On September 9th, 2002 Walmart announced its intention to shift to a new Internet-based EDI system using technology from a small software company called iSoft. I like to refer to this event as the “shot heard ’round the world” in the EDI industry, because it dramatically changed the landscape for B2B communications. Walmart’s announcement had catastrophic impacts to the group of EDI VAN providers that had been the primary channel for B2B transactions for decades. The new Internet EDI technology, AS2 short for Applicability Statement 2, would enable corporations to circumvent the VANs. Businesses could exchange transactions directly over the Internet with one another
Walmart’s September 2002 announcement was a game changer because it effectively created a market for Internet-based substitutes to VANs. Walmart used its considerable purchasing power and supply chain influence to drive Internet EDI into its supplier community. However Walmart’s supplier community was so large and diverse that this effectively meant that most of the manufacturing industry needed to begin using Internet EDI.
Wal-Mart suppliers found the technology to be inexpensive, highly reliable, and easy to use. A viral effect emerged in which suppliers began to ask other business partners to consider using AS2. The most prominent adopters of AS2 were other US retailers who quickly followed Walmart’s lead in migrating towards the new standard. Meijer, Kohls, Home Depot, and Lowes were among the first to embrace to AS2. The phenomenon spread to Europe when Walmart introduced AS2 to the UK via its ASDA brand. Over the following years Carrefour, Tesco, Metro, Macys, Sears, and nearly every other major retailer in Western Europe and North America shifted a percentage of their traffic away from VANs to AS2.
As the target of the classic “disruptive technology” phenomenon, EDI VANs appeared headed for extinction in the coming years. However, in 2011 there remains almost a $1 billion market for VANs. How did the VANs manage to avoid extinction? Answers in an upcoming post.