Guest Commentary: The Next Big Thing in “SaaS” for Supply Chains – “The Entrust”

We’ve entered a new era. This era is an “always on and always connected” and “nowhere to run and nowhere to hide” environment. This “big data” environment is creating a factorial increase in transparency (costs, prices, performance etc.) that is redefining the permanence of business relationships and supporting system requirements. In the new world, very little will last forever (or should be planned to last forever) and the best strategies will be based on the ability to configure and reconfigure partnerships within supply chains (suppliers, customers and logistics service providers). The key will be not to establish relationships, but to flexibly maintain them in a way that guarantees outcomes and insures against failure. The new “permanence” might be best described as doing lots of temporary and/or different things for long periods of time with the same people, as opposed to the old “permanence” of doing the same thing with the same people all the time.

As a consequence of this new era, product life cycles and shelf lives are shortening – quickly. In today’s world, almost any product or service can be ‘gotten’ from anywhere by anyone. And, if you wait six months to a year, you can find it done better or cheaper by someone else. Just because you have it or can get it isn’t good enough anymore – so can everyone else. Having the product or service isn’t enough – you need to distinguish yourself by being able to guarantee the outcome (or insure against failure) from using the product or service. If you can’t, you’ll be passed over for someone who will and your margins will suffer over time.

Technology Outlook – Obsolescence of the Permanent Enterprise Platform and the Evolution to Heterogeneous, Distributed Systems
From a raw technological infrastructure standpoint, many of the systems created in the prior decade will become obsolete over the next decade. They are much like a cassette tape player or VCR tape is to today’s methods of music and video distribution. The systems won’t go away, but they will not offer businesses competitiveness either. Why? Because these systems purchased in the last 5 years were purchased as “permanent platforms” that ignore the rapid “acceleration” of technology and networks.

To remain competitive, companies will need to continuously buy (or lease) new technologies that let them keep pace with this acceleration. Specifically, competitiveness will require businesses to be able to harness presence on networks, leverage ubiquitous wireless communications and distributed intelligent devices and extend their legacy systems and platforms. The notion of replacement cycles for technologies will be replaced by continuous investment cycles.

What businesses continue to invest in will also need to change. The architecture of heterogeneous, distributed technology systems that businesses will need are very different than the pre-2011 enterprise platforms. Thinking simply, an architect of houses (your enterprise) follows different design principles than someone who architects multi-tenant apartments or office buildings (an inter-enterprise collaborative, network solution). Things like common areas and shared community services are much more understood by architects of buildings or apartments. This thinking is what makes enterprise systems and inter-enterprise systems different – so different that you can clearly distinguish between an apartment and a single-tenant house on your street.

Logistics – New Super Specialists Eroding What You Thought Was Permanent
On the logistics service providers side, we’re now seeing the real impact of Darwin’s law as the logistics industry continues to evolve and specialize post deregulation. For many years, the logistics system operated with a structure of “Whales” (multi-modal, end-to-end asset-owning logistics providers such as Deutsche Post and UPS), “Sharks” (specialized, best-of-breed in a particular mode, such as nationwide domestic truck carriers) and “Peddlerfish” (non-asset owning provider in a particular space/mode). But, the system evolved and we saw a smarter-than-normal Peddlerfish emerge that I consider a “Dolphin” — a very intelligent and likeable broader logistics specialist (a 4PL, like Menlo). And as Darwin predicted, the ecosystem continues to evolve. We’re now seeing a new member I will call a “Needlefish” — this smaller fish does one thing really well and has sharp teeth. One Needlefish doesn’t eat much food, but a school of them can easily pick away at aspects of the ecosystems. We’re seeing Needlefish that are lane specific, commodity specific or super-specialized in a market/geography (such as fresh seafood or flowers). Needlefish will erode areas of business that the traditional Whales, Sharks, Peddlerfish and Dolphins had always thought of as their own permanent feeding areas.

The Entrust: Rise of the Network Federators
Businesses involved in logistics need to recognize they are competing and partnering with a constantly changing ecosystem of increased specialization. Tomorrow’s successful logistics-sensitive business needs to stop focusing on forging tools to hunt and gather, and instead look to relationships and technologies that can guarantee a constant food supply.

I believe we’re seeing the birthing of new type of company – the “Entrust” – that will help businesses guarantee outcomes (and insure against failures) by maintaining the most competitive environment for process management and systems enabling best-in-class communications, collaboration, and compliance.

An Entrust is a process-enabler, not just a technology or a logistics service provider. An Entrust is trusted by a community to facilitate consistent, predictable transactions. An Entrust is a federator, bringing together other member enterprises and networks to streamline a process. An Entrust authenticates and issues credentials to participants to ensure there are no “catfish” in the ecosystem. An Entrust insulates its members from the continuous investments needed in the new era to modernize, harmonize and effectively harness new waves of technologies. An Entrust provides shared service environments for a community of players with varied technology capabilities. An Entrust provides broad access to a community to allow members to rapidly assemble, disassemble and reassemble its supply chain relationships with speed and grace. An Entrust will distinguish itself on consistency, predictability and fairness to a community. An Entrust will guarantee delivery of expected service and provide warranties in respect of failures.

At its simplest level, an Entrust will be a trusted party that enables people of common interests to participate in a defined process of registration, authentication, encryption, the issuance of credentials, standardized business process execution, certification and exception enforcement. Each Entrust will be like a Needlefish – it will be highly-specialized and have sharp teeth that take bites out of the traditional information technology enterprise systems industry.

Winners in this new era will be business models that network together, harnessing technologies to cleanly and elegantly assemble and disassemble themselves and their business processes/relationships with speed and grace. Winners will satisfy the need to continuously invest and reinvest in technologies by trusting Entrusts to unify its business partner networks.

As I look out at the market, I see several other examples of developing Entrusts, like Nulogy, E2open, and SPS Commerce (among others that I profile in more detail in my expanded paper on this topic).

Not everyone can, or will be able to, be an Entrust. Many existing businesses will lack the technological infrastructure or community trust to be successful or accepted as an Entrust. Entrusts will be powered by a commitment to newly-architected real-time distributed network operating systems that facilitate the security, scalability, reliability and collaboration required in community-based distributed computing. The operating system will be designed to standardize transactions that automate multiparty processes across the community – both in the physical logistics supply chain sense and the technical business process management sense. We need only look at history to identify this as a fact rather than a hypothesis – just look at the Transaction Processing Facility (TPF) that was necessary for the success of the Sabre Entrust used in the airline community.

Art Mesher is Chairman and CEO of Descartes Systems, where he has led the creation of the first on-demand logistics network that provides application and communication capabilities for truck, air, and ocean transportation. Mesher has been involved in the development of business applications for distributed computing since the 1980s, helping to grow the logistics software company Vocam Systems, which went public and was then sold to Pitney Bowes. Mesher was also President of Advanced Logistics Research, where he helped companies develop and deploy emerging technology-based supply-chain strategies, and he launched the Integrated Logistics Strategies Services practice at Gartner. Mesher is also the Chairman of the Core Group, developers of the Core Recreational Complex and Elite Athlete Performance Centre in Kitchener, Waterloo.

[Editor’s Note: Adrian Gonzalez will discuss and debate this topic with Art Mesher in an upcoming episode of Talking Logistics (date TBD). Plan to attend and participate in the discussion if you have questions or comments for Art.]