EDI Communication market up in the air, up for grabs, consolidation notwithstanding

My analytical writings for lawyers and regulators have covered the dynamics of interconnections between networks in general and VANs in particular. To say, “The VAN industry was built upon collegial and permissive interconnection policies, in order to create and sustain its nascent sector”, is an ex-post facto spin. The facts are more raw.

I believe that this industry sector called “EDI Value Added Networks”, is in potential jeopardy unless it regains a unity of purpose. That is the sum total of the client satisfaction surveys aggregated from 3 major investment banks, plus my own focused telephone survey of GXS hub class clients, over 800 in total. All of the normalized results point to a damaged and deflating sector. Meanwhile, the transactional volume climbs, which is an indicator  the health  of the underlying technologies – however, there is ample room for improvement even in the tech space of EDI systems.

The EDI Comms industry, writ large, is the beneficiary of a vision, but finds itself running on reflexes, reactions, which will not allow the market to continue forward. If my colleagues do not consider the outlook quite so black, it makes the situation worse – as an institutional blindness may be setting in amongst analysts, and it’s our job to watch things closely from afar, to point out missing elements, while taking the temperature of the customers. With that all said, I don’t like what I see, and if GXS’ track record is being swallowed whole by savvy Opentext, this is just more fodder for negative speculation. Additionally, the endemic weakness of SPS Commerce in its back-end services infrastructure, counterpoised against its stock price and market cap, seem disconnected from the standpoint of critical reality….this baffles me, but at least SPS has created efficiencies in the market for the SME suppliers. I can’t see one good thing arising out of the GXS PE funded rollups. I can say there are many ex-Inovis customers that were thrown onto the GXS heap, and they are a very unhappy user population. Take that one to the bank with the previous generation of ex-IBM IE customers. Never has a 100% functional and robust VAN property been intentionally broken by its new owner, like IE was by GXS. Awful bloody awful, it was.  

The industry is going through a predicted inversion; The giants are not immune. GXS will live by only one or two mechanisms — via momentum, or reinvention.  Otherwise, GXS will die and become a non-performing asset,  leaving its acquirer with over $800M in debt. The type of reinvention needed for GXS to transform from a carcass to a runner will be monumental and absolutely require a 100% change out of the C-Suite. The fear and uncertainty caused by GXS in the Loren Data Transit cutoff has made GXS clients more angry at GXS and negative on the new owners, than any business relationship of Loren Data Corp, which still soldiers on with manifold solutions to the immediate problem of getting EDI data from a GXS Hub ,to an SPS vendor spoke…..for short money, really, in terms of dollars. So, again, Todd Gould shows the industry true stewardship –  again.

The spoils might not be inherited by OpenText, neither by default or divine right. Yet, who will capitalize on the solid groundwork built by Todd Gould (and earlier EDI Network Architects who created X12.56 and other layer seven transit standards)? Todd has made an architecture for the future  of the industry for those  who really, really want to compete and evolve .Such prototypical leaders understand that architecture is everything, which is something GXS never understood or possessed. There is no pre selected winner in the race for the global adoption of a communications architecture.

Loren Data Corp has the goods. It’s unknown (even to me), if Todd has a juicy M&A deal in his pocket. If I had the capital, I would risk it in a minute on ECGrid. Surely, SPS’ silence in the matter will be a variable pressing down their share price. (wouldn’t you want to own your foundational routing tech?).

The prohibitive winner by attribute of agile advantage….is….who? The nominal front-runner for ‘founder’s technical expertise and senior staff’s competence and overall technology portfolio’, is Loren Data Corp, ECGrid, ECGridOS, and Unified As2. The industry, however, has a nasty way of allowing its best and brightest to lay fallow, while rewarding the blunders PE Funds throwing their immense weight behind laggard incumbents (Francisco and GXS). Meanwhile, most of the important facts sail past almost everyone, floating by the leeward side innovative small businesses –  just as one of them turns on a beat to a glorious finish. I still place my bet on Todd Gould.

The VAN Wars are volatile and potentially pyrotechnic; many do not perceive the awful and utterly shameful behaviors outside of their cloister. The gutters of VAN biz dev that I am able to evaluate, is akin to the laying and lining of sewer pipe – metaphorically toxic acts that will hasten this industry’s dissolution, and eventually create enough breathing room for true reinvention by the visionaries. Place your bets, ladies and gentlemen.

What eludes most analysts at the large bureaus,  is that their isolation from the street lever politics in the VAN industry skews their ability to read the stones of the road. From my readings of trade media, and in assembling my personal coverage of the sector, It is plain to me that the remaining mid range and marginal VANs are cutting each other’s throats, when they should be pulling together. It is that simple. This behavior is symptomatic of greater ills plaguing the industry – we all know the game:  No innovation offered from the ostensible leaders, a toxic GXS acts, regulators do not act, the non-existent legal system is confused over the core issues. This is a vexing recipe for the highly invested institutional end-users (of EDI services), the retails and brand marques that drive our global supply chains.

The vendor-spokes fail to grasp the subtleties of this imminent upheaval, while bitter dissatisfaction permeates the industry. This affects the most independent iconoclastic-creatives, who are rightfully tempted to succumb to ennui – which will eventually infect even the most optimistic supply chain clients. This what GXS (and its pathetic daisy chaining ruse) did to the sector; they stole  and tried to eliminate all of the intellectual offspring” of several innovators, who would have (if left unimpeded) driven down costs and made EDI Comms better and better.

As2 is still lacking in many ways –  so Todd made it way better. VAN interconnects are backward and deficient, so Todd automated their setup and error handling in ECGrid. GXS made it personal against  Todd, because they could not compete feature for feature, in quality of support. And, finally, ECGrid is SPS’ VAN, which is the real reason old GXS was so miffed – so they decided to  cut ECGrid’s transit in full view of the USDOJ and FCC.

