Looking at Hosted Integration

Hosted service an option for integrating with small suppliers

St. Paul, MN  September 25, 2001  Companies looking to achieve supply chain automation may want to consider using a hosted service to integrate with their small and midsize suppliers (SMEs). This is based on reports from several recent technology analysts asserting that a hosted supply chain integration service can be a cost-effective option for streamlining interactions with SMEs.

Global companies in the next few years increasingly will move toward including the SME supplier into their business processes via a range of "technologies and service providers," META Group Analyst Kip Martin wrote recently.

Ken Vollmer, of Giga Information Group, wrote in a September report, "The recent availability of trading partner enablement services and software that automates many of the required tasks and offers 'self-service' techniques for others should reduce the complexity and manual efforts required to include large numbers of trading partners into existing data exchange systems."

Hosted integration services can provide enterprises with a way to partner with their suppliers without disrupting existing business relationships. The return on investment in this type of service comes from the automation of order placement, fulfillment and payment, as well as reductions in operational costs and inventory.

SPS Commerce, one of the providers in this space, points to the 35,000 suppliers it has enabled for its clients in the past three quarters as validation of the hosted services market. SPS claims it has seen a 50 percent revenue increase per quarter for the past three quarters, and the company says its sustained momentum is due in large part to the market penetration of the hosted service model.

Discussing SPS' offerings, Jim Frome, executive vice president and chief strategy officer for the company, said: "The service is designed to help large enterprises establish electronic connectivity throughout their entire supply chain, eliminating paper methods like the fax machine. As it is a hosted Internet solution, neither the large enterprises nor their SME suppliers have to install costly software or dedicate in-house resources to maintaining a complex and proprietary program."

AMR Research wrote in its March 2001 Alert on Enterprise Management: "Industry-specific suppliers such as SPS Commerce...are extremely successful in the market. [They provide] what general purpose enterprise applications, including e-procurement, do not: industry-specific process support, focused integration, domain expertise, and a shared hosted data model from which to work."