[This is a cross-post from my blog at http://www.LD.com. Thank you for your 
indulgence. -=tg=-]

This industry needs your help. EDI should be frothy with new entrants providing 
a vast variety of innovations, options and technologies for all levels of 
players. What we find ourselves burdened with is a stagnant market controlled 
by leviathan that has the ability to choose who plays and who does not.

This is a market is characterized by what is known as “The Network Effect” 
(http://en.wikipedia.org/wiki/Network_effect). The value of the market grows 
exponentially as more endpoints (trading partners) are accessible. By cornering 
a large share of these endpoints, a bad actor can control the growth and 
direction of the market. Even with the addition of direct connects through AS2, 
this market is still defined by VANs and Interconnects.

Interconnects are not just a feature of EDI, they define EDI. Had Interconnects 
not been introduced some 20 years ago, EDI would never have become as 
successful as it is today. The power of this network effect is why a technology 
that is 40-years old remains relevant today and why so many competing 
technologies, delivered by a single provider have failed.

Without Interconnects VANs would not be VANs at all, but would be isolated 
service providers, only able to service small communities that chose to be 
wholly dependent on a single system. However, Interconnects are not for the 
networks, they are for the trading partners. They allow each trading partner to 
pick the offering that is best suited to its needs and not be locked into a 
single provider solution.

The networks on both ends of the Interconnect benefit equally by having the 
other end to complete their respective trading partners’ relationships. It is 
equally beneficial to send an EDI document as it is to receive one, so by 
simple logic the VANs do not settle send/receive with each other, they are paid 
by their respective customers. This is why Interconnects are “free,” and the 
VANs to not charge each other for them. 

Here lies the problem. There is a player in the industry that by acquisition 
has gained monopoly control over the market. Entrance to the EDI data routing 
market (a.k.a. VAN market) is being controlled by this single entity. If they 
do not give permission, one does not get to play. (Of course, they are more 
than willing to offer a degraded connection…for a fee.)  Without a true 
Interconnect with GXS one cannot reach enough endpoints to be viable. Imagine 
trying to be a phone company and Verizon refuses to interconnect. (Fortunately, 
in that case this was settled in the early 80s with the landmark MCI v. AT&T 
antitrust case, which resulted in FCC oversight requiring competition.) If you 
doubt this is happening in our market, ask yourself how many new VANs have 
entered the market since 2001. The fact is we have fewer VANs now than 1996.

The elephant in the room that no one is willing to talk about is now on the 
march again. In their plans to eliminate the ex-IBM IE system, GXS is shutting 
down all the Interconnects to IE and routing them through TGMS. For every 
network save one, GXS has moved this to a comparable, reciprocal interconnect 
on TGMS; in several cases creating new TGMS interconnects where none existed 
before. GXS has singled out Loren Data, demanding Loren Data to move from a 
decade-old, reliable, reciprocal, and direct interconnect to a circuitous route 
through Inovis, and additionally requiring payment.

What they are telling their customers is that there is an “unresolved 
interconnect issue between GXS and LORMAIL.” You bet there is. As GXS has said 
on many occasions, they do not like our business model - one which enables 
service providers and developers such as SPS Commerce, CovalentWorks, Energy 
Services Group, Trubiquity, NetEDI and launched Covisint as a VAN.

Since 1999 Loren Data has been on a mission to reinvent the communications side 
of EDI. ECGrid was envisioned as an automated switch between networks. We bring 
to this market Directory Services (e.g. Qualifier/ID-based routing tables 
available to all networks), automated Trading Partner Interconnect 
Provisioning, Migration Management, Certificate Management, and a 100% 
programmable interface for all aspects of network and Interconnect management 
(see http://ecgridos.net). The illustrious William Kammerer has called ECGrid 
“The VAN of VANs.” No wonder GXS fears us. We celebrate and encourage 
Interconnects and a rich market of innovators, while GXS wishes to shut them 
down and create a single network system under their sole control. GXS’ former 
V.P. of Marketing, Bobby Patrick, told me directly that “Interconnects are a 
necessary evil.” It is these very Interconnects which allowed GXS to build its 
business and the industry, which it now is using to prevent others from 
entering.

GXS is now attempting to force Loren Data to accept a degraded (below industry 
standard for network to network communications) connection in lieu of the 
direct IE Interconnect; one that cannot handle our data with the accuracy and 
efficiency our clients and GXS’ own customers require, and which is crucial to 
Loren Data’s professional reputation.   

No greater harm has been done to VAN Interconnects since GXS terminated its 
Interconnect with Internet Commerce Corporation (ICC) 2001. In many ways this 
is even more insidious. While ICC was itself a new competitor in EDI, ECGrid 
enables many more companies to compete with GXS…providing you with new 
technologies and more options.

Not only is this immoral, we also believe it to be illegal and are pursing the 
matter in court with a Sherman Act antitrust suit. Antitrust is the last great 
protection we have when a market becomes out of balance and no longer functions 
in a competitive manner. It is an expensive and slow process, but one that must 
be pursued when all else fails. There is much about this on my blog at 
http://www.ld.com/presidents-blog/.

There is another, even more powerful route, but it takes the industry saying 
enough is enough. If you want a market with competition and innovation, help us 
stop this right here and right now. Please, for the sake of the industry and 
yourself, please write Bob Segert of GXS ([email protected]) and let him know 
that interconnects are the backbone of EDI. Let him know that it is essential 
that all viable networks freely interconnect with each other to create the 
infrastructure the industry needs to thrive. Also drop a note to David Swanlaw, 
Sr. Vice President of Operations ([email protected]). It is telling that 
Interconnects at GXS are actually owned by the Sr. Vice President of Corporate 
Strategy and Development rather than by Operations. If you would like the GXS 
strategic perspective on Interconnects you can write Steve Scala 
([email protected]). If you would also like to write the Department of 
Justice or the FCC, drop me a line and I will provide you with some contacts. 
(Please send me a copy of any letter you send; I would greatly appreciate it.)

You might think this does not affect you - don’t be so sure. We need diversity. 
We need innovation. ECGrid and other innovators should be allowed to operate on 
a level playing field in this market and not solely at the discretion of GXS. 
If GXS is allowed to choose which innovators are allowed into EDI, the market 
as a whole will stagnate, suffer and ultimately die.

This market belongs to all of us, the trading partners, the software 
developers, the service providers and the networks. Without industry level 
resolve, as time passes, GXS will become ever more emboldened to wield the 
power of Interconnects as a weapon against its competitors. Do not let that 
happen. Maintaining a healthy counter balance within the EDI Communications 
Industry means fostering competition and innovations from many diverse parties.

I am requesting you to actively add your voice to the discussion. If you agree 
with GXS, that’s fine. But if you don’t, let everyone know that GXS’ actions 
are NOT OK with you! 


Regards,

Todd Gould
President
Loren Data Corp.


[Non-text portions of this message have been removed]



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