jump to navigation

How many stock options should executives at a startup company be granted? November 28, 2010

Posted by HubTechInsider in Acquisitions, Boston Executive Moves, Investing, IPOs, Staffing & Recruiting, Startups, Venture Capital.
Tags: , , , , , , , , , , , , , , , ,
add a comment
A typical North American office

Image via Wikipedia

How many stock options should executives at a startup company be granted?

The Going Rates for Senior Executives’ Stock Options in the Boston area, 2011:

A President or CEO of a startup may typically receive anywhere from 6% to 10% of the company’s stock. The actual percentage of stock granted to the CEO will depend upon such factors as the company’s life stage and financial stability and revenue outlook when the new CEO signs on for employment. The earlier in the company’s formationary period the new CEO signs on, the higher the percentage of stock granted to him may be.

A Senior Vice President of a startup may typically receive anywhere from 1% to 3% of the startup’s stock. In general, and this is across many industries that startups participate in in the Boston area, those with a marketing and sales pedigree are rewarded toward the higher range and those with a financial orientation toward the lower range. This is often due to the fact that very top-notch marketing and sales executives are sinmply harder to find because of intense competition in the Boston area, and when they succeed, they add signigficantly to the bottom line of a startup company’s revenue outlook. In contrast, consider that senior Financial executives are essential to reassure skitish venture, angel and other early stage startup capital funding institutional and individual investors, but they can’t usually stake a claim to having increased sales.

A Vice President or a Key Manager of a startup company in the Boston area may expect to receive (or in the Boston area, may expect to have had to have negociated strongly for) .5% to 2% of a startup company’s stock. A Vice President of sales or a manager of technolgy would be liklier to command toward the higher end of this range of stock percentages, while a Vice President of finance or manufacturing would probably be at the lower end. As I outlined above with Senior Vice Presidents, those with marketing and sales expertise have the greatest amount of leverage. Executives and managers below these senior levels usually receive something less than .5% of the startup’s stock in the Boston area.

I should point out with some stridency that the above stock percentages that I have outlined can be misleading, and I advise starup senior management teams, hr directors, boards of directors, investors, and job seekers to take the above guidelines with care. In the Boston area, a great deal of savvy negociations by knowledgable parties, all armed with a great deal of stock option terminology and business experience, would have to be conducted to arrive at stock option structures like the ones above.

The actual percentage of a startup company that an employee receives in options is much less important than its potential value. Having 10% of a company that’s unlikely to exceed $1 million in value is much less desirable than having 1% of a company that has a good chance of being worth $100 million.

Want to know more?

You’re reading Boston’s Hub Tech Insider, a blog stuffed with years of articles about Boston technology startups and venture capital-backed companies,software development, Agile project management, managing software teams, designing web-based business applications, running successful software development projects, ecommerce and telecommunications.

About the author.

I’m Paul Seibert, Editor of Boston’s Hub Tech Insider, a Boston focused technology blog. I have been working in the software engineering and ecommerce industries for over fifteen years. My interests include electronics, robotics and programmable microcontrollers, and I am an avid outdoorsman and guitar player. You can connect with me on LinkedIn, follow me on Twitter, even friend me on Facebook if you’re cool.

I own and am trying to sell a dual-zoned, residential & commercial Office Building in Natick, MA. I have a background in entrepreneurship, ecommerce, telecommunications and software development, I’m the Director, Technical Projects at eSpendWise, I’m a serial entrepreneur and the co-founder of Tshirtnow.net.



Social Gaming Summit East, December 1, 2010, New York City November 22, 2010

Posted by HubTechInsider in events, Gaming, Startups, Venture Capital, Video Gaming Video Games.
Tags: , , , , , , ,
1 comment so far

 

Social Gaming Summit East, December 1, 2010, New York City. The New Yorker Hotel, New York City. Brought to you by MediaBistro, Charles Hudson, and Social Times.

Social Gaming Summit New York

Social Gaming Summit comes to East Coast for the first time December 1 in New York, and will focus on strategies for building, monetizing, and growing social games. Social Gaming Summit unites leaders in free-to-play games, social networking, and payments infrastructure for a full day of panels and talks.

Social Gaming Summit gathers established and emerging leaders in the social gaming space to share their thoughts on what works in the world of social games and the key issues impacting the future of the industry. This one-day event will feature a series of talks organized around several key themes:

Growth

  • -How can new social games developers grow on Facebook in the current environment?
  • -What does it take to bootstrap a successful new social game?

Distribution

  • -What opportunities exist to build successful Facebook games off Facebook?
  • -How can developers take advantage of opportunities to build games for international audiences?

