Importance of High Availability for B2B e-Commerce

The Importance of High Availabilityfor B2B Integration

Considerations for B2B e-Commerce Strategists

A G X S W H I T E P A P E R

B2B e-commerce is often

not a high priority in

corporate business

continuity strategies.

THE IMPORTANCE OF HIGH AVAILABILITY FOR B2B INTEGRATIONA GXS White Paper

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If you asked business or IT executives to list the top 10 mission critical applications in their enterprise, very few would list B2B e-commerce. For many leaders in the retail,manufacturing or services sector, B2B e-commerce is not considered a strategic applica-tion. The attitudes towards B2B are reflected in the investment levels in business continuity plans for B2B infrastructure. Most corporate disaster recovery managers focus on internal enterprise applications when developing business continuity strate-gies. Such a prioritization seems logical upon first consideration. In the event of a disaster, common sense would suggest that you prioritize the recovery of the applica-tions your own employees use above those used by your business partners. What manyIT leaders fail to consider is that without operational B2B platforms, many internalapplications, such as ERP, lack the data needed to operate and are therefore significant-ly handicapped. In fact, enterprise dependency on B2B applications has grown substan-tially in recent years as businesses have become more dependent upon their partners.Today, B2B is an application that can be just as critical as CRM, ERP or e-mail.

This white paper will explore the importance of B2B in today’s enterprise environment,with a focus on the need for highly available, resilient platforms to conduct e-com-merce. Specifically, the following discussion will explore how:

• Changes in the value chain have made organizations more dependent upon business partners than ever before.

• B2B information exchange has become so critical that it is one of the top metricsthat customers in many industries use to measure partner performance.

• Many business processes in manufacturing and the services sector are crippledwhen a failure in B2B communications occurs, resulting in potential for significantfinancial loss.

• Government regulations are forcing corporations to put formal business continuityprocedures in place for B2B communications.

• Few enterprises or B2B service providers have made the necessary investments tosupport a highly resilient B2B architecture.

• Significant ambiguity exists about what constitutes true availability in the B2Bsector.

After establishing the impact of B2B communications downtime on the supply chainand business operations, a methodology for evaluating the resiliency of B2B architec-tures will be offered. Best practices for designing highly available B2B architectures andmeasuring the ongoing performance will be introduced.

B2B e-Commerce—A Strategic Application?

Corporations are trans-

forming from vertically

integrated models to

become more specialized,

depending upon a net-

work of partnerships to

help design, manufactur-

er, transport and service

products.

Automotive OEMs are

shifting responsibility

for vehicle subsystem

manufacturing, supply

chain management and

raw materials production

to business partners.


3

Value Chain Evolution Raises Importance of B2B

In the early days of manufacturing, vertically integrated companies would produce all of the raw materials and component parts required to build their products. The past 100 years haveseen radical transformations in value chains. Corporations have become more specialized,depending upon a network of partnerships to help them design, manufacture, transport andservice their products. To illustrate the changing nature of value chains, let us explore thedynamics of three of the larger manufacturing sectors—automotive, electronics and consumerproducts.

AutomotiveConsider the automotive industry. In the early days of car manufacturing, companies such asFord produced all of the materials and performed all of the manufacturing necessary to build a vehicle. The OEM would produce everything from the raw materials such as steel, glass andrubber to the various parts in the engine, exhaust and suspension systems. The automotive supply chain has transformed considerably from the original vertical integration model. Today’s automotive industry is horizontally structured. OEMs are removed from the raw materials process almost entirely. Specialized Tier 3 suppliers produce the steel, aluminum, rubber, glass and leather materials needed for today’s vehicles. OEMs have transformed primarily into brand owners with much lighter supply chain management and productionresponsibilities. Instead, design, development and assembly of vehicle components and subsystems are performed by Tier 1 suppliers. Today’s automotive OEMs are focused on driving market demand, innovating product design and enhancing the customer experience.Automotive manufacturers enjoy much higher profit margins from financing services, extendedwarranties and aftermarket parts than they do from new vehicle sales. Consequently, the industry focus is shifting from the traditional model of just selling cars to a new paradigm centered upon higher margin add-on service transactions.

End-Customer Sales

Finished Vehicle Production

Sub-Assembly Production

Components Production

Raw Materials Production

Vertically Integrated

Horizontal Landscape

1930s 2000+

FIGURE 1: TRANSFORMATION OF AUTOMOTIVE INDUSTRY

Electronics OEMs are shift-

ing more of the design,

development, manufactur-

ing and service of compo-

nents, subsystems and

software to business

partners.

Consumer products compa-

nies are shifting more

manufacturing, marketing,

sales and distribution

functions to their business

partners.


