"Edge" Apps Seen Driving Software Market for Next 5 Years

Business process automation at the edge of the enterprise will be the next technology battleground, with XML playing pivotal role - Yankee Group

Business process automation at the edge of the enterprise will be the next technology battleground, with XML playing pivotal role - Yankee Group

Boston — August 30, 2004 — Software applications that resolve "edge" business problems will drive the enterprise solutions market for the next five years as companies look to streamline information exchange with trading partners, according to a new report from technology consultancy Yankee Group.

Companies are buying software to remove barriers that inhibit the speedy and accurate exchange of information between themselves and their customers, suppliers and service providers, writes Yankee in its report "Build an Effective Business Case for B2B Integration: Assess TCO and Benefits."

As the economy improves, this trend will accelerate, and an increasing share of companies' information technology (IT) budgets will be directed toward externally facing supply and demand management solutions, according to Yankee.

A Yankee survey of end users last December revealed that 71 percent of companies had increased spending on what the consultancy calls "edge-of-the-enterprise" applications, or customer- and supplier-facing applications. Spending on such technology rose more than 75 percent in 2003, albeit from a limited base, the consultancy reported. (See related article.)

The consultancy says that today's market leaders are defining their corporate success by technology strategies that are new and differentiated. Wal-Mart, Intel, Lucent, HP and their peers are leaders in changing how companies interact with suppliers and customers.

Now others in their supply chains are following suit. As integration costs fall and new technologies mature, companies that make, move or sell products need to consider alternative supply chain integration approaches, Yankee asserts.

"Market leaders have an agenda to improve electronic relationships with supply-chain partners," says Kosin Huang, business applications and commerce senior analyst at Yankee. "Now these partners face a daunting challenge in defining a concrete business case for XML and Internet technology investments."

Huang says that companies that currently use or plan to use interoperability standards, software or services say that their organization's reason for investment is directly because of a supplier or customer request. But, according to the analyst, these companies require a more substantial business case for investing in interoperability.

"Beyond simply meeting influential partners' demands, many enterprises are uncertain about quantifying [total cost of ownership (TCO)] and identifying business objectives," Huang says.

Developing an effective supply chain integration strategy for the long term requires that companies address these two areas before they can realistically justify or refute technology options, Yankee concludes.

Where should companies be focusing their efforts today to remain competitive tomorrow? See "What's Still Missing in B2B?," cover story in the June/July 2003 issue of iSource Business (now Supply & Demand Chain Executive) magazine for views on this issue from Procter & Gamble Chief Information Officer Stephen David.