New technology developments that would seem to threaten some communications options can actually drive their importance to new levels.
Retailers have come to rely on the tried and true service provided by Value Added Networks. However, with the advent of the Internet, VAN providers may need to adjust their strategy, with retailers reaping the benefits of less costly electronic data interchange.
To compete with less costly service options, VAN companies may need to explore the possibility of using Internet protocol to continue servicing the supermarket industry in a more affordable manner.
Retailers believe VANs will continue to play an essential role in supermarket business operations. An intense relationship exists between VANs and the supermarket chains they deal with, according to Fred Morsheimer, chief information officer for Trader Joe Co., South Pasadena, Calif.
"Large grocery chains, traditional supermarkets or super category chains are tied to those networks as they are to their vendors," said Morsheimer. "There is an interrelationship."
VANs transmit large amounts of data, especially for electronic data interchange, in a format compatible to retailers' and their vendors' systems. But their menu of services goes beyond just getting data from one place to another. VANs have played a crucial role in a complex communications environment by translating, processing and storing information, as well as moving it.
Because they process information as well as moving it, VANs in effect become part of a company's information infrastructure and operations. Dumping a VAN can require taking back entire categories of previously outsourced work and accumulating expensive institutional expertise.
However, information systems executives are feeling pressure to cut costs and resort to simpler pipelines. To achieve this, IS executives need to analyze what functionality VANs really provide, and whether cheaper alternatives are appropriate. "The change is not quite as easy," Morsheimer said. "VANs do wonderful things, but this emerging world of the Internet is not a secret any more."
Still, the Internet may not be ready to take on all the business functions of VANs Questions about the security and reliability of the Internet remain.
VANs will continue to play a role in the foreseeable future, but that role may be changing, said Bob Crowley, senior vice president at Research Triangle Consultants, Cary, N.C. The challenge will be for retailers and VANs to determine a reasonable cost for the process. The protocol used when moving data over the Internet is known as Transmission Control Protocol/Internet Protocol.
"We're using TCP/IP for all communication interpretation," said George Spears, vice president of retail information systems at Minyard Food Stores, Coppell, Texas. "TCP/IP is an international protocol; most everybody is trying to talk with TCP/IP."
As retailers continue to test the Internet's waters, the adoption of TCP/IP may prove painful for VANs. As companies move information over phone lines, they may explore more affordable options, like the Internet, for example, rather than rely on VANs' more costly private networks.
"I don't see us having multiple infrastructures when everything can be done over the phone lines," said Patrick Arnold, webmaster for Dorothy Lane Market, Dayton, Ohio.
As more retailers explore the potential of the Internet to transmit and share data among stores, headquarters and vendors, VANs do not have much choice but to explore new technology options, Crowley explained.
"They're going to have to move into a much greater posture of looking into TCP/IP," he said. In some ways the shift may provide an opportunity. The devaluation of the hard wired networks is a heavy blow, but it also snaps the networks out of the commodity business and into one where expertise could set them above other options.
Many small companies will probably stay away from VANs because of the high cost and difficulty of doing business. For larger and more sophisticated companies, however, VANs will demonstrate their value in many different ways.
VANs will handle the time-intensive, labor-intensive tasks that require some degree of expertise, which could be too complex or expensive for retailers to handle. VANs' ability to move information may turn out to be far less important than the ability to massage it. Dorothy Lane's Arnold certainly thinks that will be the case.
"The networks will still exist; I just think they will conduct business over the Internet," he explained. "They'll have to change dramatically in order to survive.
"VANs still offer valuable services," Arnold said, pointing to such activities as maintaining electronic catalogs of prices, translating different EDI standards, and adding a significant degree of automation to the entire communications process. "If we were to eliminate these networks and try to survive without them -- that would be impossible," he added.
A radically changing environment is the key to the progression of VANs or their taking a back seat to the Internet. What is certain is that networks and their customers are facing a lot of tough choices that will fundamentally affect their operations and futures.