"Traditional electronic data interchange, value-added networks are dead," says Benoit Lheureux, a research director in Gartner’s application development, integration and Web technologies group.

For many CIOs, this is very bad news indeed.

A New Way to Integrate

Fortunately, hope for supply chain information integration did not die with those old, kludgy networks. As Agere and many other companies have discovered, there’s an emerging category of third-party, hosted options that successfully blend traditional value-added network (VAN) capabilities with on-demand hosted supply chain software and back-office integration services. Companies in this evolving market, such as E2open, GXS, Inovis and Sterling Commerce, offer a single point of data exchange—whether using EDI, RosettaNet or XML standards—that acts as a gateway for partner-to-partner, enterprise system integration and collaboration. For companies like Agere, it’s now possible to make a single electronic connection to all customers and suppliers if they use E2open. Even better, that task can be taken care of by a third party.

Indeed, Lheureux claims that over the past few years this new strategy has so transformed the possibilities in supply chain networking that companies and CIOs that haven’t investigated the new services "have an understanding of the market that is obsolete."

The Long Wait for Integration

According to a July 2006 IDC survey (IDC is a sister company of CIO) that asked companies to describe how they collaborated with their supply chain partners, the most cited method was e-mail (88 percent). Also making the list: fax (73 percent), telephone (62 percent) and snail mail (59 percent).

These tools, which depend on employees’ fingertips, have prevented many companies from capitalizing on real-time B2B collaboration. In a September 2005 Aberdeen Group study, 75 percent of survey respondents with annual revenue of more than $1 billion report that their supply chain applications limit—not enhance—the services they can offer customers.

A root cause of this, according to analysts, is "a huge underinvestment in technology to support global supply chain processes," says Aberdeen’s Enslow. "Microsoft Excel is still the most popular supply chain planning system. [However], it’s not scalable and it does not promote collaboration—either internally or across trading partners."

Agere’s Morris says he had a wake-up call when his staffers started taking a closer look at their supply chain processes during the evaluation of E2open’s services. It was not a pretty sight. "We didn’t realize that this was the way we did things," he recalls glumly.

EDI, which Agere relied on, has been a staple of many companies’ systems (63 percent in the IDC study) for a long time. But EDI has limitations. To begin with, the cost of having a VAN provider maintain EDI communications between trading partners has been prohibitive for many small and midsize companies. (For more on this, see "How to Keep the Web from Becoming a Trap," www.cio.com/050106.) And although EDI facilitates the electronic transfer of information between partners, that data does not flow internally between ERP and CRM systems because different vendors’ applications and systems, which follow different networking and communication standards, can’t interoperate. That forces companies to use manual processes to update ERP and SCM systems, generating inefficiencies and errors.