April 1, 2005

For a very long time, Sterling Commerce had a strong and highly profitable niche in the EDI (electronic data interchange) field. Suddenly, its now possible to use technologies such as XML or even EDI itself over the Web, creating a much lower-cost conduit for sending out purchase orders, commonly exchanged business documents and advanceed ship notices.

That meant price pressure on trditional EDI, and alerted traditional vendors like Sterling that the EDI business model as initially constituted wouldn't survive the onslaught of new technological paradigms.

"We've been making the shift off EDI for the past two to three years," says Sam Starr, Sterling's CEO, noting that the company has prioritized its business-to-business (B2B) and enterprise application integration (EAI) tools and, most recently, developing supply chain execution (SCE) expertise through Yantra.

One of the guiding strategies is to move up the collaboration value chain. EDI is low-level, simple collaboration -- the exchange of business documents between two nodes. B2B collaboration is more complicated because, inter alia, it has more nodes and volume, especially in big data synchronization initiatives that involve product information sharing across multiple partners.

At the top of the chain is supply chain software proper, which enables features like high-level process sharing, collaboration (as in vendor-managed inventory, for example), and rules-based cooperation. Yantra covers this base for Sterling and helps to provide insulation from the EDI fallout. "Commoditization hasn't impacted us as it has some of our competitors," Starr claims. "We see the multi-enterprise collaboration arena as a good margin business."

Of course, there are plenty of ways to pursue those margins. Longtime Sterling rival GCS thinks that product information management (PIM) is a part of the collaboration value pie while Starr thinks PIM is still "embryonic" and that customers need the more basic challenges of data synchronization and B2B connectivity in general to be surmounted first.

This is a good time to watch Sterling, because the company will soon announce a roadmap offering more information about the Yantra integration and other matters, and is also busy on the product front. A future Line56 article will explore the Sterling product vision and differentiate it from that of GXS.

Source: Line 56