States Shop for OBI Solutions

State and local government agencies that have taken the first steps toward Internet-based procurement know that even basic electronic commerce applications have the potential to cut bid times, lower costs and improve interagency cooperation.

Massachusetts, for one, claims it can lower its transaction costs as much as 50 percent by using electronic purchasing. Likewise, such systems can cut the time it takes to conduct an agency purchase "from days or weeks to a few mouse clicks," said Tim Landy, MIS director for Massachusetts' Operational Services Division.

Such savings will no doubt continue. But what these jurisdictions don't know is whether their systems will be compatible with-or bear any resemblance to-what emerges two or three years from now as standard technology and practices for doing business over the Internet.

"At this point, it is like moving to the Wild West," said Gary Lambert, deputy purchasing director for Massachusetts, reciting an e-commerce truism. "First you have to decide where the streets go, then you have to decide who will actually live there, then who the sheriff and mayor will be."

Open Buying on the Internet

Even so, property lines are getting surveyed. E-commerce software developers are adhering to a set of standards called Open Buying on the Internet (OBI), which would allow buyers and sellers to trade over the Internet regardless of the platform they use. OBI is designed for the kind of high-volume, low-dollar transactions that are typical of agencies that employ lots of workers.

"OBI is a business specification, not a technology specification," said Landy, who is also vice chairman of the OBI Consortium, a group promoting Internet purchasing. Another way to look at OBI, he added, is that it defines how existing specifications for doing business electronically, such as electronic data interchange, Secure Socket Layer and Extensible Markup Language, would be used by businesses and their customers. "Ultimately, we define the workflow involved in an order," he said.

Another advantage of OBI is that it enables sellers to create a packaged application that their customers and trading partners can plug into via the Internet. In contrast, older protocols, including EDI, typically require an expensive, value-added network and massive application development efforts.

"The reason why OBI came about is that...business-to-business solutions were based on a retail model, but everyone had a closed network or proprietary solution that wasn't scaling well," said Dave Liggett, a vice president at Epic Systems Inc. and the specification workgroup chairman of the OBI Consortium. "Then the market [put together] a consortium to come up with an open interoperable solution that can talk with anyone."

Electronic Catalogs

On a practical basis, OBI will be transparent. But it will help pave the way for a system of electronic catalogs that shoppers can browse and, in some cases, order from. To start World Wide Web-based procurement programs, state and local agencies will have to choose among several e-catalog models that offer agencies various levels of control.

One method available for state and local governments is to have a catalog with content supplied by vendors but managed or hosted by the government. With this approach, all available products would be aggregated in a giant database that would enable purchasers to compare the features of several products at once.

On the upside, such aggregate catalogs give states increased control over the way product information is displayed for buyers. On the downside, the catalogs need to be constantly maintained and upgraded with information from multiple suppliers, causing constant pressure to keep product and pricing data up to date.

"Because products and prices change constantly, states should be concerned about how they will manage and update content for aggregate catalogs," said Bill Kilmartin, a former Massachusetts state comptroller who now is vice president of government e-commerce for American Management Systems Inc.

Florida, which has opted for an aggregate catalog approach, has 172 contracts that state employees can view on the Web. While the system offers the state more control over information posted, it also requires state purchasing departments to maintain the information in online catalogs.

Florida's site, called Purchasing Direct, is open for access by anyone with a browser (purchasing.state.fl.us). Users can look up prices, compare vendors' products and obtain information on purchase orders and other statewide purchasing requirements. Actual purchases still require paper forms that can be downloaded from the site.

"What we've really done is built a database on the Web," said George Banks, Florida's director of purchasing. But Banks said that for e-commerce to work, state and local purchasing officials need to learn about more than OBI or electronic commerce. "E-commerce is only part of the equation," Banks said. "They need to learn how to re-engineer business processes to bypass traditional procurement methods."

Have Others Host

An alternative to aggregate catalogs is externally hosted supplier catalogs. With this approach, vendors can control the presentation and content of a catalog dynamically, and product information can be updated instantly. Purchasers-meaning government agency buyers-also have accurate product availability information, thereby reducing returns and redundancies.

External catalogs also can alleviate the high cost of internal catalog creation and maintenance. "By nature, they are more open because multiple suppliers must be able to provide their products online and keep that information updated for government buyers," Landy said.

On the other hand, such OBI-type catalogs lack a protocol for pre-purchase and post-purchase business processes as well as an ability to easily compare product features, which is possible with an aggregate catalog. And because OBI-style catalogs are housed on suppliers' Web sites, users must go from one supplier's catalog to gather information and then to another supplier's catalog to compare similar configurations.

The choice of which type of catalog state and local governments should opt for boils down to a desire for control via an aggregate database or a need for an OBI-standard solution with an open architecture, Kilmartin said.

Ultimately, for e-commerce to work, government agencies and their suppliers must think of themselves as tied to each other by the network. "Governments and businesses must form a new kind of community," Lambert said. "It should be Net-based and offer opportunities for governments and businesses that take advantage of open standards."

Barbara DePompa Reimers is a free-lance writer based in Germantown, Md. She can be reached at bdepompa@aol.com.