4

ElectronicsThe high tech industry offers another example. Just a few decades ago when mainframe com-puters were introduced, companies such as IBM owned the entire value chain. OEMs manufac-tured all the components—storage, CPU, memory, displays and peripherals. Software applica-tions were developed by the hardware manufacturer as well. Early mainframe OEMs such asGE, IBM and Honeywell developed the operating systems, databases and business applicationsfor their platforms. In fact, the OEM often provided all the support services including data cen-ter hosting, call center support, systems management and application upgrades. The high techsupply chain has transformed from its originally vertical integrated model. Today’s computervalue chain is horizontally structured. High-end server equipment is assembled and marketedby an OEM brand owner. However, the hardware components are made by various independ-ent suppliers. For example, the memory may be manufactured by Kingston, the CPU by Inteland the storage by Seagate. Software applications are developed by an independent communityof developers. For example, a server-grade operating system might be developed by Microsoft,business applications by SAP and a database management system by Oracle. OEMs offer servic-es such as hardware maintenance, call center support and systems integration. However, manycorporate customers prefer to buy custom development, application hosting and IT outsourcingfrom specialized providers such as Accenture, Wipro and EDS.

Consumer ProductsConsumer products companies are transforming the value chain as well. Historically, brandowners such as P&G, Coca-Cola and Nike performed design, development, manufacturing,sales and distribution of their products. Raw materials such as sugar, corn or wheat were oftensourced from third parties. However, manufacturing and supply chain management were con-sidered core competencies of consumer products leaders. Today, consumer products companiesare developing more specialized operations focusing primarily on activities in which they cangain a competitive advantage. Some are becoming brand companies with strengths in marketresearch, product design and demand creation. Others are specializing in manufacturing, actingas contractors for their retail customers or even other consumer products brands. Non-corefunctions are outsourced to specialized third parties around the world. In the apparel sector,third party contract manufacturers are used to produce clothing and footwear in low cost geog-raphies. In the food industry, specialized brokers often are used to manage the product sale andcustomer relationships with selected retailers. In the beverage industry, distributors performstore delivery, product replenishment and regional marketing. In the media and entertainmentsegment, Fourth Party Logistics Providers (4PLs) provide expertise in category management,new product introductions and in-store advertising.

The examples above demonstrate the transformation that has occurred in supply chains over the past few decades. Manufacturers have migrated from vertically integrated models to more specialized approaches leveraging outsourcing partners. To support the new model, manufac-turers have built an international community of specialized partners to help manage their supply chain. Specialists take many forms, employing a variety of business models. Commonvalue chain participants are outlined in Table 1.

Back office functions such

as payroll, marketing and

information technology

are increasingly being

outsourced to third party

providers.


5

TABLE 1 - SPECIALIZED TRADING PARTNERS

Specialization and outsourcing are not limited to the supply chain. Increasingly, back officebusiness processes are being sourced to specialized third parties. Examples of outsourcing existin every major business function. Traditionally, business process outsourcing has focused ontransferring selected functions within an organization to an external firm. Common examplesof outsourcing selected business functions include:

• Payroll—Payroll processing is one of the most popular business functions to outsource.Specialized providers will assume responsibility for employee pay distribution on behalfof human resources. The processors will host the software applications which calculatepersonnel salaries, tax withholdings and benefit contributions. Payroll providers can alsomanage the actual payment processes including paper check printing, electronic fundstransfer or stored value cards.

• Information Technology—A wide variety of information technology outsourcingproviders are on the market. Some firms specialize in running a corporate IT infrastruc-ture including network management, desktop support and data center operations.Others will take on a broader scope including business process consulting, custom software development and ongoing application maintenance.

Design and Assembly

Transportation

Logistics

Sales Channels

Marketing Services

Financial Services

Business Function Specialized Trading Partners

Original Design Manufacturers (ODMs)Contract manufacturersPostponement specialistsMarine transportationAir transportationRail transportationFull truck load (ground transportation)Less than truckload (ground transportation)Third party logistics providersCustoms brokersImportersExportersFreight forwardersConsolidatorsDistributorsBottlersBrokersAgentsResellersFourth party logistics providersMarketing specialistsBanks for payments and foreign exchangeLenders and Factoring ProvidersCommercial Trade Insurers

The business process out-

sourcing model in which

companies outsource

entire organizational func-

tions such as human

resources or finance is

becoming increasingly

popular.


6

• Marketing—Outsourcing of selected marketing functions to specialized third parties is acommon practice. Traditionally, corporations have sought outside assistance with branddevelopment, advertising and public relations. In the past 10 years, more specializedfirms have emerged to manage primary research projects, product concept testing, web-site design and search engine optimization.

A new breed of outsourcing is emerging that extends beyond the selective sourcing approachesused in the past. In the new model corporations are beginning to outsource entire functionaldisciplines to third party providers. Examples of business process outsourcing include:

• Finance and Accounting—Business process outsourcing for finance and accounting is anascent, but quickly growing, area. Specialized providers can offload the entire financefunction from an organization including accounts payable, accounts receivable, tax man-agement, treasury management, risk management and regulatory activities.

