GXS Webinar Transcript Research Study: B2B Integration: Business Value and Adoption Trends Stanford Global Supply Chain Management Forum

Transcription

1 PRESENTERS: Dr. Barchi Gillai, Lead Researcher for B2B Integration Study by Stanford Global Supply Chain Management Forum Rochelle Cohen, Senior Marketing Manager, GXS TRANSCRIPT: Rochelle Cohen: Thank you. Hello everyone and welcome to today's webinar B2B Integration, Business Value and Adoption Trend. My name is Rochelle Cohen and I'm a Senior Marketing Manager at GXS. Our customers and our prospects are frequently asking us questions about what are the latest trends and what's the latest value of B2B integration technology because they want to be able to compare their own programs to those of their peers. And so in order to obtain insights that can help them make more informed decisions about the best strategy for their B2B program, GXS collaborated with Stanford University's Global Supply Chain Management Forum on the development of a new exciting study that provides those insights into those frequently asked questions. These are questions such as the ones you see here, what are the current levels of adoption for B2B integration, what are the trends and budget in staffing for B2B programs, what kind of savings are companies actually realizing from their B2B integration program in their ordering, their shipment, their management and invoicing process and what are the benefits of a managed services approach as compared to in-house software instead? And the results of the study have now been published as two separate reports. The first one was actually released in March and it focused on just the last question about values and trend associated with B2B managed services as a specific option for doing B2B integration. Now the second report has been released and it reveals insight into general B2B integration value and adoption trend. And that second report is the focus of today's discussion. In the next 30 minutes Dr. Barchi Gillai, who is the primary researcher and author of this new study will be sharing some of the key findings and insight from her analysis. Page 1 of 13

2 You can see her credentials here. You can tell that she has deep experience in supply chain management. Before I turn the session over to Barchi I have a couple of administrative notes. First today's session is being recorded and we're going to end you an with a link to that recording as soon as it becomes available. That s one of the most frequently asked questions on these webinars. I want t you know upfront that you're going to be getting that link and you can listen to the recording once again and share it with others in your company that might be interested but perhaps were not able to join us today. And you'll also be getting a link to the presentation slides. And second if you have any questions at any time during the presentation please feel free to submit using the Q&A tab at the upper right of your screen and we're going to be answering those questions at the end of the session as time allow. So now without further ado I will turn the session over to Dr. Barchi Gillai who will share some of the insights from her latest study, Barchi? Barchi Gillai: Yes thank you Rochelle and thank you again to all those that have joined us today. As Rochelle mentioned today I will focus on the results of the study we have completed. We simply examined the budget and adoption trend as well as the business value of B2B integration technologies. But before I show you these results I would like to give you a brief introduction to the Stanford Global Supply Chain Management Forum. We did the research organization that was in charge of conducting this study. The forum is relating with the institute that resides within the Graduate School of Business at Stanford University. It works in partnership with other academic institutions as well as with corporate and non-corporate organizations who identify research, develop and disseminate supply chain best practices. Page 2 of 13 We make companies that share the (unintelligible) interest in advancing this state in global supply chain management to become forum member and for those interested in learning more about the forum I have included the contact information of the forum director. As for the study the entire study examined the latest trends in business value associated with general B2B integration programs as well as with B2B managed services.

3 The results of the study are summarized in two separate reports. The first of these reports focused on B2B managed services and the second report which will be the focus of today's webinar, the focus is on general B2B integration programs. In today's discussion of the B2B integration study I would like to start by providing you a brief overview of the methodology we used followed by some information about the companies that participated in this study by completing this online survey. The majority of presentation will highlight the insights we gained about the participants' B2B integration program including budgeting and adoption trend associated for efficiency improvement. The strategies adopted by best in class companies we chose those that have relatively high levels for the efficiency improvement and the participants' plan for future use of e-commerce and we'll start with the methodology. In this study we wanted to learn about the adoption trend and value of B2B integration technologies where companies actually experience it. We therefore based the study on a survey distributed to current users of these technologies. Our main goal is a part of the study that focused on overall B2B integration programs to identify and provide companies with benchmark information regarding budget type trends, kinds adoption level and protected growth and the process efficiency improvement associated with this program. And so the survey questionnaire was then designed with these goals in mind. As I mentioned before participants served us that information related to the company B2B programs by completing an online survey. The data collection took place during the month of September and October of 2012 and we had a total of 92 individuals from 75 companies who completed the entire survey or a portion of it. The participating companies varied in their size, primary industry and geographically. One thing they all had in common is that all of them had integrated B2B commerce into their operation for more than a year. As we believe that this company that started using such a (unintelligible) more recently may not have enough time to realize some of the associated benefits. Page 3 of 13

