New York-based ICC provides electronic data interchange (EDI) services. EDI lets companies communicate information such as order details, product availability and delivery data with their trading partners.
EDI is not new; companies have been using the technology for decades. But ICC delivers EDI with a twist: Rather than send data over so-called private value-added networks, or VANs, it sends the information over the Internet. The data are formatted the same way; ICC simply uses the Internet to transmit the data more economically than it would cost to use private lines.
The cost difference can be huge. ICC says it can offer large customers discounts of as much as 80%. It has won business not only from small customers but from high-profile clients, including Barnes & Noble, Random House and Mack Trucks. The company currently has about 1,000 customers.
Long-time EDI vendors have taken notice, and some have taken steps to combat ICC by terminating so-called "interconnect" agreements with the company. Those agreements allow EDI network providers to send customer data from one vendor network to another. The interconnects are needed to ensure that data from one customer can reach any other customer, regardless of the vendors involved. GE Global eXchange Services cut ICC off last summer; Sterling Commerce kicked the company off in late April. Spokespeople for GE and Sterling declined to comment other than to say the cut-off decisions were made for "business reasons."
ICC President-CEO Michael Cassidy said his larger rivals simply couldnât stomach his companyâs success. "[Everything] was fine and dandy until their big customers started bringing their traffic and their business directly to us," he said.
After the termination of its interconnect agreements, ICC had to scramble to find a solution. It cut deals to hand over its data to IBM Corp. and Peregrine Systems Inc., which in turn send the information to GE and Sterling when customers require those links.
Industry-watchers stop short of slamming GE or Sterling, but say the companiesâ response adds confusion to the situation.
"Iâm not critical of it, in the sense that business is business," said Frank Kenney, a Gartner Group analyst. "I am a fan of companies doing what they have to to remain competitive. I would prefer Sterling and GE be more forthcoming about why they cancelled the interconnects. At the end of the day, all theyâve done is scare [companies using EDI]."
Cassidy is trying to make the best of a tough business situation. "Itâs free publicity," he said. ICC just closed one of its best quarters ever, which Cassidy credits partly to the companyâs higher profile. If ICC can continue to find a way to work around its rivals, then "this whole thing, at a minimum, will be no more than a marketing blunder on the part of GE and Sterling," he said.
Cassidy said heâs talked with a dozen or so small EDI providers about banding together to combat the industry giants. "We should all compete on feature and function rather than network reach," he said.
ICCâs plight provides a clear example of how the Internet is changing traditional b-to-b e-commerce practices.
For decades, EDI has allowed companies to communicate electronically, and big manufacturers and retailers have used it to better manage their supply chains. The not-so-hidden secret about EDI was its cost. For large companies, it wasnât difficult to swallow the costs of transmitting data over private VAN networks. But for small suppliers, many of which were forced by important customers to move to EDI, the network costs were a significant increase over sending orders by fax or phone.
"We realized if we could use the backbone of the Internet to do basically the same thing [as a VAN], we could drastically cut costs [and provide] better profit margins," Cassidy said. "We could expand the market for EDI while bringing the costs down and allow even bigger companies to send more traffic."
ICC customer Random House saves 50% in network costs by using the Internet-based service. It pays Sterling 10 cents per kilo-character for EDI transfers, while ICC charges just 5 cents, said Ed Ramsey, who manages EDI relationships for the book publisher.