• Human Resources—Another growing area of business process outsourcing is humanresources. A number of multi-national corporations have contracted with third parties to provide personnel management, organizational development, recruiting and hiring,benefits administration, compensation planning and strategy and performance manage-ment services.

In both the manufacturing and services sector the trend is clear. Corporations are specializing.Industry leaders are developing core competencies and deep expertise in particular niche func-tions. The specialized focus enables higher levels of innovation with better economies of scale.The benefits of the new business models are significant. However, the risks should not beunderestimated. The specialization of roles that occurs with horizontally structured value chainscreates a strong dependency upon business partners for day-to-day operations. The implicationsof the change can be substantial, particularly if the choice of business partners proves to beproblematic. Consider what the impacts would be if a key value chain partner became financial-ly insolvent or suspended operations temporarily. The disruption to a supply chain and businessoperations could last for days, if not weeks.

There are implications for information technology strategy as well. In today’s specialized valuechain, information systems are dependent upon your business partners as well. Applicationssuch as ERP quickly become inoperable without data feeds from external sources. In fact, ahigh percentage of the data housed in enterprise applications actually originates from externalbusiness partners. Examples are illustrated in Table 2.

Due to outsourcing and

specialization in the value

chain, an increasing per-

centage of corporate data

comes from external busi-

ness partners.

The delay in transmission

of an ASN, can stop manu-

facturing lines in the auto-

motive industry.


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Without reliable information exchange between business partners, the value chain becomes dysfunctional. Consider what the impacts would be if a company’s B2B communications wentoff line for 24 hours? How many orders would be lost? How many customer credits would you have to be issued? More importantly—How much credibility would be lost?

Supply Chain DisruptionTo further understand the dependence of business processes on B2B communications, let usexamine three case studies from various industries.

• Automotive Logistics—The transportation process used in the automotive sector offersan excellent example of how disruptions to B2B communications can cripple manufac-turing activities. There is a growing trend for suppliers to co-locate their plants in closeproximity to their customer’s manufacturing operations. The short distances betweencustomer and supplier sites can reduce transportation costs and lower inventory levels.Furthermore, it offers an enhanced level of responsiveness to changes in manufacturingschedules or end-customer demand patterns. Depending upon the distance between thesupplier and customer plant, the time to transport goods may be as few as 15 minutes.When the materials leave the supplier’s plant an advanced shipment notification (ASN)is transmitted electronically to the customer’s receiving system. The ASN communicatesthe details of the truckload, including shipment contents, transportation carrier, expectedarrival time and routing instructions. If electronic communications between the supplierand the customer are interrupted or delayed, the truck may arrive at the customer’s plantbefore the advanced shipment notice. Consequently, the receiving department at the cus-tomer location will not have a record of the shipment. The parts and materials will beheld until they can be correlated with a specific order. If the ASN is delayed for severalhours, downstream manufacturing processes could be delayed or suspended due to the

TABLE 2: EXTERNAL DATA SOURCES FOR BUSINESS APPLICATIONS

Enterprise ResourcePlanningProcurement andSourcingTransportationManagement SystemFinance and Accounting

Treasury Workstation

Human Resources

Information Technology

Business Application Data Sourced from Outsidethe Enterprise

External Business Partner Sources

Customer Forecasts, CustomerOrdersProduct Catalog, Pricing,Promotions, Vendor Shipment Status, Import/ExportDocumentationSupplier Invoices, CustomerInvoices, Remittance Advices,Payroll, General LedgerBank Account Statements, ForeignExchange Transactions, SecuritiesOwnershipRecruiting, Performance,Compensation, Employee recordsData center, network, applicationstatus, Trouble ticket status

Customers, Distributors, Brokers,Agents, ResellersVendor/SuppliersMarine, Air, Rail TransportationProviders, Freight Forwarders, CustomsBrokers, LTL, TL, Parcel Carriers, 3PLsVendors, Customers, F&A BPOProviders, Payroll BPO Providers

Cash Management Banks, SecuritiesBroker/Dealers, Foreign Exchange Banks

HR BPO Providers

IT Outsourcing Providers

VMI processes used for

production manufacturing

are critically dependent

upon B2B e-commerce.

Corporate payments for

employee payroll, govern-

ment taxes, shareholder

dividends and loan repay-

ments are dependent upon

B2B communications

between banks and their

customers.


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lack of availability of critical parts or materials. Suppliers are typically penalized withinvoice deductions or lower performance ratings when problems with the ASN occur.

