The Automotive Network Exchange is moving into other industries with the goal of becoming the business-class Internet
Most ANX participants call the network a success--so much so that some have turned into ANX evangelists. With more than 300 trading partners online, another 150 waiting in the wings, and a new owner with deep pockets and a global presence, the ANX is set to expand into other industries, placing any company on the list of prospective converts.
"The goal is for ANX to become the business-class Internet," says Doug Buchanan, business technology manager at Dofasco Inc., a large Canadian steel producer that conducts business with the Big Three automakers--DaimlerChrysler, Ford, and General Motors--on the ANX.
Other ANX pioneers stop short of saying that's the goal, but acknowledge that's exactly where ANX could be headed. "I'm not saying we wanted to create the business Internet," says Dennis Kirchoff, ANX development leader at Ford. "But inevitably, if the thing succeeds in other industries, that's what it will become."
Development of the ANX didn't happen overnight--it has been more than five years since work on the network began (see sidebar story, Rigorous Certification Maintains ANX Security Standards). Trading partners re-examined business practices, and it took them a long time to get their internal networks ready to trade on the ANX. For example, seven groups within Ford were running CAD/CAM applications over separate T1 lines. Ford had to develop an internal database of all its network connectivity before it could decide where and how to connect to the ANX. Plus, service providers spent up to a year getting their networks ready to pass the rigorous testing and certification required to participate in ANX.
The ANX hasn't been without its detractors. Some critics point to the relatively small number of trading partners participating, given the thousands of potential partners in the automotive industry, and question whether the network should be called a success at all.
But that hasn't stopped ANX proponents from seeking to make the network a business alternative to the Internet. Indeed, expansion of the ANX into other industries already has started. Several Detroit-area health-care companies, including hospitals and insurance companies, are established as trading partners on the network.
In an effort to increase the speed of expansion into other industries, the Automotive Industry Action Group, the not-for-profit auto industry consortium that built the ANX, sold the network in December for an undisclosed sum to Science Applications International Corp., a $4.7 billion company with offices in more than 150 cities worldwide. SAIC is the parent company of the ANX overseer, Telcordia Technologies Inc. (formerly Bellcore).
SAIC, in San Diego, is expected to give the ANX a financial shot in the arm, although the company won't say exactly how much it plans to invest. One focus: application development. "There's a hell of a lot more to an extranet than pipes," says John Sullivan, extranet offer manager at AT&T, one of the ANX's certified service providers. "What really makes it interesting is the applications."
So far, the ANX has been used for little more than CAD/CAM file transfers and electronic data interchange. During the next year, SAIC will focus on developing applications such as CAD/CAM collaboration, videoconferencing, and even IP telephony to run on the backbone, says Peter Rosamilia, the ANX's new chief operating officer.
In addition, SAIC will push harder to take ANX global. ANX pilot programs already are under way in Europe and Japan. The promise of a global ANX was one motivating factor that led Toyota Motor North America to reveal in September its plans to join the ANX this year. Toyota North America's parent company, Toyota Motor Corp., is participating in the Japanese ANX pilot.
While its chief focus is on helping the ANX grow, SAIC also is finding ways to improve on the existing backbone. Most significantly, a new dial-up service was launched this year, making it much less expensive for smaller trading partners to join the network.
Some of the visionaries who created ANX in 1994 say it was their intent all along to expand the network beyond the borders of the automotive industry, but that wasn't evident in the beginning. "When we originally described the ANX, we said it was a network for the automotive industry," says Buchanan, whose company, Dofasco, was the first trading partner connected with the Big Three on the ANX. "I could kick myself for that. People interpreted that statement as a fence around the network."
Now, in an attempt to get away from the notion that the network is exclusive, ANX pegs itself as "the world's premier multiprovider business-to-business electronic-commerce network." Eventually, the "A" in ANX will be changed to stand for something more comprehensive than "automotive," Buchanan says.
The push to bring other industries into the ANX is mostly an attempt to lower the cost of participating in the network. It can cost upward of $1,000 a month just for a dedicated 56-Kbps link. That's one and a half to two times more than traditional dedicated connections to a frame relay network or the Internet. In addition to paying the service provider, participants also must pay SAIC a 5% to 10% surcharge.
ANX participants hope that by increasing the number of potential customers on the network, they will be able to lure more service providers, which would increase competition and lower prices. So far, service providers have been slow to join the ANX because its certification process is so difficult. Many providers aren't convinced they'll make enough money to justify the investment--up to $5 million in some cases--they'll have to make in their network to meet performance criteria.
