• Illustration: BizTalk Server as an EDI Gateway

Electronic Data Interchange (EDI) improvements are planned for BizTalk Server 2006 R2, a new version of Microsoft's application integration and business process management product that is planned for the second half of 2007. EDI technology enables automated exchange of business-to-business (B2B) messages (such as purchase orders and shipping notices), speeding supply chain operations and other processes in manufacturing, retail, healthcare, and other industries. Technical improvements, along with low license costs and good developer tools, make BizTalk Server 2006 R2 an attractive EDI product, but the market is crowded, especially for the software vendors who create BizTalk Server EDI add-ons.

EDI Remains Strategic Target

BizTalk Server 2006 R2 is an update to Microsoft's entry in the market for EDI gateways, which manage EDI message exchanges between organizations. EDI remains the dominant technology for B2B data transfer today, and Microsoft estimates that transaction volumes are growing 5% to 10% annually. EDI reduces transaction costs and errors, and is critical to controlling inventory levels in manufacturing and retail businesses that use "just-in-time" ordering. In some cases, EDI is mandated by law (e.g., in some U.S. healthcare organizations) or by dominant market players (e.g., large global retailers such as Wal-Mart and Target).

EDI has gradually evolved technically: systems today rely more on the Internet and protocols such as AS2 (which supports secure EDI transactions over the Web) rather than on dedicated value-added networks (VANs). Also, some EDI systems have moved away from older text standards, such as ANSI X12 (a U.S. national standard) and EDIFACT (standardized by the United Nations), to XML-based messaging standards, such as RosettaNet (originally developed for computer industry supply chains). However, newer XML-based technologies, such as the WS-* Web services messaging standards, have had little impact on EDI systems so far.

In general, BizTalk Server is designed to serve as a hub for application integration and business process management. It includes a messaging system for routing and converting messages among applications, and it provides a platform for business rules and transaction programs (called orchestrations) that implement cross-application business processes. In an EDI gateway role, BizTalk Server's messaging system converts between EDI message formats and the protocols and data formats used by an organization's internal applications, while its business rule and orchestration systems implement the operations requested in the EDI messages. (See the illustration "BizTalk Server as an EDI Gateway".)

For Microsoft and its partners, success with BizTalk Server in EDI is important because it promotes sales of Windows Server, SQL Server, Visual Studio, and other prerequisite products. An EDI win for Microsoft also takes business from major platform competitors (e.g., IBM) and smaller EDI gateway vendors (such as SeeBeyond, Sterling Commerce, TIBCO, and webMethods) who might be less loyal to Windows than Microsoft is. Finally, EDI supports Microsoft's Dynamics ERP products such as Dynamics AX (formerly Axapta), whose customers sometimes require EDI support for supply-chain integration.

BizTalk Server's presence in EDI remains modest, but the product offers some benefits compared to competitors, including low license fees, good integration with the popular Visual Studio development tools, and a large selection of built-in adapters for hooking to internal applications. BizTalk Server 2006 R2 will have other features of interest to many EDI customers, such as built-in support for reading and printing Radio Frequency Identification (RFID) tags to track items through supply chains and other business processes.

Major Rewrite in BizTalk Server 2006 R2

BizTalk Server 2006 R2 does not radically expand the scope of BizTalk Server's ambitions in EDI, but much of its EDI technology has been completely reworked, and it offers features that previously required third-party add-ons.

Like earlier versions of BizTalk Server, BizTalk Server 2006 R2 supports the EDIFACT and X12 messaging standards, and it has add-on accelerators for specific industry standards such as RosettaNet and HL7 (for healthcare). Some of the notable improvements in R2 are as follows:

Many more X12 and EDIFACT message types. R2 will be able to validate and generate many more types of EDIFACT and X12 messages than its predecessors. BizTalk Server 2006, for instance, covered roughly 200 messages for these standards, enough for basic billing, shipping, and inventory operations. R2, in contrast, will support more than 7,000 types, including all of the ANSI X12 messages required by the U.S. Healthcare Insurance Portability and Accountability Act (HIPAA). R2 can also automatically generate and recognize X12 technical acknowledgements, which indicate that a message has been correctly received by an organization's EDI gateway but not necessarily forwarded to the relevant department that will process it.

