Networked Platforms--Solutions for Multi-Party Inter-Enterprise Processes
on Feb 3, 2015
A fundamentally different architecture and a network of pre-connected partners are needed to suitably address processes that are inherently multi-party and inter-enterprise.
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The world of SaaS applications includes both Enterprise SaaS Applications and Networked SaaS Platforms.1 In both cases, a ‘true SaaS’ application is architected to run in a single multi-tenant instance.2 The primary distinction therefore is the Networked platform’s many-to-many model for data, security, and connectivity/onboarding. Here is a comparison:
Enterprise SaaS Application
Networked SaaS Platform
Delivery/Code Sharing Model
Multi-tenant Single Instance
Multi-tenant Single Instance
Multiple One-to-Many Connections (Hubs and Spokes)
Data Isolated per Enterprise, but also Shareable Across Network – Many-to-Many
One-to-Many Enterprise Model
Many-to-Many Network Model
Social Collaboration P2P,
EDI/Messaging, Portal as needed
Platform acts as an Intermediary Broker/Agent for Discovery, Bidding, Tracking, Payment, Settlement, etc. between Multiple Parties
Below is a graphical view of the comparison. It is difficult in a single illustration to capture many of the architectural nuances (such as security permissions or data sharing), but it gives a high level conceptual idea of the difference between the one-to-many and many-to-many architectures.
Networked Platforms are becoming increasingly important. Networked Platforms sometimes become dominant in a specific industry or set of processes. When they do, they usually create a strong network effect, creating many benefits for participants and a barrier to entry for new competitors.4
Enterprise SaaS applications can work well for enterprise-centric applications, such as finance, HR/workforce management, ERP, manufacturing execution (when all production is in-house), and so forth. However for supply chain or inter-enterprise applications, the Network Platform approach has a number of advantages, including:
Pre-Connected Trading Partners and Service Providers—to the extent that the network has built up a critical mass of suppliers, customers, and service providers in your industry, many of your partners may already be connected on the network platform. That can drastically reduce the startup time and effort required to connect and start using the platform with all of your partners. However, it is often still not an instant/zero-effort connection; depending on the industry and processes being served (some processes require more partner-specific configuration) and depending on the amount of relationship-specific customization your company desires or requires, additional, per-partner setup and configuration is often required, even for partners already connected to the network. Nevertheless, the core work of connecting the partner has already been done for you.
Discovery of New Partners—The network provides the opportunity to more easily discover new partners, whether suppliers, customers, or providers of services such as transportation carriers or financial service providers. Depending on the sophistication of the platform, it may provide the ability to search on very specific capabilities and requirements, such as possession of specific machinery and equipment, certifications, geographic constraints, and so forth. Some platforms also provide for rating systems that can help in gaining a level of confidence in trying a new partner. A few even give visibility into actual performance history/record of a specific partner, including suppliers (e.g. on-time delivery, quality), customers (e.g. on-time payment), and service providers (service levels).
Inter-enterprise Orchestration—Network platforms are able to provide multi-party process automation and coordination/orchestration across the multiple players (and potentially multiple tiers of the chain).
Competitive Bidding Marketplaces—Networks provide for open marketplace bidding mechanisms and/or easier discovery and inviting of new bidders for competitive bidding. This can be useful for procurement of all manner of goods and services, where the buyer can either send out an RFP/RFQ or can set up a reverse auction (or the seller may set up an auction). Platforms may also support bidding on ancillary services. For example, a network set up to facilitate end-to-end logistics may not only provide for bidding on carriage contracts, but also on insurance and supply chain finance for those conveyances.
On Demand/Real-time Marketplaces—The network platform model enables marketplaces to provide on demand bidding, linking buyers and sellers for one-time immediate services such as drayage and goods transport (IAS), courier service (Grand Junction), rides (Uber, Lyft, Sidecar), grocery delivery (Instacart), or housing (Airbnb) for example. Many of these examples are more service provider than software company, with their revenue coming from a cut of each transaction rather than a software subscription fee.
Sharing and Leveraging of Network-wide Data—Once a critical mass of participants and usage is established, there are tremendous opportunities to leverage the aggregate (typically anonymized) data across the network. This can be used to analyze and detect trends in prices, performance, conditions (e.g. port or route congestion/delays), supply constraints and shortages, arbitrage opportunities, and so forth. Depending on the data sharing agreements, it may be possible to do benchmarking. Unfortunately, few network platforms do much leveraging and value-add from their network-wide data yet. However, some have begun the journey and have it in their vision and roadmap.
Not all networked platforms will provide all of these benefits. It depends on the market being served, processes supported, architecture and functionality of the platform, and business model of the network.
Broad Range of Networked Platform Types, Capabilities, Attributes
So far we have been describing the commonalities shared by networked platforms. There are also key differences. They may differ tremendously in what problem they are trying to solve, what market(s) they are serving, the depth of functionality provided on the platform, architectural design, security mechanisms, types of related services provided (such as participant vetting or data cleansing), and many other aspects. Some are focused at a specific horizontal domain, such as logistics, that cuts across industries. Others are focused at a specific industry or vertical.