Todd is reaching out and waiting for a OpenText confab on the practical matters of resolving this ridiculous interconnect matter that will be disruptive to the largest GXS Hub-Scale Clients, but OpenText is shaking up its executive ranks. We shall wait and see? My goodness.

The industry is on the precipice, yet who will take the  definitive position of leadership? One thing I can say without dissembling: If OpenText leadership allows this soon to be GXS engineered disruption of the transactions flowing between the GXS VANs and ECGrid, affecting tens of thousands of trading partners, then, OpenText will own the entire problem and its negative downside, as Todd has repeatedly reached out to the OpenText execs, the hubs, and even old GXS – to offer the most practical and workable solutions.

If OpenText takes ownership of this issue, and works with Todd to put in place the 20 minute fix (i.e., a true reciprocal interconnect), then OpenText can attain something that GXS never had nor could ever attain with love nor dollars: OpenText, by resolving the issue, will be seen as a True Steward of the EDI Comms Sector, as the company that puts trading partners above all – and one who will act to strengthen message deliverability within the entire mesh of Global VANs, first, last, and always. Do it, OpenText, it is within you.

OpenText should invoke a further remedy  –  which would be to use Loren Data Corp’s Platform Technology, use it to fix the ailing TGMS. Within a larger confluence, and in strategic alignment with a true visionary of B2B messaging, OpenText could acquire a superior, scalable EDI Comms routing technology that is generations ahead of what was inherited in the GXS heap.

Rousing his sense of mission (again and again!) Todd has claimed his place amongst the survivors of this period of industry reformation. The business climate will shelter but a few, and among these, the cohort of Loren Data Corp, serving the routing and comms support needs of SPS and other “System Level Operators”, with a handful of principal engineers…..yet how? Because the tech Todd Built is solid, modular, and way out in front of the market. The mediocrity of an outage per week GXS – could in a short time be exchanged for jeweled movement VAN technology, owned by a higher-minded caretaker that really thinks in terms of global reliability. I hope OpenText now understands that the best technology does not come from outsourced technical labor, it comes from the IDE of a genius software engineer.

Although I am being dramatic, I do know that the expertise alone in Todd’s noggin is worth more than his source code – and his code is amazing.

What I have learned in working with the Loren Data Corp:

A climate of collegiality did exist in academia during the formative years leading to the Internet as we know it:  ARPANET, IETF, W3C, and even ITU and CCITT. Research labs that I was once an intern (Mitre and others) were hives of collegiality. Such farsightedness seem totally absent from the EDI world, despite Todd’s best efforts (VAN Summits).

I say for the benefit of the uninitiated, that “collegiality”, for what it was (expediency), seemed collegial compared to GXS’ manifold destructive and anticompetitive practices. I think everyone see where I am going, Hear now my colleagues, this for your edification:

There was never a Golden Age of VANs; there was only expediency and profiteering in the best of cases, during the best of times. The industry is almost OVER and done with – it is only  a matter of time. See the E2.0 Crowd that is mopping up GXS clients daily.

I see an opportunity for the formation of public trading exchanges for EDI communications, in the model of social media driven markets – where relationships are the driving force, and file interchanges and transfers or transactions are a functional, not primary layer. We can thank our clients and prospects for this early epiphany.

Todd built ECGrid to work within the inherited deficiencies of the legacy VAN system, to be independent from the VAN business model, as a design goal (not an end-user network). But things have changed. As the industry continues to crumble, and Legacies of X12 ISA Envelope ID’s become less important to the ultimate future of the business, we must put in place a cooperative alternative EDI network standard via channels built on component network services. For that, starting from scratch is not required, as Todd’s ECGridOS is a great start for all, even GXS! Todd would be the first to contribute the platform to assist in the sector’s reformation. He just wants, as anyone would, a fair exit.

So, the last VAN standing, will truly be the Last VAN, trailing along staggering, thinning, with a wounded and dwindling set of interconnects, as large Hubs switch to differentiated networks that are truly collegial and competitive. In the E2.0 model, it’s not the competition per se, but self-seeded competition comfortable with services diversity and alternative providers who use common platforms (Apache for example) – so we see that as of the present, the EDI Comms market has learned, nada.

We can create a New EDI market, an unsullied patch of land for true professionals and their users, to enable the cultivation of fresh services; SPS has been with Loren Data for 13 Years, and SPS CEO Archie Black still believes, Also, GXS client’s that wish to preserve their connectivity to SPS trading partners only need to pickup the phone and call Todd or Crystal at ECGrid — problem solved. Leave GXS  or keep ’em, but keep transacting with your suppliers on SPS / ECGrid. It’s that easy.

If a shred of collegiality existed between VANs and alternative EDI providers, we would have the formation of standards suitable for growing the industry . Instead, what emerged is a barely adequate technical regime that is rife with opportunities for extortion. Charges assessed that serve no genuine features, VANs that working against their end users, and the only ones who are paying are captive, those who must accept longer contracts or termination; then there are the testing fees on the other end, pointless AS2 certification for totally competent vendors, and the per connection licenses that are blackmail and naught else? 

All of this stinks and should be put right. Then, there is more: blind ID migration lists with no global directory services. No  routing validation services, etc, ad nauseam…..none of this malarkey ever existed in other comms critical industries.

It’s time for the men and women, all EDI professionals and their upper management, to end this temporal madness with an Open EDI Trade Exchange. It can be done. It needs sponsorship. Todd is more than willing to make it happen. Retailers? Here is your chance to shape the EDI industry that way its meant to be – for the trading partners in all things first last and forever. Amen.

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