Jennifer Jones and Joshua Dean contributed to this article.

**********

Top 10 Tips for Launching E-Procurement Systems

1. Accommodate all users across the organization whose buying patterns may range from repeatable purchases to ad hoc requests.

2. Leverage existing desktop and network hardware. This will significantly reduce time, effort and costs associated with implementation.

3. Use open standards so that you have repeatable business processes. This will help ensure integration with other applications, long-term compatibility with emerging Internet standards and the ability to interface with your suppliers' electronic catalogs and messaging systems.

4. Be flexible. The objective is to leverage technology by streamlining and eliminating nonvalue steps from your procurement process, not to automate the way you are doing things today.

5. Have integrated payment options to maximize the return on investment for your organization and the supplier.

6. Capture the entire procurement life cycle from the selection of goods to approvals, purchases, order status, invoices and payments.

7. Provide MIS reporting for all activities, including supplier, cost categories, item and buyer group, as well as capture an audit trail on purchases.

8. Provide an integrated architecture that can send and receive information to other enterprise systems such as human resources and accounts payable.

9. Provide for high security and risk management for Internet commerce and offer provisions for authentication, confidentiality, integrity and nonrepudiation.

10. Allow for total supplier integration, electronically connecting your preferred suppliers, regardless of size or technology.

- Patricia Cowen, vice president of sales and implementation, Intelisys Electronic Commerce LLC

**********

An E-Procurement Sampler

Here is a sampling of electronic commerce solutions from companies offering Open Buying on the Internet-compliant e-commerce solutions.

Ariba Technologies Inc.'s Operating Resource Management Solutions

Ariba calls its Operating Resource Management Solutions a "modern electronic infrastructure that...manage(s) operating resources strategically." ORMS leverages technology, lowering transaction costs through e-commerce, automation and the use of decision-support techniques to identify opportunities to rationalize the supply chain. Last November, California announced it was adopting ORMS as the foundation of the California Statewide Procurement Network, the state's fledgling electronic procurement system. "ORMS empowers end users to make decisions on what it is they need as long as they have the authority to procure it," said Al Fox, director of government programs at Ariba.

Commerce One Inc.'s Chain Solution

The Chain Solution links buying and supplying organizations into real-time trading communities. The solution includes a BuySite, which automates the internal procurement process. BuySite resides on your company's intranet and is directly accessible to desktop users. The solution also includes MarketSite, which automates supplier interactions from order to payment. The extranet application automates a buyer's interactions with his suppliers from order to payment and manages content and transactions.

ConnectInc.com's MarketStream

ConnectInc.com offers PurchaseStream and MarketStream, e-commerce tools for buyers and sellers. One of the vendors in Massachusetts' E-Mall project, Maintenance Warehouse, a wholly owned subsidiary of Home Depot, has integrated the OBI-compliant

PurchaseStream system into its electronic catalog. Like many vendor offerings, ConnectInc.com has elements tailored for the buyer and the seller. These include cross-supplier catalog searches, customized pricing, back-end integration and reporting.

Epic Systems Inc.'s OBI Toolkit

The company offers OBI Toolkit for those with an existing commerce site or catalog. "It allows them to deal with OBI as well secure objects using EDI purchase orders," said Dave Liggett, a company vice president. Integration time varies from a week to six weeks, depending on staff and site sophistication. Epic Systems also offers InstantOBI!, an OBI-compliant buy-side application designed to get customers with existing investments operating quickly. "OBI takes vendors out of the business of transaction processing and turns them into strategic purchasing managers," Liggett said.

IBM Corp.'s NetCommerce

IBM is offering NetCommerce Version 3 in two flavors: Start and Pro. Start is for customers who want an e-commerce solution quickly installed at a low price. "Start is very simple to install, and once installed, they have a sample store up within 15 minutes," said Ruviano Martinez, IBM's product marketing manager for NetCommerce. "Many customers use it to front-end their procurement side." Pro is for larger implementations and has advanced features for designing electronic catalogs, workflow management and supply-chain management.

Microsoft Corp.'s SiteServer, Commerce Edition

If you run a Microsoft Windows NT shop, Microsoft's Site Server, Commerce Edition may be one of your only options in the Unix-centric world of e-commerce. While procurement over the Internet is conducted via browser, back-end systems typically consist of legacy applications and processes. SiteServer, Commerce Edition, is a developers tool for creating an e-commerce site. For more information, see "Setting Up E-Commerce Solutions," civic.com, December 1998.

Netscape Communications Corp.'s CommerceXpert

The CommerceXpert family of products includes add-ons tailored to specific customers. The underlying communication product is ECXpert, while the two main products are BuyerXpert and SellerXpert. "ECXpert is a conduit to move documents from business to business-EDI for the Internet," said Paul Smith, Netscape's director for state and local government sales. "BuyerXpert enables an organization to do online procurement, while SellerXpert is the vehicle which hosts the electronic catalog and integrates with inventory, price and taxation," said Leroy Kelley, a Netscape systems engineer. For more information, see "Setting Up E-Commerce Solutions," civic.com, December 1998.