Page 1
Page 1 of 2
The 10 most powerful companies in enterprise networking 2022