Integration

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INTEGRATION

Connectivity is a main element of e-commerce. It is a requirement for engaging in electronic transactions between two or more parties, be they businesses or consumers. However, companies that excel at e-commerce do more than simply connect with customers, suppliers, and other business partners; they find ways to integrate the many different computer systems and databases that are part of their operations with each other (internal integration), or with parties on the outside (external integration) so they function together seamlessly.

EXTERNAL INTEGRATION

External integration is especially important in the realm of business-to-business e-commerce, where companies can realize significant cost savings and increased efficiencies by integrating their systems. Companies and business partners may integrate systems at different points in a supply chain, which encompasses all of the different levels involved in manufacturing products. Supply chains include everything from raw materials to finished products, which can be used by other companies in their manufacturing processes or purchased by consumers. For example, an automotive manufacturer might integrate certain systems that contain information about production forecasts with a tire manufacturer's systems. With this information, the tire manufacturer is able to tie its production levels closely with the automotive manufacturer's demand. This allows for better production control, satisfactory shipment times, and more manageable inventory levels.

In the early 2000s, business-to-business transactions happened mainly through both traditional and Web-based electronic data interchange (EDI) and online marketplaces or exchanges. It was in these environments that issues concerning external integration became important. EDI involves exchanging electronic business information like bills of lading, confirmations, purchase orders, and inventory information between organizations or trading partners in agreed upon, standard formats. Through EDI, computers and databases communicate directly with one another over value-added networks (VANs), private networks, and the Internet (open EDI).

The Internet was fast becoming an important means of engaging in EDI during the early 2000s, especially for smaller companies that previously could not afford the high costs associated with traditional EDI. Extensible markup language (XML), a computer language similar in many ways to hypertext markup language (HTML), which is used to create Web pages, was playing an important role in this arena. It enabled external integration by allowing companies to share information in universal ways, no matter what kinds of software systems they used. XML also played an important role in developing online marketplaces or exchanges, which are Web-based environments where buyers and sellers are able to come together and engage in trading. These marketplaces were operated by third parties who charged buyers and sellers to engage in electronic transactions that might not otherwise have been possible due to system incompatibilities.

The need for external integration was growing rapidly in the early 2000s along with the business-to-business sector. According to Corporate EFT Report, business-to-business sales were estimated to be $3.3 trillion in 2000 and were projected to reach $5.2 trillion by 2004. The Gartner Group forecast more optimistic business-to-business sales for 2004, placing the figure at $7.29 trillion.

INTERNAL INTEGRATION

Successful e-commerce companies also make sure the many different systems they use within their enterprises are integrated. Known as internal integration, this allows many different pieces of relevant information about transactions and other business activities to be shared with appropriate divisions or departments. For example, in business-to-consumer commerce, when a customer orders a product online via an order form on a company's Web site, data about the order is instantly sent to the accounting department for billing and financial reporting purposes; to the warehouse for packing and shipping purposes; and to customer service in the event of questions or concerns regarding the status of the order.

When e-commerce exploded in popularity, many companies rushed into the game by putting up Web sites and accepting online orders. However, these front-end elements represented only half of the equation. Many organizations failed to think through processes and systems on the back end, namely how they would connect systems together. When companies take this approach, bottlenecks arise in what otherwise would be a seamless process. Orders that come in via the Web might be billed quickly to a customer's credit card, but are then printed out on paper and held for days or weeks in the warehouse before being filled. Practices like these hinder what e-commerce is all about.

As explained in InfoWorld, "Retail success hinges on what happens behind that fabulous Web site: logistics and fulfillment, payment systems, systems and policies to handle returns, customer service, and, running through it all, integration. Without these the site won't scale, and customers who once loved the Web store will quickly turn fickle and point their browsers elsewhere."

SOLVING INTEGRATION PROBLEMS

Integration-related problems, both internal and external, usually arise from incompatible computer systems. According to eCompany Now, a Forrester Research survey revealed that although most big companies (72 percent) understand the importance of external integration, less than 25 percent had integrated their systems externally. The publication explained: "There are a lot of businesses out there that have spent millions of dollars and thousands of hours automating every aspect of their operation, only to discover that their wondrous new systems stopped cold whenever their business touched their customers, suppliers, and partners." Information in Computerworld also indicated that a large number of businesses were not prepared to reap the many benefits the Internet and e-commerce had to offer, explaining that the IT infrastructures of most enterprises were fragmented collections of different programs, devices, and networks without the ability to communicate seamlessly.

Complicating matters further is the fact that some of these systems are custom, and represent significant investments both in development and user training. While starting from scratch with new systems is one possible solution, for this reason it usually isn't a practical or feasible one for many companies. After a large number of e-commerce companies failed in the early 2000s, many executives also were skeptical about investing millions of dollars in information technology that might not result in an immediate return-on-investment.

In the early 2000s, application-integration software was a potential solution for companies needing to integrate their systems internally (enterprise application integration) or externally (inter-enterprise integration). Application-integration solutions normally fall into the category of middleware—software residing between applications that functions as a translation layer. There are a variety of different kinds of middleware. Certain kinds pertain to database programs, some enable programs to connect with each other, and others exchange messages between programs and systems on different networks.

webMethods Inc. was one company offering integration solutions to leading companies in the early 2000s. Its customers included Ford Motor Co., Motorola, Starbucks, Dell, Citibank, and Eastman Chemical. The company's EDI Adaptor version 4.0 helped companies to bridge a strategic gap by supporting their existing EDI systems while they transitioned to newer Internet technologies like XML. According to the company, "While most people agree that 'XML over the Internet' is the strategy of the future, the migration path to XML is not yet clearly defined for many companies. Many of these companies have spent years building their EDI systems and want to leverage their investment. By allowing trading partners to utilize their existing EDI infrastructure, implementation time and cost are reduced."

In 2000, webMethods helped Airborne Express—a leading transportation company that also provides order fulfillment and distribution services for its customers—to win the business of a major retailer that was unveiling a new online business. It did this by giving Airborne the ability to communicate and exchange files in XML format, thereby enabling external integration. The capability allowed Airborne to process 10,000 orders daily during the Christmas holiday that year. It also enabled the shipper to improve the level of customer service it provided, because the XML code was easy to review, correct, and change if needed.

TIBCO Software Inc. also provided middleware integration solutions to companies in the early 2000s, including Bell South, Hitachi Semiconductor, Saturn, Ameritrade, Chevron, TNT Logistics North America, 3COM, Netscape, and Philips Medical Systems. Philips Medical Systems provides diagnostic imaging products (including machines used for X-rays, MRIs, and CAT scans) and related services to healthcare providers throughout the world. It used TIBCO's ActiveEnterprise software as an internal integration solution. In order to quickly meet the needs of its customers, Philips needed to connect orders it received from them with its factories in real-time. Prior to adopting TIBCO's system, Philips had a patchwork of different computer systems responsible for different functions like sales, manufacturing, and distribution. The company estimated that more than 2,000 different interfaces were needed to connect these systems, which included various business functions, computer applications, and mainframe systems. Not only was this expensive for Philips, it was slow and cumbersome for people trying to do business with them. TIBCO's solution allowed Philips' different systems to interface with one another in real time, providing enormous benefits for the company and the healthcare providers it served.