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The short answer is yes, enterprise software is killing innovation. Enterprise software in its day was innovative helping to automate enterprise business processes. Now enterprise software needs to go to a new level of openness and shed it proprietary nature. The Cloud or more features will not make enterprise software innovative again.

Definitions - Enterprise Standards Vs Innovative Changes.

Just by comparing the definition of enterprise software and innovation you can see that these definitions are at odds with each other. Enterprise software helps businesses to standardize and automate business processes across the enterprise versus innovation is about making changes to established business processes.

• Definition for Innovate. The term innovate is defined as “to introduce something new; make changes in anything established”.
• Definition of Enterprise Software. Enterprise software is defined as “software intended to solve an enterprise problem (rather than a departmental problem)”.

In the Beginning Enterprise Software Was Innovative. Enterprise software in its day (’70s - ’90s) was innovative. It enabled large businesses to standardize their Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Supply Chain Management (SCM). See Enterprise Software Top 10 for more on history of enterprise software and which are the top enterprise software companies (2009) that include SAP and Oracle.

The Enterprise Software Innovation Challenge. Now, enterprise software is becoming more and more a bottleneck and even fatal for many companies by burdening these companies with high-maintenance costs and limited options for using IT to innovate. Enterprise software needs to evolve to a new level to leverage new technology innovations such as real-time web, mobile automation, social networking, cloud computing, open APIs, augmented reality, and so on.

The Need For Enterprise Software to have APIs at the Software Module Level. Is there any hope for enterprise software and innovation to co-exist? Yes, but enterprise software is going to need to evolve into something more modular with modular-level Application Programming Interfaces (API) that can interface with external applications. This will enable businesses that use enterprise software to be innovative and not be chained to one mammoth, hard-coded application that is supporting last year’s business processes. Innovation is focused on change to leverage new business opportunities. Enterprise software that is modular with open APIs enables businesses to innovate. With a modular, API-based architecture, businesses have the opportunity to cost-effectively use enterprise software modules in whole or in part to interface with other applications and software services that best meet the needs of the organization.

Will Enterprise Software as a Service (SaaS) Allow For Innovation? No, Enterprise SaaS by itself will not enable businesses to innovate. An enterprise SaaS offering by itself is just another “hard-coded” and proprietary application hosted by the software vendor instead of being hosted in customers’ data centers. In this case, the business is still harnessed with a mammoth enterprise application and it is at the mercy of the enterprise software company to add changes and add new software services. SaaS or a cloud-based enterprise software may offer cost savings and some flexibility, but it is not the “silver bullet” for enterprise software to support business innovation nor IT innovation.

Can Enterprise Software Just Add More Features To Allow For Innovation? The short answer is no, more features will not make enterprise software more innovative. Enterprise software by its nature is to encourage, automate, and enforce good business processes across departments, business units, and the enterprise. By adding and adding a bewildering number of features to the application, the enterprise software become too complicated to use and to support as well as increases the likelihood that organizations will pay for features that they do not use. Additionally, a bunch of bloated features enables untrained users and individual departments to use the enterprise software in ways that may be at odds with the goals of the enterprise as a whole. See Enterprise Irregulars posting, Enterprise Apps User Interface – the wrong discussion, about the pitfalls of adding features versus improve the process engine of enterprise software.

I like enterprise software and have supported it and interfaced with it for many years. At the same time, it is time for a change. Information technology is here to support better, faster, and innovative decision-making. Enterprise software is wrong when it just supports repeatable, worn-out business processes or burdens us with more and more bloated features that we will never use.

Many businesses wrestle with the question of where best to exchange electronic documents (purchase orders, invoices, status, etc.) with their suppliers and customers. There are a variety of options, but basically it comes down to either using a 3rd-party Value Added Network (VAN) or directly connecting to trading partners using the internet. Originally businesses conducted Business-to-Business (B2B) eCommerce through Value Added Networks (VAN) using some form of Electronic Data Exchange (EDI). VANs are still a viable option, but B2B eCommerce has now expanded to the internet where trading partners exchange electronic documents directly in a variety of formats to include EDI / EDIFACT.

Considerations for Exchanging Electronic Documents over the Internet or Through VANs.

There are many factors to evaluate when deciding to use a VAN or use EDI over the Internet. Below are some key considerations.

