C-commerce, or collaborative commerce, is fast replacing e-commerce as the "must have" strategy for companies looking to secure their place in the New Economy. Gartner, the consulting and research group that coined the term, says c-commerce "is the future of business for the next five years, at least."

Other analysts are equally emphatic. In a May report titled, "The Collaboration Imperative," Forrester Research says that to thrive, companies must master a new operating strategy that it calls "dynamic collaboration." AMR Research predicts the rapid rise of private trading exchanges, which will serve as the hub for collaborative networks of trading partners. Seminars and webinars on collaborative topics abound and it is hard to find a software vendor, consultant or service provider that is not touting its collaborative capabilities.

With all this noise, one might easily miss the fact that most of these declarations are in the future tense. The amount of collaborative activity taking place today is small and the vision of linked networks of manufacturers, suppliers, customers and service providers all sharing real-time mutually beneficial information clearly is years away.

But don't be lulled into thinking that collaborative commerce is an emperor without clothes. The benefits of c-commerce - reduced inventory, better synchronization across the value chain, faster time to market, higher order fill rates, improved customer/supplier relationships and increased revenue - are simply too huge to ignore. So is the competitive factor. Early adopters like Wal-Mart, Dell and Hewlett-Packard are gaining competitive advantage through their collaborative initiatives and others will be forced to follow. Smart companies will understand that they have to walk before they can run, say the experts, and will begin implementing small collaborative projects now.

Research indicates that enterprises are beginning to recognize and gear up for this challenge. In a recent study, Jupiter Media Metrix reveals that B2B executives plan to buy less procurement software over the next 12 months in favor of enabling more collaborative online activities, such as inventory level monitoring and product design. Some 15 percent say collaborative planning, forecasting and replenishment (CPFR) is on their agenda. And sixty percent of global business executives surveyed by Deloitte Consulting say that collaborative commerce will become critically important to their businesses in the coming year. More than half of these executives believe the current economic downturn has increased the importance of adopting collaborative commerce techniques.

These beliefs slowly are beginning to make their way into IT budgets - a welcome development after a hiatus in deployments caused by the 18-month frenzy over e-marketplaces. "There was a great hesitation as companies waited to see what e-marketplaces would provide," says Tim Paydos, vice president of market development at Syncra, whose product enables CPFR. "We're now beginning to see a reversal of that and I think in the last six months we've turned the corner with CPFR. The early adopters are out of the barn and we are getting into fast-follower territory." Paydos says Syncra has 50 to 60 customers - major retailers and CPG manufacturers - that are engaged in various levels of collaborative forecasting.

"When you see a bit of a downturn in the economy, people recognize that the last thing they need to do is lose an existing customer," says Eddie Capel, vice president of InfoLink, a Manhattan Associates product that gives retailers real-time visibility into order status and exceptions. "They are looking for ways to get closer to those customers and to create some differentiation. Collaborative solutions built around inventory visibility offer some fairly inexpensive ways to get a pretty big return." In the first quarter of this year, "there clearly was a wait-and-see" attitude, he says, "but now we are seeing some solid RFQs [requests for quote]. We are definitely seeing things pick up in quarters two and three."

No one is predicting an overnight transformation, however. One need only look at the slow progress of CPFR, whose value was proved several years ago in a string of successful pilot projects, to understand that the barriers to collaboration run deep.

The biggest of these is trust - or the lack thereof. "CPFR will catch fire only when retailers and manufacturers are willing to drop firewalls," says Janet Suleski, senior analyst, Retail Applications Strategies Service, at AMR Research. Until retailers are convinced that the benefits from shared collaboration activities exceed the benefits from holding potentially collaborative processes in-house, adoption rates will continue to be slow, Suleski says - a shift in attitude that she believes is another two years away.

Control and trust issues are holding back other collaborative activities as well. Part of what people are reacting to is data security concerns, says Jim Kirkley, chief technology officer at QAD, a provider of enterprise manufacturing and supply-chain software. "One company's data is in there right next door to its competitors, in the same data base, and there is a concern that maybe somebody can get in there and somehow be able to look at it. We have to make sure users feel comfortable with the fact that we have enough safeguards to prevent that from happening."

Chicken and Egg
That's the easy part. A far more difficult nut to crack is the deep reluctance companies feel about openly sharing information in what was previously an adversarial relationship. "Think of the other meaning of collaboration - consorting with the enemy," says Kirkley. "You have to break through that belief that this other party will not use the information in your best interest, but will use it against you."

