Tuesday, September 17, 2002

What exactly is AS2?

A couple of weeks ago, Walmart announced that it will mandate that its entire supplier base move from traditional EDI over value-added networks (VAN) to Internet-based EDI using a standard known as AS2. After I wrote a short post on the implications for B2B adoption, the Spectator began to get a significant number of search engine hits on the keywords “Walmart” and “AS2,” indicating that a lot of people would like to know more.

So, what is AS2? AS2 is short-hand for EDIINT AS2 (Electronic Data Interchange-Internet Integration Applicability Statement 2). The AS2 standard, developed from work by the Internet Engineering Task Force (IETF), provides a reliable and secure Internet messaging protocol, using public key encryption (PKI). Although AS2 can be applied to any Internet messaging format, Wal-mart is using it at this point for electronic data interchange (EDI). Wal-Mart is currently testing AS2-based EDI with several of its primary suppliers, but it is moving rapidly to spread the standard to the rest of its suppliers. The impact of this directive is enormous, with more than 14,000 Wal-mart suppliers transacting over $200 billion in sales this year. Many of them are no doubt scrambling to learn about AS2 and to decide how to comply with Walmart’s heavy stick.

Fortunately, there are several vendors offering AS2 solutions. First, iSoft's Commerce Suite Software uses the AS2 standard to provide trading partner management, public key infrastructure (PKI), and an infrastructure for IP-based secure communications. This allows data transmitted to be digitally signed, secure and non-repudiated. Walmart itself is using iSoft’s products in building out its AS2 infrastructure and it is also promoting iSoft as its vendor of choice. For Wal-mart suppliers, iSoft is offering a canned solution with no license fee, starting at $300 per year for support. I would expect to see many Wal-mart suppliers simply take this offer as an easy choice. However, because AS2 is a public standard, other vendor solutions should work equally well. Suppliers can continue to use their current EDI vendor, if it supports AS2—or another vendor such as IPNet or Cyclone Commerce, which also provide AS2 solutions for Wal-Mart suppliers.

Even though these solutions appear to be cost effective, some smaller suppliers may be reluctant to implement AS2 if Walmart so far is their only customer accepting it. In this case, smaller suppliers may want to check whether their current VAN provides an AS2 gateway to connect to Walmart. With Wal-mart’s clout, I would not be surprised to see most of the VANs eager to provide this capability, rather than lose traffic.

By the way, I expect other major retailers such as Kmart, JCPenney, and Sears to follow Wal-mart’s example. When compared to the cost of traditional VAN-based EDI, the cost savings of Internet-based EDI are simply too attractive.