4 When analyzing the data collected for the survey we looked not only at all the responses combined but also had to break down the responses based on a number of factors such as company size and geography. We also searched for a correlation between (unintelligible) to different question. Finally we took a closer look at best in class companies to help us indentify potential correlations between their decisions regarding budgets allocation and adoption levels of B2B integration technology and the relatively high levels of process efficiency improvement they were able to achieve, the following slides summary some of the highlights of this data. First some information about the profile of the participating companies about how some participants from many sectors from such industries such as high-tech, automotive, healthcare, agriculture and more. Other participants included consumer goods companies, retailers, financial organizations, the (unintelligible) companies and service and software organizations. While participating companies varied in their size the annual revenue ranging from under $100 million U.S to more than $5 billion most of them are relatively large organizations with annual revenue more than $1 billion. When considering the headquarters of the participating companies the majority of them are based in North America. An addition 24% were based in Europe and the remaining 3% were based in Asia Pacific. The first survey question is looking at budgetary trend (unintelligible) for the current annual budget for B2B integration technologies. As can be seen from this diagram 50% of companies had an annual budget of more than $1 million including 7% of participants with an annual budget of more than $20 million. Given that companies varied in their size we also looked at the breakdown of this information based on the company's annual revenue. As expected more companies often times had a smaller B2B budget. One notable exception though was those companies that had large annual B2B budgets of more than $5 million, if you look at the diagram in the bottom these companies are represented by the blue slices in each of the (three pie charts). Page 4 of 13 As it turns out the percentage of small and medium sized companies that made this level of investment from B2B technologies was quite high especially when compared

5 to large companies. In addition to the dollar value of their annual B2B budget participants were also asked to estimate what percentage of their company's entire IT budget represented. As you can see from the diagram 66% of companies and 5% or less of their IT budget on B2B integration and for an addition 20% of participants B2B budgets represented 6 to 8% of their total IT budget. A breakdown of the information based on company size shows that overall a larger portion of small and medium sized companies send less than 1% of the total IT budget to B2B integration. Again if you look at the bottom diagram companies with this level of budget are represented by the purple parts of the (three charts). At the same time a larger portion of their large companies send between 1 and 5% of their IT budget on B2B integration. In addition to current budget levels we also looked at how B2B budget has evolved and it's expected to further change in the next few years. What we found is the general attendance of companies to increase over time the level of resources is allocated to B2B integration. More specifically the top diagram here shows that 68% of companies saw the B2B budget increase over the past three years and bottom diagram shows that 62% of companies expected B2B budgets to increase over the next three years. In addition we found that larger companies oftentimes increase their B2B budget by higher percentage compared to smaller companies. Another interesting observation was that on average European based companies seemed to be investing more in B2B integration technologies compared with companies based in North America. In particular data analysis revealed that European based companies tend to have a larger budget for B2B integration technology. Moreover a higher percentage of European based companies dedicated 6% or more of their entire IT budget to B2B integration and as for changing budget over time the European based companies more frequently saw the B2B budget increase over the past three years and/or expect it to increase over the next three years. Page 5 of 13 The diagram on the right shows us an example of the difference between European and American based companies in terms of change in their B2B budgets over the past three years. As you can see from the blue parts of the chart 40% of European companies saw their budgets increase by more than 10% compared with only 19% of