Horizontal/Cross-Industry Networked Platforms
Many networked platforms are set up to address a specific set of processes or functions, across industries. Here are some examples:
Transportation and Logistics—Some of the earliest network platforms arose in transportation and logistics. It is a natural fit because it is a many-to-many process, with so many different players involved in end-to-end moves; beyond the shipper and consignee, there are typically multiple carriers, brokers and freight forwarders, insurers, customs agencies, banks and financiers, port operators, and more. Furthermore, transportation processes tend to be somewhat more standardized across industries (compared to say outsourced manufacturing), hence easier to serve all on a single platform. Various platforms provide a variety of functionality such as transportation sourcing, rating, planning, tendering, customs filings and compliance, route planning and optimization, telematics, track and trace, dock scheduling and yard management, payment and audit, and more. Notice that some of this functionality serves shippers, some serves carriers, and some serves other participants in the network. No single platform has it all, but there are some with very rich functionality, two prominent examples being Descartes and GT Nexus. The latter started with a focus on ground transportation and the former on maritime, but both have expanded their footprints to all modes and rich functionality though in quite different ways.5 A specialty network platform example is IAS, who focused initially on drayage and has since broadened to air freight trucking, LTL, and local pick-up and delivery, as well as the 3PLs managing them. They serve a network of 3PLs, drayage motor carriers, TL & LTL carriers, couriers, chassis providers, repair depots, beneficial cargo owners, air & ocean carriers, and others.
Sourcing and Procurement—Another natural fit for the networked platforms is sourcing and procurement, because each supplier is used by many customers and vice versa. Indirect procurement platforms tend to be more horizontal/cross-industry, whereas direct procurement platforms tend to be vertical or commodity-focused. Examples of sourcing and procurement networked platforms include Ariba, Concur, Deem, Coupa, Basware, and Hubwoo. Most of these platforms focus on providing services for buyers. Some also provide services for sellers, but these are typically not as deep or rich as the buyer services. Functionality may include things like spend analytics, sourcing, contract management, procure-to-pay, supplier management, invoice management, catalog management, marketing programs (for suppliers), travel & expense management, and more.
Supply Chain Finance—This overlaps with both transportation management and sourcing and procurement to some extent, but is different enough that we can put it in its own category. We did a three-part series on it, Supply Chain Financial Network Platforms, which goes into detail on Invoicing and Payment Network Platforms, Trade-Logistics-Visibility Network Platforms, and Financing Network Platforms, with numerous examples.
Networked platforms exist in other horizontal domains, such as supply chain (e.g. demand management, planning, replenishment, inventory management, etc.), PLM and collaborative design, security and identity management, and packaging (though some might consider that to be a vertical).
From e-Marketplace to Network Platform:
A Long and Winding Road
In 2000, 17 global retailers founded the WorldWide Retail Exchange (WWRE). The same year eight other major retailers founded GlobalNetXchange (GNX). In 2005 they merged to form Agentrics, by that time comprising 50 retailers, with over $1 trillion in combined revenue, and thousands of their suppliers. NeoGrid (i.e. “New Grid”), a Brazilian company founded in 1999, bought Agentrics in 2009 to form the company it is today.
Vertical/Industry-Specific Networked Platforms
Back in the late 90s, e-Marketplaces were all the rage.6 Many of these were industry-centric marketplaces founded by coalitions of industry players.7 The bubble burst and many failed, but a number managed to transform themselves into Networked Platforms, hang on and even thrive. Some of these serve multiple vertical sectors. Here are examples from two industries:
Retail/CPG—NeoGrid has become a dominant network platform for retailers (including fashion, electronics, pharmacies, and DIY/Home centers) and for their suppliers (see side bar). They provide supply chain collaboration and synchronization between players across the chain (suppliers, manufacturers, distributors and retailers) with demand planning & replenishment, strategic sourcing, and integration brokerage. One Network Enterprises is dominant in grocery, but their network spans across all retail and CPG sectors. In addition, they have a platform in automotive, defense, and high tech. In this sense, both One Network and Exostar (see below) are sort of a hybrid vertical and horizontal; they could be considered to be a horizontal supply chain platform with broad rich functionality across S&OP, demand management, sourcing, supply and inventory management, logistics, risk management, and more. One Network also has some social networking capabilities, such as chat and ‘blips’ (giant tweets) which can be embedded in the workflows and captured as transactions so they can be reported on.
Aerospace & Defense—Exostar was launched in 2000 via joint investments by BAE, Boeing, Lockheed Martin, Raytheon, and Rolls-Royce. As such they have built a platform that is especially strong in security (see below). They leverage partner’s technology, such as e2Open for supply chain, IBM/Emptoris for sourcing, and Perfect Commerce for procurement. Exostar’s A&D platform serves both aerospace and defense. They also have a Life Sciences industry network platform, serving both pharmaceutical and healthcare, both having similar requirements for extra strong security. One Network serves the Defense sector as well, focusing more on fulfilling the needs of the DoD and armed forces.