These concerns are not without basis; the information involved can be very sensitive. Suleski cites an example of supplier-retailer collaboration, where the retailer asked the supplier to share information about its cost to build the product. "What the supplier feared was that the retailer would use that information to squeeze its margins even tighter. So there is a delicate balance between information that can be shared to the benefit of both parties and information that one party may use to put an e-squeeze on the other."

Even if everyone's intentions are good, supply-chain complexities may complicate the sharing of information, says Capel. "Everybody has to run their own business. Retailers are trying to get the best price and suppliers are trying to get their goods into the channel that will bring them the most sales and highest return. So a supplier is probably saying, well I know I promised this customer 150, but I would like back that off to 125, because I can get a better price for that additional 25 over here. It's a very complex process. Those are the things that make true collaboration very difficult."

In collaborative forecasting, there also is the problem of figuring out how to use certain knowledge in a way that benefits the supply chain, without revealing proprietary information. "Say I am a major retailer and I tell you that next week you are going to sell 15 percent less of a product than you think," says Karin Bursa, vice president of marketing at Logility, whose Voyager Collaborate product supports CPFR. "It may be because your competitor is offering a special. I can't tell you that and ethically maintain relationships with each trading partner, so we need to have the kind of relationship where I can just say, 'trust me on this one.'"

That only happens with time, she says. "As partners get a couple of wins under their belt they start trusting each other more and more."

While true, this presents something of a chicken and egg situation. Companies first have to make the investment and take the leap of faith necessary to get started.

To make that easier, Logility recently introduced an Express CPFR program that operates in a hosted environment and can get a company up and running with a partner inside 20 days. The idea, says Bursa, is to provide a proof-of-concept opportunity by removing any significant front-end investment. Once users start to see benefits they can decide if they want to continue to outsource or bring the solution in-house. "We are trying to make it attractive for folks to get started as easily as possible because we know they will see very tangible benefits," she says.

Syncra's Retailer Ramp-up Initiative has the same goals. This hosted solution leverages Syncra's installations at major CPG manufacturers by enabling retailers to immediately start collaborating with these suppliers.

In other areas of collaboration, fast startups are being enabled by web-native software and service vendors like Tonbu. "We are purely a web play, so it's low-cost entry and we can get you up and running in 5 days rather than six to 12 months," says Charles Orlando, director of marketing. Taiwan-based Acer Computer recently selected Tonbu to enable collaboration in the design and manufacture of its laptop computers. The company started with 10 users, but as the value was proved that increased to 30, then to 80. There now are 1,200 workers collaborating online, instead of by fax or mail, and Acer has cut its time to market in half.

Putting an up-front dollar value on collaboration is how J.D. Edwards encourages companies to drop their mistrust. "There has to be lot of value there for companies to get over these concerns and I think it is hard for people to know what value they will get if they exchange this information, so we try to quantify that for them with a program called Total Value Management," says Ed Sitarski, vice president, supply chain. It's a methodology that not only helps companies see what their gains can be, but also to identify high-return collaborative opportunities.

"Our formula is trust+communications+action=value, and value creates motivation for more trust. If companies can quantify what the value will be they are more likely to get that cycle started."

Internal Barriers
Many companies do a poor job of sharing information internally, much less externally - and this is another barrier to c-commerce.

"Opening companies to this collaborative fire hose of information isn't going to help anything if they aren't set up to respond to it," says Sitarski. "When we do our assessments we find that 85 percent of what companies should be doing is focusing on their internal supply chains."

Many "best practice" companies, he says, have a four-day lag between when demand information hits the company and when it can transfer that demand information up the chain. "What they do is run their DRP [distribution resource planning] system to figure out what orders should go to what plants, then they will run their MRP [materials resource planning] systems to figure out what they can make based on their materials. Then they have to do their finite scheduling to figure out how they are actually going to make the stuff. Then it goes to procurement and by the time they are done, it's been four days. If there are three companies in the supply chain you triple that, so you have almost two weeks of lag before the third-tier supplier has visibility to what the end customer is doing. In that scenario, it doesn't really make a whole lot of sense to talk about real-time communication."

The type of process silos Sitarski describes are the result of 200 years of business practice, say Gartner analysts, and technology alone will not solve the problem. "The enterprise must reward collaboration," they say, to spur the cultural and organizational changes necessary to reap the benefits of c-commerce.