Monetization

  • -What role will brands play in monetizing social games?
  • -What new opportunities are there for social games developers to monetize their games?

>> Register now!

Have a question?

events@mediabistro.com
(212) 547-7867

About the organizers

Program

Venue Info

Speakers

Manny Anekal MANNY ANEKAL oversees the development and sales of Brand Sponsorships for Zynga’s network of games. He focuses on creating high impacting ad integrations, which provide immense ROI to brands through the reach of TV, the measurability of online, and the most engaging advertising products. Before joining Zynga, Manny ran Global Ad Operations for Electronic Arts, which managed advertising across online properties, in game dynamic and static ads for Xbox 360 and PS3, mobile and social networking. Prior to that, Manny spent 2 years at Microsoft/Massive Incorporated, developing new in game advertising technology and worked with the world’s top game publishers and developers to drive advertising revenue. Manny has also held positions at The Nielsen Company, Time Warner, and Accenture. Manny holds an International Finance and Marketing degree from the University of Miami and graduated with Honors.

Follow Manny on Twitter: @mannyanekal

Brian Balfour BRIAN BALFOUR is a serial entrepreneur and pioneer in the social networking and virtual goods industry. Brian is the founder of Viximo, the largest social game distribution platform beyond Facebook. Prior to founding Viximo, Brian managed new product initiatives at ZoomInfo, and was founder of multiple online community startups, including the first college specific social network in early 2003. In addition, as a founding member of Betahouse, a co-working space for technology entrepreneurs, and co-founder of PopSignal, one of Boston’s largest professional networking organizations, Brian is actively contributing to the growth of Boston’s technology startup scene. Brian holds Bachelor’s degrees in Sports Business, Economics, and Applied Statistics from the University of Michigan.

Follow Brian on Twitter: @bbalfour

Paul Chen PAUL CHEN is Director of Business Development at PapayaMobile. In this position, he is responsible for building the ecosystem of game and application developers that support the Papaya social network for Android devices. Prior to joining PapayaMobile, Paul served as lead Product Manager for NVIDIA’s line of Tegra application processors that cater to mobile devices which range from Smartphones to Tablets. Paul has also held various engineering roles at Advanced Micro Devices and covered the technology sector for investment banking firm Salomon Smith Barney.
Bill Clifford BILL CLIFFORD joined WildTangent in October 2000 and currently manages a global ad sales organization. Bill has been a pioneer of new game advertising models that have fueled award winning campaigns for major global brands like Unilever, P&G, FOX, Paramount, Honda, Sprint, and many other top tier clients. Prior to his current position, Bill served as General Manager of Advertising Platforms as well as Creative Director. And prior to joining WildTangent, Bill was Director of West Coast Sales at News Corporation’s News Digital Media (now Fox Interactive Media). He is currently an active member of the IAB Games Committee and the IAB Sales Executive Council. He is a graduate of Georgetown University.
Geoff Cook GEOFF COOK is now the CEO of his third multi-million dollar Internet enterprise, all grown from zero traffic and zero revenue to significant market-leading properties. In 1997, at age 19, Geoff founded EssayEdge.com and ResumeEdge.com from a Harvard dorm room. Each property dominated their respective niches: admissions essay and resume writing help. He then sold his companies to The Thomson Corporation where he led the Consumer Market Group for a Thomson Learning division, departing Thomson in 2005. Geoff has been featured in Wired, Rolling Stone, ABC News, CNBC, and USA Today. In 2005, Geoff became the CEO ofmyYearbook, joining forces with his siblings. Geoff was instrumental in raising $20+ million in angel financing, venture capital, and venture debt to build the young company into the largest US social media site. Geoff has an A.B. in Economics from Harvard University and lives in New Jersey with his wife Kerri and daughters Madeline and Elyse.

Follow Geoff on Twitter: @geoffcook

Andrey Fadeev ANDREY FADEEV is the founder and CEO ofProgrestar. Progrestar employs over 50 highly professional developers in its offices in Moscow. Owing to this invaluable asset Progrestar released almost 15 projects, highly appreciated by users of the most popular social networks, including Facebook.com. Progrestar projects have over 20,000,000 registered users from over 100 countries around the globe. The newest Digger game has 3.0 M users across the three Russian social networks but of course it number is growing every day. Firstly Progrestar has launched on Facebook multilanguage social game ‘Digger’ available for not only Russian speaking users but also for English, Spanish, Turkey speaking users too. Russian social game developer Progrestar Inc. integrates Facebook credits exclusively.