6 North American companies that saw the same level of budget increase over the past three years. In addition to budgetary trends we also asked participants to estimate the change in their company's B2B transaction volume and number of connections over the next two years. In that nearly all participants expected their production volume and the number of connections to increase but the majority of them expecting an increase of up to 25%. This involves (unintelligible) the expectation of most companies to expand their B2B use of e-commerce over the next few years. There are three questions in the survey that looked at the percent of customers, vendors and other business factors that currently exchange transactions with the company electronically. The responses to all three questions are summarized in the diagram on the right. As you can see the range of responses was quite wide with (a pattern) that was similar across the different types of business partners. Specifically for each type of business partner close to 1/2 of the participating companies exchanged transactions electronically to 20% of them while at the other end of the spectrum 7 to 10% of participating companies exchanged transactions electronically with 81 to 100% of one or more types of business partners. However, the similar pattern of responses does not necessarily mean that companies use the same strategy for all their business partners. As an example the bottom diagram shows the percent of customers with vendors, the companies connected with electronically. We can see for instance that regardless of the company's strategies with regard to the customer but haven't been exchanged. Transactions electronically was up to 20% of their vendors and these are the green parts of each of those (unintelligible) at the bottom. In fact it turned out that only 28% of participating companies exchanged transactions electronically with the same proportion of all their business partners. So we can conclude from these diagrams the decisions regarding the number of trading partners to electronically connect with vary across companies and also the same company as many of them use different strategies for different types of business partners. Page 6 of 13

7 We asked participants to tell us about some of the process efficiency improvement that companies realize by using B2B integration technologies. And this slide includes a summary of the participants' responses to this group of questions. Overall for each of the listed areas about 1/2 of the companies are able to realize more than 40% cost reduction. This includes 53% of companies that reduce order processing costs by more than 40%. Forty-eight percent of companies that reduce cost to manage incoming shipments pay more than 40% and 56% of companies that reduce invoice processing costs by more than 40%. Next we looked at B2B budgetary trends and adoption rates of best in class companies which were defined as those companies that achieve more than 50% cost reduction and at least one of three process efficiency improvements listed in the survey. We wanted to see if there was anything in the B2B strategy that helped them achieve this higher level of process efficiency improvement. Internal we had 38 of the 92 participants that met the definition of best in class companies and following the main finding of this analysis. When looking at the total estimated annual budget for B2B integration technology it turned out that on average best in class companies tended to have a larger annual B2B budget compared with all other companies. In the diagram on the right the gray part of the chart represents those companies that had an annual B2B budget of more than $1 million and in total 57% of best in class compared with 46% of all other companies and more than $1 million on B2B. Furthermore when considering the percentage of the companies' total IT budget that's dedicated to B2B integration technology we can see that it was higher for best in class companies as it's shown in the bottom diagram. Physically 43% of best in class companies spend 6% or more of their IT budgets on B2B compared with only 26% of all other companies. In summary we can conclude from these two diagrams that best in class companies tended to have on average to spend more on B2B integration. Page 7 of 13 Our next finding was that the percentage of customers that exchanged transactions electronically with the company was higher for best in class companies compared with all others. It can be seen from the diagram that 37% of best in class companies

8 compared with 23% of all other companies exchanged transactions electronically with more than 60% of their customers. These are the gray parts of the diagram given the results were obtained for most other type of business partners. The other percentage of the customers' B2B transactions that were exchanged using structured messages such as EDI, XML or fractured messages as opposed to being keyed into a Web portal. As can be seen in the bottom diagram on average best in class companies exchanged the higher percentage of their transaction using fractured messages. Overall the result seemed to indicate on average best in class companies are using B2B integration technology more extensively. But considering the anticipated growth of B2B programs it turns out that on average best in class companies expected a higher increase in both the transactional volume and the number of connections. This diagram shows that 66% of best in class companies compared with 34% of all other companies expected their transaction volume to increase by more than 25%. Again these percentages correspond to the gray parts of the chart and the bottom diagram shows similar results for the expected growth in the number of B3B connections. At the end of the survey we asked participants to share with us their plans for future use of e-commerce (unintelligible) whether they plan to increase the number of customers they trade with electronically, include the number of suppliers they trade with electronically and/or increase the number of business processes they support. It turns out that almost all of the participants plan to expand their user B2B e-commerce in at least one of these categories. Basically 82% of participants plan such an expansion in more than a single category and 57% of participants who plan to expand their use of e-commerce in all three categories. These results may provide another indication to the value the company sees in B2B e-commerce. Page 8 of 13 In summary some of the key takeaways that emerged from the study include the following, one was the majority of companies spend up to 5% of the total IT budget on B2B integration. Overall the dollar value of B2B budget seemed to be on the rise. And this is based on changing budget over the past three years as well as the expected change over the next three years.