Batch processing and duplicate suppression. R2 will enable both inbound and outbound EDI messages to be grouped in batches for more efficient transmission and processing. It can also automatically detect and suppress duplicate EDI messages caused by attempts to retransmit unacknowledged messages.

AS2 support. R2 builds in support for AS2, a protocol for transmitting EDI messages over Hypertext Transfer Protocol (HTTP, the primary Web protocol), which supports encryption, digital signatures, compression, and acknowledgements for reliable transmission. Microsoft's AS2 implementation was certified for interoperability with other AS2 products by the Drummond Group in a Nov. 2006 test.

BizTalk Editor tools for EDI messages. R2 will deliver specific EDI tools in its BizTalk Editor, the Visual Studio plug-in that enables developers to define message types and their translation into BizTalk Server's internal messaging format. For example, the BizTalk Editor will enable developers to generate and receive EDI test messages from within the development environment. This will simplify testing and debugging of EDI solutions.

Orchestration access to message envelopes. In R2, orchestrations will be able to access envelope fields in EDI messages, such as the GS fields that identify the target department of an ANSI X12 message. This enables orchestrations to handle routing and processing decisions which would otherwise have to be handled by another application, complicating the overall solution.

The wholesale changes for X12 and EDIFACT EDI have a downside: The R2 EDI system is not compatible with the BizTalk Server Basic EDI Adapter, which supports EDI in earlier versions of BizTalk. Organizations can still run the Basic EDI Adapter on BizTalk Server 2006 R2, but they will have to port EDI solutions to the new R2 EDI technology if they want to take advantage of any of its new EDI capabilities. Microsoft plan a migration utility to aid the porting process.

Crowded Market, Partners

The improvements in R2 make BizTalk Server more technically viable as an EDI gateway. However, business barriers remain. EDI is a complex technology, often beyond the reach of any but the largest and most tech-savvy firms (and the smaller partners forced to keep up with them). At the same time, EDI is a mature, business-critical technology that Microsoft has mastered relatively recently. Consequently, Microsoft will struggle to find companies capable of using EDI software that have not already committed to a gateway vendor.

One promising avenue could be to work through partners that offer hosted EDI services. For example, Microsoft has partnered with GXS, a former General Electric division that offers a hosted EDI service (called the GXS Trading Grid), which has standardized on BizTalk Server. In general, online services like the GXS Trading Grid can open up EDI to smaller, less technically capable companies by removing or reducing the need for software and integration work at the customer site, and papering over many of the other technical complexities.

However, partners looking at BizTalk Server as a platform must avoid overlapping with Microsoft's own plans, and that has proven difficult in the past. Covast, for example, developed an EDI Accelerator for previous versions of BizTalk Server; R2 will subsume many functions provided by the Covast product. Microsoft says it will continue to work closely with Covast, whose products still have some distinctive features, including VAN connectivity, support for regional EDI standards, and tools managing large numbers of trading partners.

In general, Microsoft will probably continue to develop BizTalk Server EDI components for specific business processes (such as supply chain management) and standards that apply broadly in a large industry (such as retail or healthcare). Less likely is actual hosting of EDI services, something Microsoft tried with an offering called the Microsoft Business Network and gave up almost immediately. Similarly, Microsoft will probably continue to depend on partners for EDI products and services that support very narrow industries, that support national EDI standards outside the United States, or that connect EDI to less widely used, non-Microsoft applications.

Availability and Resources

The first public beta test of BizTalk Server 2006 R2 began in Mar. 2007, with production availability planned in the second half of 2007. R2 will probably be available free of charge to customers who have Software Assurance coverage on BizTalk Server, although Microsoft has not yet announced pricing and licensing for the release.

The BizTalk Server 2006 R2 beta (registration required) is at connect.microsoft.com.

A BizTalk Server EDI and B2B blog is at blogs.msdn.com/biztalkb2b.

A Microsoft presentation summarizing R2 is at download.microsoft.com/documents/uk/windowsserversystem/bpm/SOA%20_and_Business_Process/KEYN05_MWKHOA.ppt.

The Drummond Group and its interoperability testing services are described at www.drummondgroup.com.