Follow Progrestar on Twitter: @progrestar

Trip Hawkins TRIP HAWKINS, founder and CEO of Digital Chocolate, also founded and built Electronic Arts. Best known for Millionaire City, MMA Pro Fighter, Rollercoaster Rush and Tower Bloxx, Digital Chocolate led all software companies in App Store downloads in 2009 and in 2010 has been the fastest-growing maker of Facebook social games with virtual goods. Hawkins got the world’s first college degree in video games and was the first game business executive named to the Hall of Fame by the Academy of Interactive Arts and Sciences. The inventor of three patents and the NanoStar virtual goods platform, he has also led the design and production of many hit games including John Madden Football.

Follow Trip on his blog: http://blog.digitalchocolate.comand on Twitter: @DChocGames

Alexey Kostarev ALEXEY KOSTAREV graduated from the Urals State Technical University in 2001, and founded an Internet provider, Medialt, that succeeded to become the most profitable one in Ekaterinburg just after four years. In 2005, Alexey decided to concentrate on games, and co-founded i-Jet Media as a browser-based game developer. In 2007, i-Jet Media published first titles on Rambler.ru, and the cult social game Maffia New was launched. Following its success, Alexey left for the USA to study the social games market. After his return, the partners decided to step aside from the game development and focus on publishing ‘games for friends’ on social networks. In 2009, i-Jet Media published Happy Harvest which exploded the Russian Internet: 10 million users, $20 million in less than a year, Google Trend prize as the best game of 2009. Today, i-Jet Media is the largest publisher and distributor of social games in Russia and Eastern Europe.

Follow i-Jet Media on Twitter: @ijetmedia

Albert Lai ALBERT LAI is a co-founder and president of Kontagent, a Facebook funded viral analytics platform venture. Albert sold his first internet company, the MyDesktop Network while in his teens to JupiterMedia (JUPM) for 7 digits in cash. Most recently he was the founder/CEO of BubbleShare, a photo-sharing company sold to Kaboose/Disney in 2007. He is now hard at work on Kontagent, his 5th internet startup based out of San Francisco and Toronto. In his spare time, Albert blogs athttp://simplyalbert.blogspot.com

Follow Albert on Twitter: @albertsupdates

Katherine Lewis KATHARINE LEWIS has 15 years experience in the media and investment industry, working in the Americas and Asian markets. As Deputy Head of FM Ventures, she is responsible for the team’s Americas portfolio. and specializes in investments in high growth areas of media, including casual gaming, social networks and branded content. FM Ventures is the strategic venture arm of FremantleMedia, the world’s largest independent television production and general entertainment company, which is best known for its global brands such as American Idol and Price is Right. Prior to FremantleMedia, Katharine held commercial and investment positions at eBay, PwC, various startups including GovWorks, Bloomberg and BZW Investment Bank.
Davin Miyoshi DAVIN MIYOSHI leads GSN’s Games application, a top 20 game on Facebook, where over 7 million users play casual Flash games and compete in tournaments for virtual currency every month. Previously, Davin was a Co-Founder and CEO of Mesmo, a leading social game developer that since the launch of the Facebook platform in 2007 had engaged over 25 million users on Facebook, MySpace, hi5 and Bebo. In addition, Davin helped build two other Internet start-ups. At Intraware, a pioneer in online digital media distribution, he was integral in helping the company achieve a $2+ billion market cap and $50 million in annual revenues. After Intraware, Davin joined as VP of Business Development and one of the first employees at EQuill, an early social web discovery company that was acquired by Microsoft. He started his career in Investment Banking at Montgomery Securities (acquired by Banc America Securities) and also led corporate development initiatives at 3Com. Davin serves on the Executive Committee of the Board of Directors for Hands On Bay Area, a Bay Area non-profit where he previously served as the Board Chair and Treasurer. He received a Bachelors degree in Economics with honors from the University of California at Berkeley.

Follow Davin on Twitter: @dmiyoshi

Dan Porter DAN PORTER is the CEO of OMGPOP, a social games developer and leader in the real-time multiplayer space. At OMGPOP he oversees the team, business and strategy. OMGPOP is funded by Bessemer Venture Partners and Spark Capital. Prior, Dan was the SVP Corporate Development for Richard Branson and The Virgin Group in North America where he led investments and sat on a number of Boards of Virgin Companies. Dan was also President of TicketWeb, the first online ticketing company, which he sold to Ticketmaster City Search. Before getting into business, Dan was a founder and President of Teach For America, launched some of the first Charter schools in NYC and was a public school teacher in Brooklyn. Dan has a B.A. from Princeton University, an M.A. in Latin American Studies from NYU and lives in Brooklyn with his wife, kids, various pets and guitars.