• Manufacturing VMI—Some manufacturers are moving one step beyond plant co-loca-tion to vendor managed inventory (VMI) models. The VMI model requires the supplierto assume responsibility for the ownership of the inventory up to the point of consump-tion. The supplier must monitor inventory levels to ensure parts are always available atthe customer’s location. It is cost-prohibitive to have an on-site person in each customerlocation monitoring inventory. As a result, software-based VMI applications are used tomonitor consumption. VMI applications typically track inventory on-hand, in-transit,on-order and out-of-stock at an individual part level. VMI software can model and pre-dict out-of-stock situations based upon forecasted manufacturing and delivery plans.When an out-of-stock situation is predicted, the application will send a replenishmentrequest to the supplier electronically. But what happens if the electronic communicationsbetween the customer’s site and the supplier’s order fulfillment applications are interrupt-ed or delayed? The replenishment request may not be fulfilled or even received before anout-of-stock condition occurs. For VMI programs supporting production operations, theconsequences can be significant. Manufacturing processes may be suspended until thenecessary parts or materials are available. The labor force may be sitting idle for severalhours. The manufacturer may not be able to meet demand downstream resulting in theloss of sales or issuance of penalties. Repeated manufacturing delays could result in a lossof business with key accounts.

• Corporate Payments—B2B communications are not just critical for the supply chainsector. Financial activities can be impacted by disruptions to B2B connectivity as well.High value payments and funds transfers offer an excellent example. Most payments arecleared and settled through automated clearinghouse and wire transfer systems. Thesewholesale payment systems typically operate during a limited set of business hours. As aresult, banks establish payment cutoff windows with their customers. Payments andfunds transfers submitted before the cutoff window will be executed the same day. Thosenot received before the cutoff will be postponed until the next business day. It is com-mon for corporate treasury departments to wait until the mid-afternoon to submit theirdaily batch of instructions. As a result, banks must be prepared to accept and process ahigh volume of payments in the last hour before cutoff. If there is an interruption ordelay in B2B communications during the peak processing timeframe, funds transfersmay not executed as planned. Delayed payments result in SLA violations by the bankand financial compensation to the customer. Repeated missed payments can negativelyimpact a bank’s relationship with their corporate client and result in a loss of business.The implications for the corporate client could be far more significant. If a loss of B2Bconnectivity occurs, most likely not one, but an entire series of payments will not be exe-cuted. Delays to employee payroll, government taxes, shareholder dividends or bank loanrepayments could have expensive consequences. Failure to execute a funds transfer on a

The impacts of B2B down-

time have become so sig-

nificant that they are now

one of the key perform-

ance indicators used to

rate suppliers.

A VCF study found that

20% of the 500 most

common causes for

invoice deductions were

related to B2B e-com-

merce.


9

particular day could result in late-payment penalties, overdraft banking fees and evenlower credit ratings.

Customer SatisfactionDue to the potential consequences of B2B communication interruptions, large buyers havebegun to measure and penalize suppliers for downtime. These metrics are tracked as part of anoverall supplier scorecard program. Measurement programs have become common policy forlarge buyers in the aerospace, automotive, electronics and retail industries. Suppliers are ratedmonthly, quarterly or sometimes annually by their ability to meet the buyer’s Key PerformanceIndicators (KPIs). Poor ratings can affect a supplier’s competitiveness in renewing contracts ornew business proposals. In some cases, buyers in procurement organizations will use a weak per-formance rating as leverage to negotiate better prices or contract terms.

A common example of a B2B communication metric tracked by many buyers is order acknowl-edgement response time. Customers will measure how quickly a supplier confirms acceptanceof a purchase order. Time frames of two to four hours are most common. In some cases, thelack of a response within a specified time frame constitutes acceptance of the buyer’s terms.

The Vendor Compliance Federation (VCF) recently conducted a study to assess the extent towhich B2B communications are being measured in supplier scorecards. The study found that20 percent of the 500 most common causes for invoice deductions were related to EDI (B2B e-commerce). Table 3 highlights the most common supplier metrics identified in a recent VCFstudy of the retail industry.

Note that several of the top measurement categories track criteria related to the advanced ship-ment notification or barcode label. In fact, VCF found that the fourth most frequent invoicededuction category was ASN-related problems. Failure to deliver complete, accurate ASNs in atimely manner can have a significant impact on vendor performance ratings. Consider forexample the scenario in which an interruption to B2B communications delays the ASN of a

TABLE 3: COMMON DEDUCTION CATEGORIES USED IN US RETAIL INDUSTRY

Source: Vendor Compliance Federation

Purchase OrderEDIFloor ReadyPackaging & MarkingTransportationPurchase OrderTransportationEDIFloor ReadyFloor ReadyPurchase OrderEDI

Category Violation

Late ShipmentNo Advanced Shipment NotificationPoor Quality, Un-scannable or Un-readable BarcodeNo GS1 128 LabelsWrong Transportation CarrierOver-shipmentShipped to Wrong LocationLate Advanced Shipment NoticeWrong Barcode LabelWrong Retail PriceUnauthorized SubstitutionsBill of Lading—Missing or Incorrect on ASN

Vendor scorecards are

becoming increasingly

popular in the corporate

banking sector as clients

seek quantitative methods

to assess their financial

institution's performance.