Muti-tier supply chains, by their nature, complicate inter-enterprise communications. To date, most collaborative efforts have involved only two parties, a manufacturer and retailer, or a manufacturer and supplier. But efforts are under way to enable more inclusive collaborative networks. The Voluntary Inter-industry Commerce Standards (VICS) committee last year extended its CPFR guidelines to include the distributor who often sits between the retailer and manufacturer. Logility recently added this multi-tier capability to its Collaborate product. And vendors like Viewlocity, Vizional and Tilion are enabling multi-tier visibility and real-time exception management. Forrester reports, for example, that second-tier auto supplier Molex uses Tilion's SupplySolution to monitor upstream customers' daily consumption of its connectors, so it can ramp up production as soon as it spots a demand spike.

VICS also recently issued extensible markup language (XML) standards to help ease the difficult problem of interoperability between partners that have different systems. This is a particularly important issue for suppliers that may be asked to share information with a large number of customers, all with different technology requirements. "The way the XML guidelines have been defined allows you to have a standard interface or standard way of communicating the data and communicating exceptions that occur when you compare a forecast between each trading partner," says Bursa.

Paydos of Syncra says this initiative will make sharing forecast information something like exchanging e-mail. "It doesn't matter what e-mail system you or I are using, if they both adhere to the standard, we can exchange messages." Similiar initiatives aimed at stardardizing connectivity and communications in other sectors are under way at such bodies as the Uniform Code Council and Open Applications Group Inc.

Interoperability involves more than an electronic handshake, however. This point was brought home to QAD's Kirkley at a meeting between a manufacturer and its supplier, concerning the manufacturer's requirement that the supplier begin using QAD's Supply Visibility. This is a portal product that gives suppliers access to on-hand inventory levels and production schedules at their customers' locations.

"I was sure the supplier, who was responsible for inventory replenishment, would love this because it would make his life so much simpler," says Kirkley. "Instead of having to drive to the customer's plant and go in and count the number of boxes on the shelf, they could just use an internet browser to go to our screen and the numbers would all be there. The problem was, we were giving them this great information in a way that wasn't useful to them. They needed to be able to take that information and bring it into their ERP system. So we learned something right away: Integration to back-end systems is as important for the supplier as the customer." QAD solved the problem by providing the data in a file format the supplier could import.

In its work on c-commerce, Gartner stresses that "the internet has not provided ubiquitous and trivial integration" and that XML only enables the exchange of content; it does not manage business processes across enterprises. This piece, cross-enterprise workflow management, is in Gartner's view "a critical missing element in the collaborative technology landscape." The challenge, its analysts say, is that enterprises process workflows differently. How one routes a purchase order may be completely different than another enterprise. "When enterprises try to distribute that process between multiple enterprises with a shared responsibility, the resultant workflow logic could be very conditional."

Start Now
The bottom line is that the road to collaborative commerce will be fraught with organizational and structural change as well as evolving standards, processes and technology. But the message from the experts is unanimous and overwhelming: Don't wait for the dust to settle. Start small, but start now!

Forrester advises firms to minimize cultural and budgetary hurdles by working with existing partners on a single business problem. "Start with basic information sharing," its analysts say. Other advice: Talk to partners to find collaborative opportunities, agree on goals and measurements and share technology.

Suleski of AMR urges retailers that are not already piloting or implementing CPFR to start today. "Consider piloting with a supplier that has established collaborative relationships with other retailers. They can help your organization move up the learning curve faster ... Even the simplest forms of collaboration extended to only a handful of vendors will return value and provide experience on which to build future collaborative processes and systems."

Vendors can help companies identify which projects will have the greatest return on investment. "We encourage our clients to think strategically but act tactically," says Capel. "Keep an eye on the development of c-commerce at a strategic level, but move now with tactical applications that have real ROI." For example, he says, getting real-time visibility of inventory and orders at offshore vendors may not be collaborative in the "digital dialogue mode, but it is very, very useful."

Forrester analysts acknowledge that the bursting of the internet bubble has left executives disenchanted by new strategies, but they say the threats of failing to act are real. "Firms need to take initial steps toward dynamic collaboration now to defend their margins and fend off newcomers." Overcoming the fear of getting started, they say, is the biggest challenge of all.