September 29th, 2021
Connectivity is the foundation of today’s society. With the help of the Internet, you can now get in touch with someone on the other side of the world within milliseconds. Now, you may be thinking: Duh.
As individuals, we may take this ability to communicate without boundaries a bit for granted. Calls, emails, SMS, iMessage, WhatsApp, Teams, FaceTime, OneDrive, WeTransfer—the list goes on. But from a business perspective, this luxury isn’t always a given. When it comes to connecting buyers and suppliers or vice versa so that they can easily do business together, this ideal state of connectivity is still a work in progress.
Key in the realization of this transformation is interoperability and the use of open networks, both of which have the power to transform (international) business.
Interoperability Enables Seamless Connectivity
To make it easier for trading partners to connect with one another, interoperability is key. In a basic sense, interoperability means that systems can work together, communicate, and exchange information without restrictions. For example, data exchange between SAP S/4HANA and Microsoft Dynamics 365 Finance & SCM.
Interoperability between different systems can only be achieved if there are clear rules about communication, or how the data is formatted and transferred. When the data is exchanged according to these predefined rules, the systems can understand each other. That’s where standards come into play, of which there are two types: open standards and closed standards.
What Are Open Standards?
Some examples of open standards are HTML, XML, and SQL, but this is by no means an exhaustive list. Standards are open when the following are true:
- The necessary documentation is readily available
- There are no impediments with regard to intellectual property rights
- Stakeholders have sufficient opportunity to participate in the development and further elaboration of the standard
- The independence and sustainability of the standardization organization is guaranteed
A good example of interoperability and the resulting connectivity based on open standards is the Internet. Countless open standards come together to create an accessible-to-all platform that is continuously expanding based on the contribution of others. Users are not restricted to any one communication method or data structure. If that were the case, the Internet wouldn’t be nearly as commonplace or extensive as it is today.
Open Standards from a Business Perspective
It’s important to keep in mind that open standards are continuously evolving and everyone can utilize them differently. If we take the example of the Internet, every developer has a different idea of the “best” way to build a website. In other words, there’s more than one means to an end, and it doesn’t really matter what the “best” way to build a website is—every developer is free to make that call on their own.
From a business perspective, the use of open standards has created a basic foundation for interoperability between trading partner systems. However, unlike the free use of open standards on the Internet, the ability for trading partners to connect to one another for business purposes relies on the use of highly sophisticated standards that meet regional, industry, or business-specific needs. Both parties must also agree on the standard(s) as opposed to structuring their data in whichever way they prefer.
For example, if a buyer requires all of their suppliers to send their invoices in line with Peppol BIS 3.0 specifications, the requirements for doing so are openly available. After all, Peppol BIS 3.0 is based on a set of open standards and specifications. But since ERPs and other internal systems aren’t nearly as flexible as the Internet, there are many more rules involved in achieving interoperability in this regard. To clarify, it’s not enough for the buyer to tell their suppliers that they need to send their invoices in XML format because there’s no chance that every supplier will structure their XML files in the same way.
Open Standard ≠ Open Source
On a side note, despite certain similarities, open standards should not be confused with open source (think GitHub). With open source software (OSS), someone writes source code and allows anyone else to modify and/or further develop it with virtually no limitations.
Open standards (i.e., HTML and SQL) are a primary element of open source code, but open standards themselves do not serve the same purpose. While open source software can be freely modified by anyone, anywhere, open standards are more controlled and are often maintained by an oversight body (e.g., ISO). Furthermore, open standards have the main function of increasing interoperability while open source hubs provide a space for developers to build off of existing code and foster creativity by collaborating with one another.
What Are Closed Standards?
We won’t go into too much detail here since we’re focusing on openness and interoperability. But simply put, a closed standard is any file format, protocol, or program that is not freely accessible; documentation on source code and other necessary requirements are hidden from the public. Two common examples of closed standards are Word and Photoshop because you have to have the right software to be able to open the file types and work in the same way.
In addition to systems interoperability, there’s also network interoperability. Network interoperability enables participants of one network to connect with participants of another network without having to adjust any of their usual processes.
Here’s a good example:
If you have a phone plan with Verizon and call someone that has a T-Mobile phone plan, you expect to be able to reach that person immediately, just as if you were calling someone with a Verizon plan. Everything is exactly the same—quality of service is not affected because you are calling someone in a different network, and you can still call using the same device.
Ideally, this would apply to document exchange between trading partners as well. If we look to the future, the ultimate goal is to create a network that is in line with the interoperability example above: Regardless of network association (e.g., Peppol or EESPA’s EIN), a global interoperability framework (GIF) would enable seamless connectivity between all participants. We’re not quite there yet, but it’s in the works. You can read more on the developments here.
As with standards, networks can be open or closed.
What Is An Open Network?
An open network is interoperable and can be integrated with any type of solution and/or technology. This does not mean, however, that an open network is interoperable with other open networks—this requires close collaboration between network organizations, process modifications, and much more. Again, this is what the GIF aims to create: network interoperability.
Like open standards, an open network offers freedom of choice in regard to internal technology and software provider, granted the software provider meets network requirements. For example, an organization would have to choose a service provider that is an official Peppol Access Point in order to access the Peppol network. TIE Kinetix is one of these service providers.
Once an organization connects to an open network they are able to connect to every other organization in that network with ease. The Peppol network prides itself on their “connect once, connect to all” approach, and the same can be said for any other open network; the need for point-to-point connections between trading partners is eliminated. Interoperability becomes instant.
What Is a Closed (Proprietary) Network?
Closed, or proprietary, networks are often meant for one region, industry, or other isolated community, for example, a network that is only open to those with the same service provider.
Closed networks are not conducive to interoperability with other networks or trading partners that do not meet the requirements of that network. Closed networks may also make use of standards that are not available to everyone. Therefore, connecting with trading partners outside of a closed network would require either a point-to-point connection or participation in an open network.
Together for Openness & Interoperability
Organizations such as OpenPeppol, GS1, VeR (Verband eRechnung), and more jointly provide standardization in the exchange of electronic documents to facilitate collaboration between companies and (government) organizations around the world.
At TIE Kinetix, we believe in open communication. Trading partners should be able to send business documents to one another regardless of system or service provider. That’s why we rely on a four-corner interoperability model and maintain an open network. For our customers, our goal is to allow them to stop worrying about technical details and enable them to focus on what matters: realizing growth. Discover the possibilities with FLOW, our one and only cloud-based platform for EDI and e-invoicing.