10

critical shipment. The supplier will be penalized even if the physical shipment arrived in full, ontime and at the specified quality level. The delayed ASN could result in a decrease in perform-ance rating from five out of five to a three out of five. The lower rating may be the differencebetween the supplier winning or losing their proposal to renew an annual contract. Having ahighly reliable B2B communication service with fast throughput time frames is critical toachieving a strong performance rating on supplier scorecards.

Service level measurement has become more popular in the services sector as well. The corpo-rate banking industry offers an excellent example. Third party institutions such as GreenwichAssociates and Phoenix Hecht conduct independent surveys of bank customer satisfaction on a monthly basis. The results of the surveys are published in the form scorecard ratings for indi-vidual banks. More frequently, corporate clients are demanding the option to review copies ofsatisfaction scorecards as part of their bank selection processes. Increasingly, corporate clients are requesting that banks develop their own scorecards with customized metrics specific to particular accounts. For example, many corporate clients want to ensure that banks process high value payments within seconds of receipt. Examples of service quality metrics commonlymeasured in the banking sector are outlined in Table 4.

Note that several of the key metrics relate to electronic transmission of account status databetween the bank and their client. A March 2006 Tower Group report titled Service Quality inTreasury Management stated:

“Superior service quality is the most important avenue for differentiation among treasury management service providers... The institutions that lag their counterparts in service qualityare likely to see decreased market share, reduced profit margins, and relegation to status of a second tier provider...”

Bank-to-corporate communications represent an important subset of the service quality metrics.Success in the corporate banking sector demands a reliable, high performance B2B integrationplatform.

TABLE 4: EXAMPLE BANKING SCORECARD FOR CASH MANAGEMENT

Source: Tower Group

Service Quality Metrics

Electronic Transmission of Daily Statement InformationElectronic Transmission of Daily Funding InformationElectronic Transmission of Monthly Billing Information

Percent of Previous Day Reporting Deadlines MetPercent of Current Day Reporting Deadlines Met

Information & Statement Accuracy and Transmission QualityNumber of Open Information, Statement and Billing Inquiries

Average Resolution Time of Closed Inquiries

Government agencies and

ministries have begun to

include business continu-

ity in regulatory policy.

Even if a B2B communica-

tion failure does not lead

to business disruption, it

may result in missed

opportunity costs.


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Regulation

Customers are not the only group tracking performance of B2B communications. Governmentagencies have enacted regulations governing business continuity policies in various industries.Examples of guidance or legislation in the health care, financial services, government and publicutilities sectors are outlined in Table 5. These regulations govern a broad scope of IT functionsof which B2B is only a subset.

Business continuity is important even for industries without a specific government regulation.In today’s market there is an expectation amongst shareholders, customers and suppliers thatthe necessary efforts to make systems highly available will be performed.

Missed Opportunities

Business disruptions which suspend manufacturing activities or interrupt financial operationsare often the most straightforward examples of the costs of B2B downtime. Equally impactfulare scenarios which do not necessarily disrupt operations, but instead result in missed opportunities.

The Vendor Managed Inventory (VMI) process in the retail sector offers an example of howdisruptions to B2B communications can lead to missed opportunities. VMI is enjoying adop-tion in the big box retail segment for a variety of product categories which have complexdemand patterns such as video games, movies and music. The retail VMI process typicallyworks as follows. Each night the retailer aggregates point of sale data from its stores and trans-fers the information to the brand owner. The brand owner will use the sales consumption dataalong with its last-known store inventory positions to assess stock positions at each individuallocation. The data is fed into a replenishment application which can calculate SKU-level stock-ing needs for each store. The calculated replenishment quantities are then sent to local distribu-

TABLE 5: SELECTED REGULATIONS IMPACTING BUSINESS CONTINUITY

Health Care

Government

FinancialServices

Utilities

Industry Regulation Business Continuity Impacts

US Health Information Portability andAccountability Act (HIPAA)US National Institute of Standards andTechnology (NIST) Special Publication 800-34, Contingency Planning Guide forInformation Technology SystemsBasel II, Basel Committee on BankingSupervision, Sound Practices forManagement and SupervisionUS Federal Energy Regulatory Commission(FERC), RM01-12-00 (Appendix G)

Requires data backup plan, disaster recoveryplan and emergency mode operation plan.Defines detailed recommendations from NIST,requiring contingency, disaster recovery andcontinuity of operations plans.

Requires that banks put in place business continuity and disaster recovery plans to ensurecontinuous operation and to limit losses.Mandates recovery plans.

Source: Gartner—Laws Influence Business Continuity and Disaster Recovery Planning Among Industries—

11 July 2005—Number: G00128123

Retailer replenishment

processes in the VMI

model depend upon the

exchange of point of sale

and inventory data with

the brand owner and

distributor. B2B communi-

cation failures can result

in out-of-stock situations

and missed sales opportu-

nities.


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tion centers for routing of product to each location in time for store openings. As a result, con-sumers can expect to find the product of their choice at their local retailer.