Auto-industry executives working on the ANX project saw the health-care industry as one of their first opportunities to expand the network. The auto industry alone spends billions of dollars every year providing health insurance for its employees, so bringing insurance companies and hospitals onto the network seemed like a logical step. "Providing health insurance is a significant cost of doing business for us," Ford's Kirchoff says. "Anything we can do to make it more efficient and reduce costs is worthwhile."
It just so happened that health-care companies in the Detroit area were in the market for a secure extranet when the auto industry came knocking. Federal legislation in the form of the Health Insurance Portability and Accountability Act of 1996 was a motivating factor, says J. Sean Kenney, president and CEO of the Healthcare Industry Action Group, a not-for-profit group similar to the Automotive Industry Action Group.
The legislation required Congress to enact comprehensive national medical record privacy standards by August 1999. If Congress missed that deadline, which it did, the U.S. Department of Health and Human Services was expected to follow up with a proposed set of standards. In October, the department issued those standards, requiring that organizations entrusted with health information protect it against deliberate or inadvertent misuse or disclosure. That federal requirement, along with a need to streamline EDI connectivity among insurance companies and hospitals, made the ANX attractive to the Healthcare Industry Action Group.
"The ANX supply-chain model fits for the health-care industry," Kenney says. "We were lucky to have this in our own back yard. Without it, we would have had to build a network just like it."
The health-care industry has just started to use the ANX. Detroit-area insurance providers such as Blue Cross Blue Shield of Michigan and SelectCare Inc. have begun trading information with hospitals such as William Beaumont Hospital in Royal Oaks, Mich. Within the next six months, Kenney says he expects about 15 health-care organizations to be online using what the Healthcare Industry Action Group is calling HNX@ANX--the Healthcare Network Exchange at ANX.
Initially, the health-care industry is using the network to trade eligibility, enrollment, and referral documents among insurance providers, hospitals, and employers, including the Big Three. "We'll start with the low-hanging fruit and move on from there," Kenney says.
Kenney envisions a network that eventually will link not only employers, insurance companies, and hospitals but also individual physicians nationwide so they can trade information and medical images securely.
Other industries targeted as possible ANX users include the steel, plastics, chemical, trucking, and railroad industries. Individual companies also have expressed interest. For example, appliance maker Whirlpool Corp. says it's interested in using the ANX to trade with suppliers. The company says it sees about a 50% overlap when comparing its supplier base with the automakers' supplier base.
Dofasco, too, is looking to reach customers outside the auto industry using ANX. "There is no steel industry association that is a counterpart to the AIAG or HIAG, but the steel companies have started to look at this on their own," Buchanan says.
An online marketplace that links buyers and sellers of steel, called e-Steel, has had its eye on the ANX since the network's inception, says Gene Moses, director of the strategic services group at e-Steel. "E-Steel could be an application riding on top of the ANX," Moses says. There are no direct talks going on between e-Steel and ANX, but a deal could benefit both groups, he says.
The ANX must move quickly to get applications such as e-Steel running on top of its core network, or e-Steel will find alternative solutions quickly, Moses says. If it doesn't team up with ANX, e-Steel likely will build its own infrastructure so it can act not only as a Web portal but also as a network provider for the steel industry, he adds. That would mean competition for the ANX.
ANX participants seem to realize the importance of adding applications to the ANX foundation. Ford and GM recently said they will ask suppliers to use the ANX to access the companies' new online catalog and procurement systems, called AutoXchange and TradeXchange, respectively.
In its effort to help add applications and push the ANX into other industries, SAIC has signed a deal with VerticalNet Inc., a company that owns and operates more than 50 Web sites designed as online business-to-business communities called vertical-trade communities. The idea is to use applications such as Web portals to penetrate industries with ties to the automotive industry first and branch out from there.
Even ANX service providers are looking for ways to bring applications onto the network. AT&T, for example, is working with an application service provider called Channelinx.com, which specializes in helping small businesses that aren't EDI-enabled communicate with big companies that are. Channelinx.com uses AT&T to host some of its applications today and eventually plans to resell AT&T's ANX services to small businesses.
"The value of the network is the applications that are running across it," says Skip Miller, executive VP and general manager at Channelinx.com. "You want to be able to view the network as one big computer operating system. In the end, that's the real value of the ANX--delivering connectivity with almost unlimited computing power and a wealth of applications."
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