In March, the electronic data interchange (EDI) service provider GXS Worldwide Inc. acquired RollStream, a small B2B social media company. It's an interesting move that's possibly transformative for GXS.
For manufacturers trading electronically with their customers, moving orders as EDI documents is a reliable way to exchange large volumes of critical data. But the missing link in automated supply chains is the human factor, including information about the myriad activities that go on behind the digital transaction exchange. RollStream’s Facebook-like front end puts a consumer-like interface on the deep and complex processes that support electronic supply chain management.
RollStream provides a centralized system that connects suppliers and customers; it can help to manage everything from finding suppliers that may qualify as trading partners to scorecarding their performance, once they are part of the supply chain. The service is very much like a specialized Facebook in that it uses an interface that is, by now, familiar to the legions familiar with social media. At the same time, RollStream has built a set of applications that simplify and automate several key functions that typically create delays and add expense to traditional trading relationships.
GXS is an old-line company that has provided EDI software and connection services for decades. The company's traditional offerings have been delivered by the sale and maintenance of installed software that companies use to translate and communicate their EDI documents both into and out of their enterprises.
The move to acquire RollStream could be a turning point for GXS, as it embraces software as a service (SaaS) architecture, a common delivery method for social media, but a departure from GXS’s typical product offerings. A positive departure, in my opinion.
For GXS, pasting RollStream’s social connectivity on top of its old-school software helps to move the company into the 21st century, without causing large-scale disruption to its current business model. Representatives from GXS did not respond to our requests for an interview, but here's why I think this move is a good one for the company.
First, the functions enabled by RollStream round out GXS's service offerings that have, until now, been either self-managed by customers, or offered as outsourced services paid for by the customer. This is because the process of onboarding, testing, setting compliance standards, and evaluating performance can typically be time-intensive and require specialized skill sets.
RollStream's tools make that process much more self-managing. I don't know how GXS will charge for the use of RollStream, but the automation and consistency imposed by the system will certainly reduce the overall costs to accomplish these backend activities.
The second (and possibly more important) aspect of the RollStream acquisition is that it brings GXS into the SaaS world, an arena the company desperately needs to enter, if it wants to remain relevant and competitive. Cost comparisons between software installations and SaaS offerings typically show a clear advantage to the latter.
GXS would likely find it difficult to switch from its installed base to a SaaS platform without first building experience and history with the online technology. But migrating to the SaaS world with RollStream could make it easier for GXS to sell SaaS-based EDI products to its existing customer base as less expensive offerings.
Time will tell how successfully GXS integrates its new RollStream tools into its product portfolio, but its move toward a SaaS-based model provides an indication of the overall acceptance of cloud-based offerings as replacements for installed software in the enterprise.