This gives you some feel for the variety even within each industry. There are dozens of other vertically oriented network platforms, such as GHX in healthcare, Elemica in chemicals, Covisint in automotive, and e2Open in High Tech.
Specialized Capabilities—Security and Identity Management
Specific firms have developed or acquired specialized capabilities to serve their industries’ needs or other specialized needs. For example, Exostar provides security solutions such as identity management, access management, identity proofing, credentialing, and secure collaboration to serve the defense industry (and pharma). DocuSign, while not strictly a networked platform, has built up the DocuSign Global Trust Network of more than 50 million verified individuals. In both of these cases, Exostar and DocuSign provide services beyond the digital domain to validate and verify the identity of the individuals and entities participating in their networks to ensure security and trust. This is becoming increasingly important as increasingly larger decisions and enormous volumes of trade flow through these networks.
Specialized Capabilities—Social Supply Chain
Another example of a specialized capability is Social Supply Chain. Central to this is the ability to integrate transactional flows with the human interactions and decision making processes that surround them. For example, in sourcing and procurement systems typically deal with RFQs, contracts, purchase orders, and invoices. But around each of those are myriad phone calls, emails, and conversations back and forth between buyer and supplier, as well as between different people within the company. The ability to capture, organize, search, and integrate these with the transaction management functionality has a lot of value. Many companies have been developing these types of capabilities. MACROLYNK is an example of a network platform that was built with social supply chain at its core (for more on them see Transportation Solutions Highlights). MACROLYNK was designed with multi-party exception management in mind. It not only raises the alarm on critical issues, but then brings together the right people and transactional information from multiple organizations across the supply chain—corralling the right experts, decision makers, and information needed to quickly solve the critical issue that has arisen, and providing social collaboration tools to share, interact, and reach decisions.
Specialized Capabilities—Supplier Management and Compliance
All network platforms provide tools for onboarding network participants. Some, such as Hiperos (acquired by Opus), are specifically focused on managing third party partners, their certifications, and their compliance with regulations and company policies. A networked approach enables suppliers to manage the onslaught of requests they get for providing various certificates (insurance, licenses, etc.) and other information and validation processes without being overwhelmed. At the same time, buyers can largely automate the collection and management of all those compliance requirements across potentially tens of thousands of suppliers, using far fewer resources, thereby lowering risks for the firm.
Looking Ahead: Higher-order Integration of Service Partners and Networked Platforms
As mentioned before, one of the key advantages of networked platforms is that you can have pre-integrated business partners, including suppliers, customers, and all sorts of service providers supporting the process directly or indirectly. When these partners are well-integrated into the network, that means that the networked platform provider is now bringing more than just software. They are now bringing a network of service providers and their services.
Networked platform providers can go beyond merely onboarding these participants and start to treat those service providers as part of their vision for the platform, exploring how to make a more complete, holistic, integrated service for customers. We have seen glimmers of this in SAP’s future vision for their Business Network (which includes Ariba, Fieldglass, and Concur). With the Concur acquisition they describe a vision of supporting the ‘perfect trip,’ in which not only are expenses automatically submitted for the traveler, but the platform can provide other services, such as click-of-a-button printing of a presentation, while on the road, which is then automatically printed at a print shop near your destination and delivered to your hotel room by the time you arrive. Or emergency replacement of a laptop that crashed while you were travelling, including restoration of the data and delivery to your next destination.
These require a higher order integration between the service providers, the network platform, and other internal and external systems. The platform provider and service providers could collaboratively define a set of web services that allow these types of services to be autonomously created, requested, confirmed, tracked, fulfilled, and paid for. Here the network platform provider and the service provider are co-creating a set of networked services that go way beyond just some software functionality. It is early days yet in this vision, but this could be the future for providing even more value in some of the most advanced network SaaS platforms.
1 There are also consumer SaaS applications, but these are not particularly relevant in this discussion. -- Return to article text above 2 This does not mean that a true SaaS solution is never run in a single-tenant instance. This might happen, for example, when the user/customer is ultra-concerned about security or performance. However, some solution providers call their application SaaS or cloud when, due to its architecture, the application is not capable of being run in multi-tenant mode and they can only host a separate single-tenant instance of the software for each customer. -- Return to article text above 3 There may still be partner-specific configuration and customization as needed, but core data and configuration is re-used across all partners -- Return to article text above 4 For more on this, see Technology Adoption—Rethinking the Model, on page 9 it describes “Stage 4: The Network Phase—Achieving a Critical Mass of Connected Enterprises” -- Return to article text above 5 Both Descartes' and GT Nexus’ footprints are quite a bit broader than just transportation. Descartes additionally provides commercial B2B, customs filings (security and fiscal filing), and Product Information Management networking services. GT Nexus provides outsourced factory management, procure-to-pay/order management, supply chain finance, inventory management, and more. -- Return to article text above 6 I still recall one estimate that $50 trillion would soon flow through these marketplaces, an insane number considering global GDP was about $40 trillion at the time. -- Return to article text above 7 Examples of bubble-era e-marketplaces include Covisint, WWRE, GNX, GHX, Exostar, and many others. -- Return to article text above
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