The technology infrastructure required to support the process can be very complex, requiringhigh levels of reliability and throughput. Each retailer captures different sales information dueto variations in POS applications. As a result, the files sent from each retail chain will vary instructure and content. Data must be cleansed and standardized before it can be analyzed by thebrand owner’s replenishment algorithms. Capacity is another challenge. Very high volumes ofdata must be transmitted, re-formatted and analyzed in a relatively short time window to enablea daily store delivery model. Brand owners only have a few hours to cleanse and analyze thedata. The few hours between the nightly store closing time and the morning truck dispatch donot leave much room for error. If there is an interruption or delay in the exchange of demanddata between the retailer, brand owner and distributor, the process breaks down. Stores forwhich data is not processed will not have a replenishment order. If a truck visits the store on its route, the driver may be able to visually inspect the store shelves for out-of-stock inventory. The truck driver can sometimes pull products off of the truck to fill the shelves. However, thedriver may not be carrying the right inventory or sufficient quantity to replenish each of thestores. There is a missed revenue opportunity for both the retailer and the brand owner duringout-of-stock situations. The opportunity costs are highest for recently introduced products.Often brand owners perform extensive marketing to drive consumers to the stores for the newproduct introductions. New offerings typically enjoy higher prices and margins, particularlywhen there is less competition on the market. When VMI replenishment processes are inter-rupted, not only will consumers be disappointed to find out-of-stock situations, but the brandowner will lose out on high margin sales.

Corporate cash management offers another example of the opportunity cost associated withB2B communication. Large corporations use a pool of bank accounts in various countriesaround the world to fund their day-to-day operations. The local accounts are used to remit pay-ments to suppliers, employees, investors, retirees or government agencies. The accounts are alsoused to collect receivables from government, business and retail customers. At the end of anygiven business day, the summation of all the payables and receivables will result in a net cashdeficit or cash surplus. If there is a cash deficit, the treasury department will draw upon a bankline of credit to fund the shortage. If there is an end of day cash surplus, treasurers will put thebalance to optimal use. In most cases the money will be invested in an overnight interest-bear-ing account such as a sweep. Alternatively, the funds may be transferred to another operatingcompany to offset a deficit. Ideally, a corporation would put all available funds to use and azero balance would exist in each account at the end of each operating day.

Identifying idle cash requires the ability to obtain accurate account balance data for each of thecorporation’s various bank accounts. Corporate treasury departments are dependent upon a feedof account balance information from each of their banks to assess their cash position. If theB2B communications between a corporation and its banks are interrupted, the treasury depart-ment will have an incomplete view of their global cash balances. If a significant cash surplus

The first step in assessing

high availability require-

ments for B2B is to identi-

fy the financial impacts of

downtime.


13

exists, the opportunity costs of missed interest payments could be substantial. Treasurers can usethe web, phone, fax and email to gather the data from individual banks. However, the manualdata collection process will be time-consuming. Manual processes can usually not be completedin the critical time window near the end of the day in which account balances must be evaluat-ed and investment decisions need to be made.

The examples above represent just a few of the scenarios in which a supply chain disruption ormissed business opportunity might occur due to a loss of B2B communications. With a greaterappreciation of the impacts of downtime in B2B integration, we will now explore a methodolo-gy and best practices for developing a highly available e-commerce infrastructure.

Defining High Availability in B2B

To develop a business continuity strategy for B2B integration, the corporation needs to under-stand the acceptable amounts of downtime that business processes can accommodate.Downtime is typically measured by two factors:

• Recovery Time Objective (RTO), which refers to the maximum acceptable length of timebetween the point of disruption and the recovery of critical functions. In other words,RTO measures how long B2B communications were interrupted.

• Recovery Point Objective (RPO), which refers to the point in time to which data must berestored in order to resume processing. In other words, RPO measures how many B2Btransactions need to be reprocessed due to the outage.

To assess the maximum acceptable RTO and RPO for your business processes you should con-sider a number of factors:

• Acceptable Latency—Some business processes require information exchange to occur innear real time over a period of just a few seconds. Other business processes may toleratehigher levels of latency with transactions being orchestrated over a period of minutes oreven a few hours. Example transaction sets with typical latency time frames are exhibitedin Figure 2.

• Customer Impacts—Transactions which are measured by customer scorecards or thosewhich are regulated by government legislation should receive a higher level of focus.Financial penalties will result if such transactions are delayed due to downtime.

• Manual Workarounds—Some business processes have manual workaround proceduresthat can be executed if a loss of B2B communications occurs. Scenarios with reasonableworkarounds can reduce the operational impacts of downtime.

With a full understanding of the financial and operational impacts of downtime, IT organiza-tions can design the B2B architecture to meet the necessary RTO and RPO objectives.

True Availability Tenet

#1—Measure uptime of

the entire B2B architecture

versus the uptime of each

individual component.


