Technology Equals Leverage

This post is about the revolution in hosted platforms, the Open API revolution, and how agile innovation in the staid B2B commerce industry is being impacted by these trends. But first, let me tell you about Paul Graham.

The title of this post is from Paul Graham’s bog. Don’t know Paul Graham? Too bad. He runs ycombinator, a startup incubator responsible for many new companies you have heard of.He is a hoot to read, and he picks winners in the early stage, contributes a small amount of early seed capital, and provides a growth medium of help and mentorship. You can see ycombinator in my old video here.

I would tell you to read every word on Paul’s blog, to watch and analyze his investment decisions, but who has time? The point is that new technology creates wealth by creating leverage. Wealth is not money, wealth is the expansion of possibilities. Money is fixed (for you and me, not the Fed), wealth is totally variable – ask the inventor who created the paperclip.

Much of the newer technology that creates upheaval and unprecedented leverage and productivity comes from small companies and start-ups. Why? Agility. Whereas many supply chain and EDI systems companies are leviathans by any measure, many of the new commerce ventures that have their roots in Web applications are much smaller – start-ups, young upstarts, teams that broke off from established giants to sally forth and innovate. Certainly, with exceptions, many of the new SAAS / PAAS commerce hubs are in the start-up and small company category; many will be gone in a year or two, unable to execute to profitability before the burn rate catches them. Nothing new under the sun here.

My question before the jump: how will the commerce communications industry play with this new blood in the growing, fresh channels of platform based ecommerce?  Read on, and I hope you are coming to the NEECOM user meeting in Westborough, MA on Oct.15th.  It’s not too late!Are we going to expand the industry footprint and increase business by selling increasingly complex and expensive solutions? Or, is the classic ecommerce communications industry to remain mired in supply chain and ERP? Please, don’t get me wrong, I respect companies that sell seven figure integration servers to businesses that have already spent seven figures on ERP systems! Genius.

Let’s take a look at market segmentation: (Disclaimer: These are my opinions as an analyst, and do not reflect the opinions of Loren Data Corp , President Todd Gould, or his Guinea Pig, Dog, or Cat.

The classic EDI / EDIFACT market for tools, services, and software is around 3 billion USD / year.  This last few quarters there was a slight bump, as automation assets in the supply chain were ramped to offset personnel reductions.  The revenue growth rate for classic EDI as part of SCM tools and systems has plateaued at 1.5% a year, with a few tens of thousands of clients that buy capital line systems, and a hoard of unwilling EDI victims that are forced to deal the VAN reseller industry by duress. It’s a hell of a way to run a business.

The green and growing end of the commerce industry is centered on lightweight commerce platforms, tools, and services. This sector does have some relation to the delivery of goods and inventory, but its greater corpus is concerned with pure commerce messaging between peers. Let me be clear here. The classic EDI SCM and Logistics channel is fine, the VAN’s are fine. But, the growth end of the business is in the SME (Small medium enterprise <100M year businesses), that do business, yes with large buyer, but do more trade with each other outside of supplier relations.

What do they do in the mid market? Answer: everything else that happens in your city, neighborhood, and on the street having to do with services, local and regional contracting and inventory, on the street payments, etc. This sector has been ignored by the EDI industry, or the few applications that have infiltrated are for the top end cleavage of the mid market. Most of these companies have standard internal systems that are bought once, rarely upgraded (especially now), and they no or little IT labor in house beyond sys admins.

Where is the mid market commerce systems consumer going for their post recession bump – hosted solutions that work with their existing incumbent systems – Boomi, and a million other Cloud platforms that streamline data access, process authoring, and every other big little thing.

This is the new channel, the platforms people, the platforms. They reduce costs to the mid market, they mesh with on-premises systems, and they consume Web Services and external API’s, like ECGridOS.

Self serving? Be that way, but Todd knew that programmers in the corp IT shop needed better EDI tools beyond FTP and AS2, better they needed ECGrid – the big EDI grid – but there was no way to grant this or that program access to the ECGrid….so he went for it and created a grand architecture for EDI called by remote method invocation. Now any program, platform, host, etc., can be global traffic ready, across all VAN routes, with one attachment.

Platforms in particular can now assign unlimited mailboxes, send traffic, track the messages, and control each and every EDI message parameter for any number of hosted clients.

Now, the next step is the Grand, Grand architecture, further APIs and Web Services that break commerce into bite sized easy to use and integrate functions for everything else – partner peering, data access, open market functions, directory functions….the ground floor is now in place with ECGridOS- with Loren’s API, any higher level API layer can communicate across the globe (not just X12 parcels, either), and applications gain access to the biggest and best EDI routing grid on the planet….the Akamai of EDI, if you will.

The leverage comes from the new era of the cloud platforms entering the mid market, and the EDI and ecommerce vendors partnering with them and thousand of other light commerce web services vendors that never heard of EDI, or only heard bad things about how hard it is to use. Not any more, that stops now.

Stay tuned for some colorful and descriptive materials about what the new higher level commerce APIs will look like. It takes an industry to reinvent itself, no one will do it for you.

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