Europe's Single Unified Market - 1992 - a Spur to the Development of Electronic Data Interchange?

In December 1992, the EEC will complete the implementation of its Single Unified Trading Market, exerting a significant influence on organisations based in or trading with the EEC in terms of both increased competition and greater opportunities. To take advantage of these opportunities (and protect their interests) companies trading with the European bloc must be able to deal quickly and accurately with their trading partners. Information systems are already a part of many organisations' corporate strategy, but the effective implementation of Electronic Data Interchange may prove an essential pre-requisite for the greater efficiency required by those hoping to compete against a unified Europe. EUROPE 1992 The Single Unified Market The European Economic Community has not, until now, been the "common market" its name implies. Wine lakes and butter mountains have been the subject of inter-national jokes; and cross-border trading has been little easier within the EEC itself than it is between Europe and the rest of the world. This lack of unity has enabled better organised North American and Asian commercial trading blocs to make significant inroads into markets which Europe has traditionally regarded as its own territory. The EEC White Paper entitled "Completing the Internal Market" published in 1985 has, however, provided the impetus for a truly common market for products, services, finances and labour throughout the European Community, which will be completed by the end of December 1992. The 285 reforms of the EC'92 programme will effectively make a single trading market of 12 disparate nations. The regulations currently under way include such sweeping reforms as: . eliminating technical barriers to trade (such as differing standards and regulations) in the 12 member countries; . creating a single Trading Document to replace the 35 separate documents originally required for pan-European trade; . abolishing restrictions on member state capital transfers; . liberalising financial services (there will be single banking licences; open securities trading; a common insurance market); . liberalising telecommunications, transport and utilities industries; . liberalising public procurement policies of the member states; . allowing free movement of professionals between member countries; . harmonising laws such as copyright. While the movement towards total integration is still, for the moment, a developing concept rather than established fact, EC'92's supra-national vision is being taken very seriously indeed by its potential competitors: "The energy and reality of substantial change are irrefutable: European business and political leaders are forcing the pace. If the outcome is anywhere near as radical as some Europeans hope, the American eagle and the so-called Asian dragons are about to meet a kind of European wolf pack" (Magee, 1989). Implications for European Organisations The pace of change varies from one European nation to another (Tate, 1989b) but some movements are consistent across all 12 member nations of the EC. One of the opinions expressed frequently by commentators on the Single Unified Market concerns the importance of information technology to the success of EC'92. "Information technology is the fastest growing area of business and industrial activity in the Western world. Without question, it will be the engine of economic growth for at least the rest of the century ... that is why we need a single European market with common technical standards. Without it, we cannot achieve the optimum scale and the lower unit costs we need to be competitive worldwide" (Stone, 1989). In practical terms, a greater emphasis on IT means that European organisations must also place more emphasis on their information systems departments. "The creation of a single European market will mean changes in many parts of an organisation, but nowhere more than in the information systems department" (Ross, 1989). This view was reinforced by a survey of organisations in Europe, Japan and North America by "Datamation" which found an enormous number of information systems issues likely to be affected by EC'92 (Tate, 1989a). The most significant of these include: . widespread reviews of corporate and government IS strategies; . changes to existing systems and cancellation of inappropriate development projects; . planning and purchasing confusion; . cheaper, coordinated European networking and network services; . high demand for Electronic Data Interchange, multi-lingual software, development tools, expert systems, Executive Information Systems and distributed databases; . increased emphasis on open systems; . the rise of the European network and data centre. The common themes running through these issues are standardisation (and thus the development of common standards), strategic planning and the widening of electronic links between organisations. Inter-Organisational Information Systems The foundation for systems based on electronic links of any type is the availability of a telecommunications infrastructure. The "universal set" of telecommunication-based information systems (TBIS), therefore, is that group of information systems which extend beyond the physical boundaries of a single central processor; and which are enabled by telecommunications technology. A definition as broad as this covers a truly enormous group of systems, and the diagram below therefore breaks this group into a hierarchical structure based