Integration - External Integration

External integration is especially important in the realm of business-to-business e-commerce, where companies can realize significant cost savings and increased efficiencies by integrating their systems. Companies and business partners may integrate systems at different points in a supply chain, which encompasses all of the different levels involved in manufacturing products. Supply chains include everything from raw materials to finished products, which can be used by other companies in their manufacturing processes or purchased by consumers. For example, an automotive manufacturer might integrate certain systems that contain information about production forecasts with a tire manufacturer's systems. With this information, the tire manufacturer is able to tie its production levels closely with the automotive manufacturer's demand. This allows for better production control, satisfactory shipment times, and more manageable inventory levels.

In the early 2000s, business-to-business transactions happened mainly through both traditional and Web-based electronic data interchange (EDI) and online marketplaces or exchanges. It was in these environments that issues concerning external integration became important. EDI involves exchanging electronic business information like bills of lading, confirmations, purchase orders, and inventory information between organizations or trading partners in agreed upon, standard formats. Through EDI, computers and databases communicate directly with one another over value-added networks (VANs), private networks, and the Internet (open EDI).

The Internet was fast becoming an important means of engaging in EDI during the early 2000s, especially for smaller companies that previously could not afford the high costs associated with traditional EDI. Extensible markup language (XML), a computer language similar in many ways to hypertext markup language (HTML), which is used to create Web pages, was playing an important role in this arena. It enabled external integration by allowing companies to share information in universal ways, no matter what kinds of software systems they used. XML also played an important role in developing online marketplaces or exchanges, which are Web-based environments where buyers and sellers are able to come together and engage in trading. These marketplaces were operated by third parties who charged buyers and sellers to engage in electronic transactions that might not otherwise have been possible due to system incompatibilities.

The need for external integration was growing rapidly in the early 2000s along with the business-to-business sector. According to Corporate EFT Report, business-to-business sales were estimated to be $3.3 trillion in 2000 and were projected to reach $5.2 trillion by 2004. The Gartner Group forecast more optimistic business-to-business sales for 2004, placing the figure at $7.29 trillion.