Whither RosettaNet?

It is, says one industry watcher, the industry's equivalent of the classic chicken-and-egg conundrum. How can RosettaNet become a business-to-business communication standard until it's used across the supply chain?

"If OEMs are not demanding that their contract manufacturers put RosettaNet in place, then the CMs aren't demanding it of the component suppliers, and so on," says Mike Kirschner, president of consultancy Design Chain Associates. "Then it becomes the chicken-and-egg problem."

RosettaNet—a set of open, Internet-based business processes—is far from being a failure: Worldwide, its consortium has 500 members. The group has developed nearly 90 automated business processes called partner interface processes (PIPs). But several segments within the electronics industry seem to be waiting for the standard to gain more traction before making a full-fledged commitment to it. "From the contract manufacturing perspective, RosettaNet has not been as widely embraced by the industry as we would expect," says John Caltabiano, director of global supply management for contract manufacturer Solectron. Of the 4,500 companies Solectron does business with, the number asking for RosettaNet "can be counted on one hand," he says.

As a result, he says, Solectron supports a variety of e-commerce formats, including the widely used electronic data interchange (EDI). "It would be valuable for everyone in the industry to be operating on the same protocol," he says, "but we are hearing the same thing from test companies, component makers and contract manufacturers: There is no road map for getting us there."

RosettaNet founders admit that adoption has been slower than anticipated in the supply chain. "When RosettaNet was formed, we thought it would be a 12-month effort, and here we are five to six years later, and we are still building standards and getting them implemented," says Jennifer Hamilton, CEO of the RosettaNet consortium. "Reengineering the business process takes time, and over the last several years, we've gained a better understanding of what it is going to take to be in for the long haul."

"Reengineering the business process takes time, and over the last several years, we've gained a better understanding of what it is going to take to be in for the long haul."—Jennifer Hamilton, CEO, RosettaNet consortium

At the same time, she quickly points out that the industry gets only as much out of a standards effort as it puts into it. Notes Hamilton, "If a standard is being created for the industry and you don't get involved—if you sit back on the sidelines and complain when you don't get what you want—you need to look at yourself in the mirror."

So where is RosettaNet as it enters its sixth year, and what are consortium members doing to continue to drive the standard?

RosettaNet has found many strong proponents among the movers and shakers of the electronics industry, including Dell, Hewlett-Packard, IBM and Intel. But what's slowed widespread adoption of the standard is the perception that it caters to the big and wealthy. "I think some companies are simply unwilling to make the expenditure," says Kirschner. For instance, implementing a single automated procedure—one of the aforementioned PIPs—originally cost about $50,000. But the consortium has been working aggressively to drive development costs down: A PIP implementation costs about $20,000 now, and the group is aiming for a $5,000-to-$10,000 range in the near future, says Hamilton.

"It was very expensive to implement initially," says Craig Conrad, senior vice president of global sales and marketing for distributor TTI. "This limited participation to a select few."

The market downturn, industry players say, also derailed some efforts. Retooling the supply chain simply hasn't been a priority. "Electronics companies have been in survival mode for the past few years," Kirschner says, citing one company at which he is consulting that has reduced its procurement team from 20 people to one. "If companies are comfortable with EDI, the attitude is, 'If it ain't broke, don't fix it.'"

Even big companies find implementation challenging, Kirschner says. Companies that find themselves running multiple ERP systems within their own organizations have to get those applications in order before tackling RosettaNet, he says. The contract manufacturing industry, which has grown largely through acquisition, is one such group. "In some cases, there are dozens of ERP systems," he says. "Companies are not operating as a single coherent organization. They have to get their house in order before they can integrate externally."

"The financial realities of the market have forced us to prioritize," says Solectron's Caltabiano. "Our suppliers use EDI and other formats, and we don't see RosettaNet as the primary mode of communication." Solectron provides RosettaNet support to its suppliers and customers through service provider e2open.

It has taken a while for supply chain software providers to build the standard into their products, says Hamilton. Oracle and SAP are only now making RosettaNet native in their software. "This has been a product cycle of three to four years," she says. "A new release of SAP is a long time in the making." She adds that companies such as Microsoft, which can offer inexpensive software solutions, usually don't do so until they see the market scale. "It takes time to build scale," she says.

Companies also seem to have difficulty measuring the potential benefits of moving to RosettaNet, both Caltabiano and Kirschner say. But Hamilton says that that capability has been available for about a year. "We worked with Stanford University and created an ROI calculator, so you can plug in the factors unique to your organization and find where the value can be derived," she says.

"The financial realities of the market have forced us to prioritize."—John Caltabiano, director of global supply management, Solectron

And the consortium can cite several success stories. Intel transacts billions of dollars' worth of business a year through RosettaNet. IC packaging company Amkor Technology has used RosettaNet standards to link with its suppliers and customers and has been able to cut the time it takes to test, assemble and package semiconductor wafers from weeks to just 72 hours. And Nokia, which processes roughly 10 billion parts per year, manages about 10 million parts per hour through RosettaNet. Nokia is using RosettaNet standards to communicate with its suppliers, its contract manufacturers and its own manufacturing operations; in manufacturing logistics; and with customers, according to Hamilton.

But RosettaNet's biggest opportunity may come from areas or companies that don't have legacy systems or have not yet adopted e-commerce processes. One company Solectron deals with, says Caltabiano, has not yet made any investment in EDI or supply chain software. "It has decided to go with RosettaNet, because it feels that the investment will still be usable in three to four years," he says. Several Asian governments, says Hamilton, have offered subsidies to help indigenous companies implement PIPs. In September, for instance, China's Ministry of Science and Technology created a RosettaNet affiliate and said that it would provide funding to help companies there implement PIPs.

But efforts will lag in the United States as long as only a few major players actively drive the standard. And that scenario may prevail until implementation costs go down or IT spending skyrockets. Just about everybody thinks RosettaNet is a great idea. (Solectron is a past member of the consortium.) "It's a viable standard that we use and all companies can work toward. If it didn't exist, we would probably have several companies all trying to do their own thing. It will take time, but it is the right thing to do," says TTI's Conrad.

Still, companies fear alienating their business partners by pushing too hard. Hamilton doesn't buy it. "You can come up with a million reasons to do what your customers and suppliers ask you to do," she says, and continue to support a variety of e-commerce options. "I think that to some degree, you reap what you sow." Or you can become part of the standards drive. "Take a position," she says. "You have to be willing to lead."

For more on RosettaNet see PIP PIP hooray!