14

There are additional dimensions beyond RTO and RPO which must be considered when struc-turing high availability measurements in B2B. GXS recommends that B2B architectures beevaluated on the concept of “true availability,” which offers a new framework for corporationsto assess the operational and financial impacts of downtime. True Availability is based upon two tenets not traditionally factored into high availability metrics:

• System-Wide Availability—Uptime of the entire B2B architecture as opposed to measur-ing the uptime of individual architecture components or selected subsystems.

• End User Availability—Uptime as experienced by the end user of the B2B services asopposed to the IT organization or service provider which often exclude scheduled main-tenance periods.

Let us explore these two tenets of True Availability in further detail.

Tenet #1—System-Wide AvailabilityTo appreciate the concept of system-wide availability, one must understand the structure of atypical B2B platform. B2B architectures are based on an integration broker, which typically actsas a gateway for all external communications. The integration broker uses a services orientedarchitecture to link enterprise applications with the systems of external business partners. It iscommon for large companies to offer a choice of multiple interface types to their trading part-ners. Larger business partners will prefer a direct, Internet-based connection for data exchange.Small and midsize partners will interact either through a third party B2B integration provideror a web-based portal. A typical B2B architecture is illustrated in Figure 3.

For a B2B communication to be fully functional all components of the architecture must behighly available. Many IT architects focus high availability investments on the heart of the B2Binfrastructure, the integration broker. As a result, the trading partner interfaces such as Internetcommunications and the web portal are often exposed to single points of failure. The lack ofresiliency in trading partner interfaces can result in significant business impact if an outage

FIGURE 2: ACCEPTABLE TRANSACTION LATENCY FOR KEY BUSINESS PROCESSES

• Purchase Order

• Commercial Invoice

• VMI—Daily Replenishment

• Import/Export Declarations

• VMI Signal—Intra-Day Replenishment

• Advanced Ship Notice

• Health Care Eligibility Inquiry

• Field Service (Emergency Request)

• High Value Payment or Funds Transfer

Hours Minutes Seconds

True Availability requires

both B2B Gateways and

Trading Partner Interfaces

to be designed for busi-

ness continuity.


15

occurs. Even the portals and third party integration providers used by small and midsize busi-nesses can cause business disruption. Some might incorrectly conclude that a smaller businesspartner cannot have a material impact on a supply chain or business function. However, thesize of a supplier is in no way reflective of their importance to the supply chain. It is not com-mon for even the largest retail and manufacturing companies to depend upon small businessesfor critical parts or services. A true high availability architecture for B2B must include a fullyredundant suite of trading partner interfaces. Internet connections, web portals and third partyprovider architectures should be evaluated for single points of failure that may lead to serviceinterruptions.

One of the most challenging aspects of evaluating the resiliency of a B2B infrastructure is identi-fying potential failures from third party service providers. The internal architectures and opera-tional processes of B2B integration providers are often a mystery to corporate customers. Fewcorporate buyers spend much time evaluating the business continuity capabilities of their serviceprovider’s infrastructure. Instead, corporate buyers typically select B2B vendors based upon trans-action pricing rates. However, in the long term, a narrow focus on transaction pricing may notresult in the optimal financial benefit to the corporation. Many of the lower cost B2B providershave underinvested in the resiliency of their B2B architectures. A prolonged outage at a low priceB2B service provider may lead to manufacturing line delays, retail out-of-stocks, customer com-pliance penalties and lower supplier scorecard ratings. The financial impacts of business processinterruptions and unfavorable performance evaluations will far outweigh the cost savings realizedfrom lower vendor transaction fees.

FIGURE 3: TYPICAL B2B ARCHITECTURE

EnterpriseApplications

B2B Gateway(Integration Broker)

Direct Connections(AS2, S/FTP, HTTPS)

Internet

B2B IntegrationProvider

Web Portal


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To mitigate the risk of a service interruption from a third party B2B provider, you should thor-oughly evaluate the underlying architecture of your vendor’s operations. An example of a typicalB2B service provider architecture is illustrated in Figure 4.

Most service providers focus high availability investments on the core transaction managementcomponent of the architecture. The focus is logical given that the transaction managementmodules perform the most critical and computing intensive processing. However, a single pointof failure in any of the trading partner interfaces, value added services or operational supportsystems can be crippling to the overall availability. Consequently, True Availability demands thata service provider ensure the resiliency and high availability of all components of their infra-structure including:

• Enterprise Communications—For all Internet protocols (AS2, AS3, Secure FTP) andprivate network connections (Point-to-point, MPLS, Frame Relay).

• Small Business Enablers—For services such as fax-to-EDI conversion and web-basedforms; specialized adapters for Intuit’s Quickbooks or Microsoft Excel; and dial-upmodem banks for legacy communications.

FIGURE 4: EXAMPLE B2B SERVICE PROVIDER LOGICAL ARCHITECTURE

EnterpriseConnectors

Small BusinessConnectors

Value Added ServicesOperations Systems

3rd Party Interconnects

Private Line

HTTP/S

Secure FTP

AS2

FTP/S

EDI-to-Fax

Web Forms

Dial-Up

Excel Adapter

Quickbooks Adapter

Transaction Management

Queues

Logging

Event Mgmt.

