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February 1, 2002

A Moment of Clarity

The real benefits of Web services may be delivered in the coin of BI

by Justin Kestelyn

Sept. 11th threw the just-in-time (JIT) value chain for a loop. For the first time, the far-fetched scenario in which the national transportation grid goes into lockdown went into play. JIT manufacturers and retailers faced a paradox: Keep sufficient inventory online in case of further disasters, yet keep inventory levels sufficiently low to avoid future oversupply problems.

The latter was particularly important, considering that many manufacturers and retailers had foreseen a poor 2001 holiday shopping season before the attacks. As described recently in The New York Times ("A Brighter Holiday [If the Goods Hold Out]," Dec. 9, 2001), some companies were even willing to risk losing sales by undersupplying popular products last year; the problem was exacerbated by the fact that everyone was clueless about the purchasing habits of the post-Sept. 11th consumer. Some experts believed that the ability to maintain this delicate balancing act would make or break many companies last holiday season. (As of this writing, it's too early to judge the accuracy of that claim.)

As you are probably aware, the source of these problems is that information takes too long to move across the value chain; there is too much latency between consumers and suppliers. And as the Sept. 11th story suggests, even the JIT model, which is designed to cushion the blow of value chain "distortion" by making oversupply less likely, fails to solve the problem.

The solution, of course, is to make information travel across the value chain more quickly than purchase orders do. And what better potential answer than cross-company business intelligence (BI) networks that give every partner involved visibility into customer demand, inventory levels, and logistics?

BI TO GO

Business Objects is to be commended for its efforts here. As of this writing, the company has beta users test-driving a .Net-based Web services SDK that will let customers build what the company calls "second-generation BI extranets" — fully integrated, multipoint BI networks that cross corporate firewalls. (A J2EE edition is expected for general availability in Q2 2002.) According to senior product manager Karl van den Bergh, the SDK represents the first BI application of Web services protocols.

Because Web services are self-describing, dynamic, and based on standards such as TCP/IP and XML (and de facto ones such as SOAP), theoretically a partner could use this SDK to build an interactive BI application that supports the analysis of value chain information originating from multiple applications outside the firewall. The partner would "subscribe" to the required information from a private UDDI directory hosted somewhere along the value chain.

Business Objects is onto something here. The beauty of this approach is that it makes BI links with second- and third-tier suppliers more feasible (no expensive point-to-point connections are required) and eliminates the distinction between internal and external data. It also makes the BI process truly collaborative.

Furthermore, as Van den Bergh points out, some of the traditional barriers to operational Web services — working out service-level agreements (SLAs), for example — are not relevant because no performance issues are involved. (I can see SLAs becoming an issue down the line, however, as these apps become business critical.)

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THE REAL B2B BENEFIT

The fact that strategic business application companies such as Oracle, SAP, PeopleSoft, and Siebel Systems are building Web services frameworks around their products can only fuel the demand for BI networks, although the corporate culture-related challenges of collaborative commerce will still apply.

The Web services movement has been focused on improving B2B collaboration via integrated business processes. But the real benefits of Web services may in fact be delivered in the coin of BI, not transaction processing. The idea is worth a look.