Inter-organizational Systems: an overview

Inter-organizational Systems: an overview Presented by Stephen Lackey November 30, 2004

Articles in review • Zaheer: “Determinants of Electronic Integration…” • Transaction costs / risks • Kumar: “Sustainable Collaboration…” • Transaction costs / EDI • Nault: “…Horizontal Alliances” • Shared fees / revenues

IT systems as enabler • EDI cited as mechanism to reduce transaction costs (Zaheer) • Insurance VANs (Value Added Networks) presumably use EDI-type paradigm (Kumar) • Shared costs / profit models facilitated by lower transaction costs (Nault)

Lower transaction costs? • IT Interorganizational communications • Options: • Electronic Data Interchange (EDI) • EDI reinvented here at higher cost but incompatible and different • Homemade system that illustrates why EDI was invented in the first place

What is EDI? • Electronic Data Interchange (Today recast as ebXML, EDIXML, and others) • Structured flat file format to seamlessly exchange all facets of business, financial, logistical information between organizations • 1980’s-1990’s-2000’s eCommerce standard to blur organizational lines regardless of internal data systems • Drastically reduced transaction costs, drastically accelerated transaction speeds • Typically facilitated by VANs or direct Internet

“Measuring the Extent of EDI Usage in complex organizations…”by Nassetti, Zmud (MISQ 9/96 p.331-345) • 1996 article citing Zaheer/Venkatraman (authors of “Determinants of Electronic Integration…”) • EDI can (should) blur lines between organizations as data flows rapidly between systems vertically in supply chain • Horizontal integration benefits industry (Real estate, insurance, finance) as pooled efforts benefit all players at cost of compliance • However, implementations typically limited to narrow applications limiting real value to organizations

Failure to maximize EDI value • Study cites limitations of case studies to single implementations in single organizations • EDI Diversity measures (in types of documents) reflect quality of interaction between organizations. • Lower diversity measures may reflect internal obstacles between fragmented IT systems in an organization • Higher diversity means a richer interaction between trading partners and greater mutual benefit

The EDI commons • “Sustainable Collaboration…” suggests EDI may be used by auto industry to “establish or re-enforce domination” over suppliers through proprietary extensions or alterations to standards • Large (dominating) retailers also guilty • Technology Standards constitute a “commons” for the IT community

Tragedy of the eCommons • If the EDI standards are a “commons”, does customizing the standards constitute poaching? • Violating standards leads to conflicts between organizations and breakdowns in integrated business processes.

How to improve cooperation • Enforce data interchange standards • External bodies (trade associations, consortiums, cooperative ventures) need teeth. • Expand depth, breadth of interprocess communications and integration

Questions?

Inter-organizational Systems: an overview