Users caught in middle of VAN spat

A nasty spitting match between rival e-commerce value-added networks has corporate users crying foul and worrying about the long-term status of their online links to supply chain partners.

Dublin, Ohio-based Sterling Commerce Inc. last week confirmed that it plans to terminate its VAN interconnect with New York-based Internet Commerce Corp., effective today. Sterling's move follows a decision in September by market leader GE Global Exchange Services Inc. to disconnect its VAN from the one run by ICC.

Users need interconnects between different e-commerce networks to process business transactions via electronic data interchange transmissions with suppliers and customers that subscribe to other VANs. ICC said its network has more than 1,000 users.

Neither Sterling nor Gaithersburg, Md.-based GXS has said why it cut off ICC. GXS said only that it acted for "business reasons," while Sterling declined to comment.

For now, ICC customers can get around the disconnects by having their EDI traffic routed to Sterling and GXS users through intermediary links. Charlie Townsend, chief technology officer at New York-based Randa Corp., said the men's neckwear maker will be able to send data to business partners on Sterling's network via IBM's VAN at no extra cost, with ICC picking up the tab.

"There's always more than one way to skin a cat, and maybe these bigger [VANs] will discover they're not as important as they thought they were," he said. "If this was a power play, it didn't work."

But Ken Vollmer, an analyst at Giga Information Group Inc. in Cambridge, Mass., said ICC may not be able to absorb the extra fees indefinitely. "They can only afford to eat those charges for so long," he said.

Gregory Onjack, data interchange e-commerce administrator at Mack Trucks Inc. in Allentown, Pa., said VAN users need assurances that they won't be subject to these kinds of unexpected changes. He pointed out that telecommunications firms can't randomly disconnect from one another.

Onjack said Mack Trucks has 200 suppliers on Sterling's network and more than 350 on GXS's VAN. Mack used to be a GXS customer, but he said it switched early last year because ICC's prices were 70% lower than the $20,000-plus monthly fee it paid to GXS.

Now, Onjack said, both GXS and Sterling have offered to meet ICC's price if Mack shifts to their networks. "To me, this is a terrible business practice," he said. "I call it price fixing."

Russell Stultz, president and CEO of Wordware Publishing Inc. in Plano, Texas, said that he also was contacted by Sterling shortly after it informed customers in January that it would disconnect from ICC.

"The timing seemed to imply that if we didn't switch, we'd no longer be able to trade with Borders and Waldenbooks via EDI," he said.

A GXS spokesman denied that the company's decision to sever its connection to ICC's network was a case of corporate bullying. He also denied that GXS is engaging in any price fixing, saying that its offers to prospective customers "are made unilaterally, based upon our own information."

Sterling declined specific comment but said it has "an active plan to enable customers affected by" the termination of its link to ICC's network.

ICC CEO Mike Cassidy acknowledged that the disconnects will prevent the company from meeting its goal of becoming profitable this month. But he said ICC will survive the spats with Sterling and GXS.

Other new VANs haven't faced the same kinds of problems, Vollmer said. "There's something going on [with ICC] that we don't know," Vollmer said. "I'm sure at some point there'll be lawsuits flying around, and we'll find out."

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