9 Second all but a very small percentage of companies expect to expand their use of B2B integration technology including expand increase in B2B transaction volume and the number of B2B connections and the number of customers or suppliers they trade with electronically and the number of business processes they support. And as a point to keep in mind if (unintelligible) the vast majority of companies plan to expand their B2B integration programs the companies defer in their actual B2B strategy, in particular the types of business partners that (unintelligible) with electronically as well as the extent they use B2B integration for each type of business partner differ across companies as well as within companies. Finally the data collecting in the study indicates that most companies do see value in B2B integration as it's demonstrated by the relatively high level of process efficiency improvement, realizing (unintelligible) a new participant. Furthermore best in class companies which are those that achieve the higher level of the efficiency improvement were also those companies that on average invested more in technology, used this technology more extensively and anticipated a larger expansion of the B2B program. That concludes my presentation. I would like to thank you again for listening. If you have any questions on the study, any (unintelligible) I'd be happy to answer them later, back to you Rochelle. Rochelle Cohen: Okay thank you so much Barchi. Before we open it up for question I would like to highlight the fact that you'll be receiving a thank you for attending within the week and it will include direct links to both of the Stanford reports as well as the recorded webinar. In addition all of us will also be available for download from the GXS website at the resource tab at the URLs that you see listed here. You might find it interesting to read through the whole report and that way you can get some more of the detail. So now time is really running short so we'll only have time just one or two questions so let me take the first question. Page 9 of 13

10 Okay this first one. You mentioned higher investments in Europe. Do you see that Europe is getting more value out of these investments or why is Europe investing more? Barchi Gillai: One of the results that we saw was the European companies are investing more and need to be and there can be multiple explanations for that. One may be that it's just that currently six of the European regions which include different countries that are using different languages and different standards will increase the complexity of the integration focus not for just in this region and consequently such projects may require higher resources and it may also be that projects in this investment (unintelligible) and therefore require more investment so there may be multiple reasons for that. I don t recall that we saw - I'm not sure if we actually analyzed in detail the - in terms of the results the actual benefits if thee are differences between European based companies and American based companies. So it may the characteristics of the region require this higher investment. Rochelle Cohen: Okay thank you. I'm going to just take one more question because it's 2:31 right now, one more. How did best in class companies differentiate themselves from the rest of the company? Barchi Gillai: As a reminder how we define best in class companies, so we define those companies that achieved a relatively high level of process efficiency improvement. In particular it's those companies that achieved a cost savings of at least 60% within at least one of the business processes. And so what we found out is that these companies also those that on average invested in B2B integration programs which tends to show that those companies that have invested more are also getting more benefit from their investment. What we also saw is that these companies had been using this technology more extensively and they're also planning larger expansions of this program in the next few years possibly due to the relatively high level of benefit that this program has been bringing to them. Page 10 of 13

11 Rochelle Cohen: Okay. Well thank you very much. I hope that you found that today's webinar was informative and that you learned some of the answers to your burning B2B questions that are helpful in planning for your company's B2B program. If you need additional information feel free to send an directly to me at Rochelle.cohen@gxs.com or visit us at the websites around the world that you see here or call us on the phone number. Again thank you very much for your attendance and you will be getting a copy of this presentation within the week. Have a good day. END Page 11 of 13

12 About GXS GXS is a leading B2B integration services provider and operates the world s largest integration cloud, GXS Trading Grid. Our software and services help more than 550,000 businesses, including 22 of the top 25 supply chains, extend their partner networks, automate receiving processes, manage electronic payments, and improve supply chain visibility. GXS Managed Services, our unique approach to improving B2B integration operations, combines GXS Trading Grid with our process orchestration services and global team to manage a company s multi-enterprise processes. Based in Gaithersburg, Maryland, GXS has direct operations in 20 countries, employing more than 2,800 professionals. To learn more, see read our blog at follow us on Twitter at twitter.com/gxs and join us on LinkedIn at You can also access our public filings with the Securities and Exchange Commission at Copyright 2013 GXS, Inc. All Rights Reserved. June Page 12 of 13

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