The plug-and-play economy
By By Robert Glushko, Commerce One fellow -- Purchasing, 12/22/2000 7:00:00 AM
In 10 years' time, the U.S. economy will see its tradition of entrepreneurship taken to an entirely new level. Any person with a great business idea will be able to plug into a vast global network of interlocking marketplaces where they can quickly and easily assemble the right sets of business processes to succeed.
Ron Coase won a No-bel Prize in economics for his theories relating the size and organization of companies to the "transaction costs" they pay in identifying trading partners and doing business with them. Simplify those processes (with automation) and reduce their numbers (by outsourcing) and companies don't need to be large. They can exploit technology in which the services they need can rapidly be "plugged in"-interconnected and configured to create virtual companies.
In a plug-and-play economy, sourcing major business processes-design, finance, manufacturing, scheduling, logistics, insurance, sales, marketing-will be as easy as opening the Yellow Pages. And this specification, automation and outsourcing of processes with global economies of scale will bring big growth in the number of strategies for assembling businesses. The number of potential businesses and marketplaces will grow exponentially.
Technology to support this vast interconnected global commerce network is maturing rapidly due, in large part, to the great progress being made in establishing standard specifications for building commerce messages-RFQs, POs, contracts, invoices and so forth. Soon there will exist completed libraries from which businesses can build and dispatch electronic messages that any other businesses in the world can accept and act upon with ease.
Another crucial step is to establish standard specifications for business processes-the ways in which messages are generated and acted upon once they are received. For example, there will emerge specifications for how POs or invoices get handled. The processes will be described so explicitly that machines can interpret and act upon them.
That's not to say that businesses will do everything in precisely the same ways. Rather, they'll use a modular architecture to build competitive strategic business processes from a standard set of explicitly defined process elements. For example, the systems that run electronic auctions can use the same components as those that run PO-acknowledgement processes, only they'll do it simultaneously with several companies. Businesses will take elemental pieces and rearrange them to create new competitive processes.
The ultimate goal is to have virtual companies that assemble with efficiency the right sets of businesses processes-at the right times-from large numbers of market participants. But this vision assumes fundamental changes in the way business people behave. It requires sophisticated-non-technological-abilities to conceptualize new businesses. It requires more people to become risk takers and greater willingness to engage frequently in all sorts of new business relationships. It requires that people trust the marketplace to deliver goods or services they need while also protecting their proprietary interests.
Technology is not the limiting factor here. The extent to which processes become automated depends almost entirely on the willingness of people to be open and explicit about their intentions. A buyer's ability to find the right supplier depends fundamentally on his or her willingness to send out an RFQ that explains, in detail, the competitive advantage that he or she is trying to exploit. It depends, as well, on how explicitly a supplier is willing (and able) to describe itself to the market at large.
If a purchaser buys from a certain supplier because they fish together on weekends or went to the same college, he or she won't be willing to make those criteria explicit, so the process can't be automated. If, on the other hand, the buyer is doing everything possible to make objective, knowledge-based purchasing decisions, then the rules governing those decisions can be made explicit and the process can be automated. If that happens, then, over time, machines will be able to learn as they go, recognizing patterns in human decision-making and writing their own precise and effective business rules.
Through standardization-of messages and business processes-today's market makers will create interoperability among markets. As well, they will serve as guarantors of predictable, trustworthy behaviors among trading partners, giving entrepreneurs the confidence they need to take their great ideas into the market and build virtual businesses.
Commerce One provides solutions for builders of Internet markets. Its Global Trading Web is a large B2B trading community.
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