This industry needs your help. EDI should be frothy with new entrants providing a vast variety of innovations, options and technologies for all levels of players. What we find ourselves burdened with is a stagnant market controlled by a leviathan that has the ability to choose who plays and who does not.
This is a market characterized by what is known as “The Network Effect” (http://en.wikipedia.org/wiki/Network_effect). The value of the market grows exponentially as more endpoints (trading partners) are accessible. By cornering a large share of these endpoints, a bad actor can control the growth and direction of the market. Even with the addition of direct connects through AS2, this market is still defined by VANs and Interconnects.
Interconnects are not just a feature of EDI, they define EDI. Had Interconnects not been introduced some 20 years ago, EDI would never have become as successful as it is today. The power of this network effect is why a technology that is 40-years old remains relevant today and why so many competing technologies, delivered by a single provider have failed.
Without Interconnects VANs would not be VANs at all, but would be isolated service providers, only able to service small communities that chose to be wholly dependent on a single system. However, Interconnects are not for the networks, they are for the trading partners. They allow each trading partner to pick the offering that is best suited to its needs and not be locked into a single provider solution.
The networks on both ends of the Interconnect benefit equally by having the other end to complete their respective trading partners’ relationships. It is equally beneficial to send an EDI document as it is to receive one, so by simple logic the VANs do not settle send/receive with each other, they are paid by their respective customers. This is why Interconnects are “free,” and the VANs to not charge each other for them.
Here lies the problem. There is a player in the industry that by acquisition has gained monopoly control over the market. Entrance to the EDI data routing market (a.k.a. VAN market) is being controlled by this single entity. If they do not give permission, one does not get to play. (Of course, they are more than willing to offer a degraded connection…for a fee.) Without a true Interconnect with GXS one cannot reach enough endpoints to be viable. Imagine trying to be a phone company and Verizon refuses to interconnect. (Fortunately, in that case this was settled in the early 80s with the landmark MCI v. AT&T antitrust case, which resulted in FCC oversight requiring competition.) If you doubt this is happening in our market, ask yourself how many new VANs have entered the market since 2001. The fact is we have fewer VANs now than 1996.
The elephant in the room that no one is willing to talk about is now on the march again. In their plans to eliminate the ex-IBM IE system, GXS is shutting down all the Interconnects to IE and routing them through TGMS. For every network save one, GXS has moved this to a comparable, reciprocal interconnect on TGMS; in several cases creating new TGMS interconnects where none existed before. GXS has singled out Loren Data, demanding Loren Data to move from a decade-old, reliable, reciprocal, and direct interconnect to a circuitous route through Inovis, and additionally requiring payment.
What they are telling their customers is that there is an “unresolved interconnect issue between GXS and LORMAIL.” You bet there is. As GXS has said on many occasions, they do not like our business model – one which enables service providers and developers such as SPS Commerce, CovalentWorks, Energy Services Group, Trubiquity, NetEDI and launched Covisint as a VAN.
Since 1999 Loren Data has been on a mission to reinvent the communications side of EDI. ECGrid was envisioned as an automated switch between networks. We bring to this market Directory Services (e.g. Qualifier/ID-based routing tables available to all networks), automated Trading Partner Interconnect Provisioning, Migration Management, Certificate Management, and a 100% programmable interface for all aspects of network and Interconnect management (see http://ecgridos.net). The illustrious William Kammerer has called ECGrid “The VAN of VANs.” No wonder GXS fears us. We celebrate and encourage Interconnects and a rich market of innovators, while GXS wishes to shut them down and create a single network system under their sole control. GXS’ former V.P. of Marketing, Bobby Patrick, told me directly that “Interconnects are a necessary evil.” It is these very Interconnects which allowed GXS to build its business and the industry, which it now is using to prevent others from entering.
GXS is now attempting to force Loren Data to accept a degraded (below industry standard for network to network communications) connection in lieu of the direct IE Interconnect; one that cannot handle our data with the accuracy and efficiency our clients and GXS’ own customers require, and which is crucial to Loren Data’s professional reputation.
No greater harm has been done to VAN Interconnects since GXS terminated its Interconnect with Internet Commerce Corporation (ICC) 2001. In many ways this is even more insidious. While ICC was itself a new competitor in EDI, ECGrid enables many more companies to compete with GXS…providing you with new technologies and more options.
Not only is this immoral, we also believe it to be illegal and are pursing the matter in court with a Sherman Act antitrust suit. Antitrust is the last great protection we have when a market becomes out of balance and no longer functions in a competitive manner. It is an expensive and slow process, but one that must be pursued when all else fails. There is much about this on my blog at http://www.ld.com/presidents-blog/.
There is another, even more powerful route, but it takes the industry saying enough is enough. If you want a market with competition and innovation, help us stop this right here and right now. Please, for the sake of the industry and yourself, please write Bob Segert of GXS (email@example.com) and let him know that interconnects are the backbone of EDI. Let him know that it is essential that all viable networks freely interconnect with each other to create the infrastructure the industry needs to thrive. Also drop a note to David Swanlaw, Sr. Vice President of Operations (firstname.lastname@example.org). It is telling that Interconnects at GXS are actually owned by the Sr. Vice President of Corporate Strategy and Development rather than by Operations. If you would like the GXS strategic perspective on Interconnects you can write Steve Scala (email@example.com). If you would also like to write the Department of Justice or the FCC, drop me a line and I will provide you with some contacts. (Please send me a copy of any letter you send; I would greatly appreciate it.)
You might think this does not affect you – don’t be so sure. We need diversity. We need innovation. ECGrid and other innovators should be allowed to operate on a level playing field in this market and not solely at the discretion of GXS. If GXS is allowed to choose which innovators are allowed into EDI, the market as a whole will stagnate, suffer and ultimately die.
This market belongs to all of us, the trading partners, the software developers, the service providers and the networks. Without industry level resolve, as time passes, GXS will become ever more emboldened to wield the power of Interconnects as a weapon against its competitors. Do not let that happen. Maintaining a healthy counter balance within the EDI Communications Industry means fostering competition and innovations from many diverse parties.
I am requesting you to actively add your voice to the discussion. If you agree with GXS, that’s fine. But if you don’t, let everyone know that GXS’ actions are NOT OK with you!
Loren Data Corp.