• Costs. VANs usually cost more and charge by the transaction. The more volume you have the less cost per transaction, but the overall costs go up as your transaction volume increases. Doing EDI over the Internet does require technical expertise. This cost in technical expertise will increase depending on the number of trading partners and types of transactions. Transaction volumes are not usually a major cost factor when it comes to EDI over the internet.
• Security. Every business that exchanges information with other businesses needs an on-going data security program. VANs have a lot of security expertise. The question is how much security do you need for your data, and how much outside security expertise do you need, if any.
• Flexibility. VANs increasingly offer more and more value added services. These B2B eCommerce and supply chain information services can provide you a lot of flexibility and even a competitive edge. At the same time a long-term, fixed-cost contract with a VAN can become a severe constraint as lower cost alternatives over time become available for B2B eCommerce services.

Deciding Whether to Use a VAN or the Internet. There are no easy answers, but here are some rules of thumbs:

• Small Company With Small Number of Trading Partners. Tough choices. Many times your large trading partners will have several B2B eCommerce options for you and even assist you with getting setup for free. Just ask. A third-party consultant, a VAN, buying EDI software or, if you have a programmer on staff, may be an option. Need to evaluate the startup costs and on-going costs. Again, ask your largest trading partners for advice. Many times, large companies have a whole web site dedicated to helping trading partners get setup to exchange electronic documents.
• Medium-Size Company A third party consultant or software as a service (SAAS) vendor that caters to your industry and your major trading partners may be the best answer. Medium-size companies should look for every opportunity to exchange electronic documents over the internet. VAN charges for small and medium companies can be expensive. If you have an IT staff, it is also time to start building up your expertise to exchange EDI, XML, or proprietary-formatted documents over the internet. As the number of your trading partners grow, you should look for every cost-effective opportunity to setup trading partner relationships directly in order to exchange electronic documents over the internet.
• Large Companies With Hundreds of Suppliers. Invest in IT staff and software to exchange business documents over the internet. Software includes EDI translation software and managed file transfer software. Maintain relationships with one or more VANs. As a minimum, use VANs for connectivity with suppliers that are not cost effective to connect over the internet and with major trading partners that opt for a VAN / B2B eCommerce portal only solution. Additionally, VANs are offering more value added services such as supply chain information services and software, data synchronization, and matching services such as matching purchase orders and invoices. Some of these offerings may be cost effective or offer you a competitive advantage.

The history of Electronic Data Interchange (EDI) started in the 1960’s when computer systems first had the capability to transfer data between other computer systems. The progressive history of EDI has centered primarily on the evolution of data format standards for exchanging electronic business documents. On occasions advances in data communications and data protocols have dominated the history of EDI. See timeline below on the history of EDI.

1965: First EDI Messages. Holland-America Steamship Line sends shipping manifests as telex messages that are automatically converted into computer data.

1968: Transportation Data Coordinating Committee (TDDC) Formed. A group of railroad companies concerned with the quality of inter-company exchanges of transportation data formed TDDC to study the problem and to improve it.

1973: FTP Protocol Published. The File Transfer Protocol (FTP) enabled file transfers between Internet sites.

1975: First TDCC Standard Published. Ed Guilbert, a member of the TDCC, is referred to as the Father of EDI, and was involved in coordinating the development of translation rules among four existing sets of industry-specific standards.

1975: Telenet, the first Value Added Network (VAN) Started. Telenet, the first commercial packet-switching network and civilian equivalent of ARPANET, was born. Telenet represented the first value-added network, or VAN — so named because of the extras it offered beyond the basic service of linking computers.

1978: TDCC renamed EDIA and Received ANSI Charter. TDCC was renamed the Electronic Data Interchange Association (EDIA), received a charter from the American National Standards Institute (ANSI) and became the ANSI X12 Committee, which gradually extended and replaced those created by the TDCC.

1981: ANSI X12 Published. EDI data standards now existed for transportation (air, motor, ocean, rail), banking, warehouse, food industry, and drug industry.

1982: EDI Mandated for Automotive Industry. GM and Ford mandate EDI for suppliers.

1985: EDIFACT EDI Standard Created. The EDIFACT EDI standard was created under the auspices of the United Nations to enable a broader global EDI trading capability.

1996: EDI over the Internet (EDIINT) Formed The Uniform Code Council (UCC) started EDI over the Internet (EDIINT) program. EDIINT was set up to standardize the communications of EDI data over the Internet.

2001: AS2 Communication Standard Created. EDIINT published the AS2 standard which supports communications of EDI using the HTTP protocol.

2004: Wal-Mart Implements AS2 Over Internet. Wal-Mart sets trend for EDI over the internet by migrating thousands of their suppliers to AS2 using iSoft.

To be continued …