Archiving

Backup and Restore

Systems Health Monitoring

Logical Security

Database Administration

Call Center

Network Based Translation

Network/Data Encryption

File Compression

Data Quality Management

Reporting and Scorecards

Tenet #2 of True

Availability—Measure

uptime from the perspec-

tive of the end user ver-

sus the viewpoint of the

IT organization.


17

• Interconnects—Often overlooked, but provide critical access to third party networkssuch as VANs (e.g. Sterling Commerce, Inovis, Kleinschmidt), specialized networks (e.g. ANX, ENX, or SWIFT) and industry exchanges (e.g. Covisint, Liaison, Elemica).

• Operations Systems—Must be operational for the service provider to manage theunderlying hardware, software, network and application infrastructure.

• Value Added Services—Such as network based translation and data quality managementwhich may provide critical transformation of the file format or its contents.

B2B service providers should have architected redundancy into each of the subsystems in theirarchitecture.

Tenet #2—End User AvailabilityThe second tenet of True Availability is the measurement of uptime from the perspective of anend user rather than the IT organization or service provider. Many IT organizations and B2Bservice providers are still running their applications on mainframe-based platforms. These lega-cy applications have not been enhanced in years, in some cases more than a decade. Not onlyare these mainframe based systems out-of-date, they require long periods of extended down-time. IT organizations and service providers regularly take these systems offline for periods orfour, eight or even twelve hours during weekends under the policy of “scheduled maintenance.”These service interruptions impact end users, but they are not counted in the reported down-time or even end user SLAs. Consider the example illustrated in Figure 5.

FIGURE 5: EXAMPLE DOWNTIME REPORT FOR A B2B INTEGRATION PLATFORM

0:00

2:00

4:00

6:00

8:00

10:00

12:00

14:00

16:00

18:00

20:00

22:00

SystemAvailable

ScheduledMaintenance

ServiceInterruption

Sun Mon Tue Wed Thu Fri Sat

True Availability requires

“Scheduled Downtime” to

be included in availability

calculations.


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Using the model for measuring B2B system availability, an uptime level of 99.5 percent wouldbe reported. The scheduled maintenance windows on Sunday, Wednesday and Saturday nightswould be excluded from the downtime calculations. Only the fifty minutes of service interrup-tions on Monday evening and Thursday morning would be considered “downtime.”

FIGURE 6: TRADITIONAL B2B SYSTEM AVAILABILITY CALCULATION

However, if measured using the GXS True Availability model, system availability would only be88.8 percent. The 1080 minutes of scheduled downtime would be added to the fifty minutes ofunplanned service interruptions to form the numerator of the availability calculation.

FIGURE 7: TRUE AVAILABILITY CALCULATION

Summary

Despite misconceptions by many business and IT leaders, B2B e-commerce applications haveevolved into mission critical applications. Front office and back office systems depend uponB2B for the data they need to operate manufacturing plants, stock retail stores and processfinancial transactions. With the trends moving toward specialization and outsourcing in thevalue chain, the importance of B2B will only to grow in significance. The financial conse-quences of B2B downtime is too large to ignore. B2B communication failures can result indowntime at manufacturing plants, out-of-stock situations in retail locations, performancepenalties from customers, risk of losing future business, impact to corporate credit ratings andpotential for missed sales. B2B e-commerce strategists need to develop highly resilient architec-tures capable of supporting 24x7 operations with a global community of business partners.Achieving truly high availability levels will require adopting new measurement techniques foruptime and analyzing a broader scope of IT components than historically performed.

GXS can help. We have invested millions of dollars to build a new state-of-the-art infrastructurefor the GXS Trading Grid®. Leveraging data centers in the United States and Europe, GXSoffers the industry’s highest levels of availability for B2B e-commerce. To learn more about ourhighly reliable GXS Trading Grid Ultra offering visit www.ultra.gxs.com.

System Availability =Unplanned Downtime in Minutes

Total Minutes per Month

System Availability =Unplanned Downtime in Minutes + Scheduled Maintenance Time in Minutes

Total Minutes per Month

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About GXS

GXS is a leading global provider of B2B e-commerce solutions that simplify and enhance business process integration, synchronization and collaboration among trading

partners. Organizations worldwide, including 75 percent of the Fortune 500, leverage the GXS Trading GridSM to extend supply networks, optimize product launches,

automate warehouse receiving, manage electronic payments and gain supply chain visibility. With an unmatched global presence, proven trading partner management

and B2B outsourcing services, GXS’s on-demand solutions maximize the benefits of integration for businesses.

Based in Gaithersburg, MD, GXS’s extensive global network serves customers throughout the Americas, Europe, the Middle East and Africa and Asia Pacific regions. GXS can

be found on the Web at www.gxs.com.

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