on functional roles (although it is apparent that some types of system may belong to more than one category). Inter-organisational systems differ from the earlier and simpler distributed systems in that they often cross organisational boundaries and may thus involve legal and administrative complexities. They are, however, an area of considerable importance to the development and success of EC'92. "The single market ... will lead to more European links at the business level. IS will play an important part in providing the communications infrastructure for these links electronic mail, electronic data interchange, etc." (Tate, 1989a). Companies trading or competing with European organisations may well see the growth of such links as a warning to outsiders: "The big question for US industry is whether the EC will become Fortress Europe ... There are already signs that the protective barriers which European countries are about to dismantle between each other will be raised again as an EC barrier against outsiders" (Gee, 1988) Telecommunications-based Information Systems TBIS Intra-Organisational TBIS Inter-Organisational TBIS Single-Function Cross-Functional Cooperative Competitive TBIS TBIS TBIS TBIS (e.g. Inventory Management) (e.g. Airline Reservations) (e.g. Decision Support Executive Information Systems) (e.g. Electronic Data Interchange) Figure 1 a Taxonomy of Telecommunications-based I.S. The Growing Importance of Co-operative Systems Information systems have been seen as an integral part of corporate strategy for some years now (Ives et al, 1984; McFarlan, 1984; Porter et al, 1985, Clemons, 1986). Competitive interorganisational systems such as American Airline's SABRE or the McKesson Drug Company's warehousing system are quoted ad infinitum as examples of the strategic and competitive uses of IT. A Butler Cox report on competitive edge applications suggested that strategic and competitive information systems tended to be those which involved links between organisations and their customers or suppliers (Butler Cox, 1987). More recently, however, the importance of co-operative information systems has been receiving attention (McNurlin, 1987; Wiseman, 1989, Swatman and Swatman, 1989). These authors point out that the mutual benefits of multi-partner alliance may often outweigh the possible gains offered by competitive systems. The need for standardised inter-organisational links which EC'92 requires will mean a rapid proliferation of electronic networks, TBISs and the expertise to manage both. Arguably the bestknown and most important example of the co-operative systems group is Electronic Data Interchange (EDI). "The single European market is all about the 12 member states working as one. Every procedure which improves business communications helps us to attain the single European market. EDI will accelerate our attainment of the single European market" (Purton, 1989). ELECTRONIC DATA INTERCHANGE (EDI) The Evolving Definition of EDI The many definitions of EDI currently extant tend to agree that its communications are a "standards-based, computer-to-computer exchange of business documents", but the recent proliferation of new types of EDI systems (such as the exchange of free-format quotations) has led to a need for a broader definition of the topic. We believe that EDI may more accurately be described as "an open-standard based, cooperative, computer-to-computer exchange of contractually binding data between trading partners" (Swatman and Swatman, 1989). EDI, which began as an attempt to standardise documentation in the U.S. transport industry during the late 1960's has now developed into a multi-billion dollar industry. It has grown from providing increased efficiency and lower direct costs, to offering entirely new methods of doing business. "Combining EDI with Just in Time (JIT) manufacturing inventory control and Quick Response retail inventory management requires serious evaluation of traditional ways of doing business" (Takac et al, 1989) Potential benefits to organisations adopting EDI are well known, with a typical list being that quoted by Colin Hill of Mitsubishi (Hill, 1989): • improved inventory management; • better control of transport and distribution; • reduced administration costs; • the possibility of more flexible buying strategies; • better cash management; and • improved trading partner relations. As EDI systems have become more complex in terms of the numbers and types of users, the use of third-party network service providers has increased. "There appears to be an interesting change in attitude towards third-party network services. Business managers as well as IT directors are accepting the concept of the independent clearing house for EDI transactions" (Bonfield, 1988). With their sophisticated software, document translation facilities and delivery systems (and their better security provisions) third party networks are seen as the practical approach to EDI, particularly for the more complex "many-to-many" or "incremental paper trail" systems (Wheatman, 1987; Bonfield, 1988; Norris and Waples, 1989; Burch, 1989). EDI System Types a Development Perspective From a systems perspective, EDI systems are often divided into three basic categories (Akerman and Cafiero, 1985): • one-to-many systems: These systems typically arise when a (large) organisation wishes to streamline the way in which it interacts with its suppliers (or customers). The initiating organisation is at the hub of the system while its trading partners form the satellites. EDI Third-Party Network