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Thought Leaders In Cloud Computing: Steven Smith, President And CEO, Gcommerce Inc. (Part 4)

Posted on Sunday, Oct 10th 2010

By Sramana Mitra and guest author Shaloo Shalini

SM: What is the response from the industry? There are a large number of players on the AAIA board; what is their response to architecture such as yours, and what is their interest in getting on board?

SS: That is interesting  because in essence the industry is all about performance, and they are all about seeing the results. They want things to work, they want to work quickly, effectively, and accurately, and they want it now. What GCommerce has done is used their existing models of logging in through this single sign-on methodology. This allows them to use their accounts, the ones they have already created, in our system to work seamlessly with the introduction of cloud. They do not have to do anything else; they have the same user ID and same passwords authorizing them to keep doing stuff.

In essence, they don’t see any difference; they don’t know if the repository is in our data center here, which is really in a private cloud, or if it in the Microsoft data center in San Antonio. They cannot tell any difference, so from their standpoint, their visual interaction with that is negligible. Where they started to focus attention is security. Well, when we explain to the security model and that the close trust we have between two environments, the on-premise and our cloud environment, and they see how we manipulate and store data and move it over, security becomes a nonissue.

SM: Can you explain to me why security is such a big issue if you have a parts catalogue of some sort, which is essentially what you are putting together here – a centralized parts catalogue of the world’s auto parts. Don’t you want the buyers and everyone else to know what parts you offer?

SS: Sure. This a good question, indeed. Here is how I can answer it. For one, we do not provide a catalogue where a catalogue is information about the parts that are available in the world regardless of who you are. What we are presenting is parts that are available to buy right now, today, that are not stocked anywhere. These are the parts that you have access to buy, and not every one has access to buy from every vendor out there. They already have pre-existing agreements with buyers and so those vendors will authorize buyer to be able to buy their parts and some of the contracts go down to what part they can buy and how they can buy it.

SM: I see. Therefore, it is the application and permission that they are worried about.

SS: That is right, and some of the same people who are buyers are suppliers in other ways, too. Some vendors do not want their prices to be shown to the world; they do not want people to know what parts they have in stock or what parts they do not have. There’s a lot of information: The metadata that eventually could be mined out of this potentially demonstrates how parts are being sold and are being moved and what and where are the best selling parts, which parts they should start stocking more instead of leaving them on fresh order.

SM: I see. Well, there was an attempt to do something like this 10, maybe 12 years ago, to bring together the automotive supply chain. What happened there, and why is it that it is working now, or working to the extent that we can say it’s working compared to what happened then?

SS: I will explain that; it is the kind of my life’s work. I grew up in this business, and now I am 41 years old. Here is what happened. First of all, the automotive industry actually has two spheres of influence. One is the industry that makes cars, and then there is the aftersales market. Covisint, which still exists today, was established by the Big Three. Compuware owns it, and they are actually one of our partners because we handle the General Motors (GM) relationship in collaboration with Covisint. The bottom line is that they were trying to establish an electronic data interchange (EDI) data exchange standard for the vehicle side of the industry. The aftermarket side of the industry never really went down that path. Covisint was never active in this side of the market. That is the number 1 reason. The number 2 reason is that other companies, including Ariba and CommerceOne, also wanted to do this in the automotive and many other industries. The approach, however, was much more of a “build it and they will come.” There is a problem with that approach. Those who have the economic power are the retailers, the buying groups and the wholesalers. AutoZone, Carquest, NAPA, O’Reillys, and Craig, they are the ones that actually drive the market economically. Therefore, our model is built upon the hub-and-spoke model from the Wal-Mart world. In this model, Wal-Mart drives and all the suppliers follow. So, the reason that 12 years ago similar initiatives by companies such as Ariba, CommerceOne, and VerticalNet did not succeed as much was that they didn’t abide by the rules of the jungle, which are that a person who has economic power drives the adoption. Everyone would argue that no one has done a better job of that than Wal-Mart. I spent five years working with Wal-Mart internationally in supply chains, and we when we started GCommerce, we operated from that same viewpoint. That is, we get the AutoZones and the big buying groups like Alliance. Federated Auto Parts, O’Reillys, NAPA, and Carquest on board. They drive adoption for our solution. If you do not follow that economic model, you end up with anemic adoption.

So that is my take on why it did not work earlier. You cannot ignore the channel, especially when the channel and the people in the channel have the economic power. If they are not part of the solution, the solution will never be adopted. In our case, we have had widespread adoption. I mean, we can just take you through the whole underbelly of our business. Our business is expanding exponentially right now because we have laid down the entire infrastructure; now with the cloud we have the ability to grow hyperactively and to be able to port this entire infrastructure and the whole metadata model to other industries. We have just started another vertical market, and we have expanded into Mexico. If you do not approach it from the point of economic power, you are going to fail. I think this was the cause of the big failures in all of those big exchanges. In addition, I think that is the reason why Covisint never made it, and Covisint today really is just an EDI exchange primarily serving companies like General Motors and Ford.

This segment is part 4 in the series : Thought Leaders In Cloud Computing: Steven Smith, President And CEO, Gcommerce Inc.
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