New Research Download: Solving Modern Businesses’ Connectivity Problem

This analysis is excerpted from the Spend Matters Perspective: The Great Debate: Will Supplier Networks Thrive, Implode, or Evolve? (free, registration required). Authored by Christian Lanng, CEO and Co-founder of Tradeshift, it explores fundamental connectivity challenges facing buyers and suppliers today – and why past and most current approaches to trading partner connectivity come up short.

In recent years we’ve begun to see the emergence of supplier networks, which have slowly but surely gained momentum. Will this momentum continue and thrive in the same way individual networks have? Most certainly. But not in the way they have existed in the past.

Today we live in a world connected by platforms and new ways to interact with one another. We engage and communicate on Facebook. We manage our days with the help of our smartphones. We customize these tools easily so we may reach further, work smarter, connect more deeply, and make our daily lives simpler. They help us become more efficient on a personal level.

Networks are alive and thriving on these platforms. Sharing information amongst individuals has never been easier. The world of social networks and platforms is ripe with innovation. Yet the business world lags behind. To this day, only three percent of companies in the world do business electronically. The rest is done on paper. Some might say that business has a paper problem, but the reality is much simpler: business has a connectivity problem.

When we look at the way companies have connected over the years, we must first go back to where it all started, with EDI and web portals. These solutions were defined by their limited one-to-one connectivity. They were restrictive in their functionality and expensive to change or enhance.

Today, businesses demand the ability to connect on a much larger scale. And connectivity is where the future of these networks lies. For enterprise buyers it is no longer a one-size-fits-all model for business solutions. They are thinking bigger to determine what other processes can be connected beyond invoicing, such as payments and logistics. They want their employees and partners to actively engage with the system they are implementing. They demand solutions that reach their entire supply chain, not just the large suppliers.

We now see two competing models that have emerged in the world of business networks. There is the closed model, referring to networks that offer more connectivity than predecessors but are still expensive 
to maintain and expand. The power is in the hands of the vendors, rather than businesses on the platform. This closed model sees traction with very large suppliers but misses the opportunity to connect the millions of smaller suppliers that cannot engage with such a model.

We also see a much more open model, where businesses can connect on a many-to-many basis and bring all processes online and distribute them to their supply chain via apps and extensions. This model is similar to that of the networks we engage with in our personal lives like Facebook and with our smartphones. These are network-connected platforms. The power lies in the hands of the companies doing business on the platform, not with the provider.

It is with this open model that we also see a shift in pricing models. For decades, transaction-
based pricing has dominated the industry. But today transaction volume is becoming less and less important. It is becoming more about their ability to connect new processes. Pricing is determined by the amount of value delivered.

Supplier networks will thrive and continue to evolve in this open, network-connected platform world. Companies are just now beginning to see the benefits of such connectivity. They understand the way we do business today will continue to evolve in unforeseen ways. From this, they are driving 
the demand for solutions that are open and can evolve. Solutions that are shared, global and deliver value to not only the buyers, but also the partners and suppliers they work with.

Download the Spend Matters Perspective on which much of this essay is based: The Great Debate: Will Supplier Networks Thrive, Implode, or Evolve? (free download, registration required).

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First Voice

  1. Andrew - Server Space:

    Connectivity is about peace of mind. The customer needs to be given the peace of mind that your they won’t experience network overload at your busiest times. For the business, you need to know that your will have very high levels of availability and the ability to protect your data against the impact of network outages.

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