Follow Dan on Twitter: @tfadp

Nima Pourshasb NIMA POURSHASB is VP of Strategy and Corporate Development at Live Gamer, the premiere virtual goods commerce platform. His background includes Business Development at MTV Networks, where he led M&A deals with social media properties, and a Senior Project Manager role in strategy consulting at Oliver Wyman, specializing in Emerging Markets. He holds an MBA from Harvard Business School, during which he worked part-time at venture capital firm General Catalyst, helping launch an online advertising company. Other work experience includes Goldman Sachs and PWC, and he also holds a Masters in Engineering from Imperial College, London.
Jessica Rovello JESSICA ROVELLO is the president and co-founder ofArkadium, a gaming powerhouse for online and social game solution development. Under her stewardship, Arkadium has become a multi-million dollar company with over 100 employees, two offices and a library of over 300 games. As one of only a handful of technology businesses based in New York City, Arkadium’s client list reads like a “Who’s Who” of top media companies, boasting CBS, ABC, Disney, ESPN, Lifetime, Hearst Digital, Discovery, National Geographic Channel and Microsoft to name a few. At age 24, Jessica pioneered digital viral marketing as the Director of Online Services for Artisan Entertainment, whereS she produced the website for The Blair Witch Project. Blairwitch.com has been cited as a ground breaking event in the history of film and the internet and was acknowledged as a key driver in making The Blair Witch Project the most successful independent film of all time. Jessica is the winner of the 2009 American Business Award for Executive of the Year and the 2008 Stevie Award for Entrepreneur of Year. She writes a weekly technology blog for the Huffington Post and was recently named as one of Crain’s New York 2010 “40 Under 40.”

Follow Jessica on Twitter: @jessrovello

Dennis Ryan DENNIS RYAN joined PopCap in 2005 and runs global marketing, sales, business development, social business operations, and product management. Prior to PopCap, Dennis was a General Manager and Vice President at Click Commerce, Inc., where he ran a business unit for a software-as-a-service (SaaS) CRM solution. Previously, he was CEO of Allegis Corporation for five years when it pioneered on-demand SaaS for enterprise channel management. He was also CEO at Net-It Software, which developed intranet document management software, and Vice President at EO, Inc, which created early smart phones for AT&T. In 1987, Dennis was a founding team member of Claris Corporation (now FileMaker, Inc.) where he was group manager for information management products, including the ever-popular FileMaker database product line. Prior to Claris, he was a product manager at Apple Computer, Inc.
Arjun Sethi ARJUN SETHI is currently the CEO of LOLapps. Prior to Lolapps, Arjun was the CEO and founder of ROFLplay, a social gaming startup which was acquired by Lolapps in July 2009. Arjun initially served as the Head of Business and Corporate Development for Lolapps and was named CEO in March 2010. Previously, Arjun has held various management roles with the Carlyle Group and Saset Healthcare. In 1999, he also co-founded Advanced Tuning Products, a manufacturing company within the automotive industry. Arjun currently serves on the Board of Advisors for isocket and is an active angel investor. Arjun holds a B.A , B.S in History, Economics from University of Maryland, College Park.

Follow Arjun on Twitter: @arjunsethi

Robert Tomkinson ROBERT TOMKINSON brings a career-long passion for e-commerce to his role as head of marketing at Playfish, an Electronic Arts company and a pioneer in social games. Robert oversees integrated global marketing strategies for the company’s portfolio of social games to build Playfish’s active and loyal community, which numbers in the tens of millions. Prior to Playfish, Robert was global marketing director at Shopping.com (an eBay Company), and held leadership roles at eBay and eBay Motors in the US and Australia. His career also spans venture capital and management consulting – but none of that was as much fun as social games! Robert holds an MBA from Stanford University and a BA in Experimental Psychology from Oxford University.

Follow Robert on Twitter: @rtomkinson

Peter Wexler PETER WEXLER is TrialPay’s Director of Strategic Partnerships, where he is responsible for all worldwide advertising partnership initiatives. Peter comes to TrialPay from GetConnected, Inc. where he held Senior Business Development and Account Management positions focused on growing industry adoption of GetConnected’s digital services platform that enabled merchants to seamlessly sell high speed Internet, VoIP, Satellite, Wireless and Cable services through their various sales channels. Earlier in his career, Peter held senior leadership positions with both Grant Thornton LLP and Arthur Andersen LLP specializing in network security implementation and consulting, as well as financial data modeling solutions. Peter holds an MBA with a concentration in Entrepreneurship from Babson and BS from The University of Delaware.

Follow Peter on Twitter: @trialpay

 

December 9: Playtime Party @ Saint, 90 Exeter Street,Boston, MA November 22, 2010

Posted by HubTechInsider in events, Startups, Venture Capital.
Tags: , , , ,
add a comment

December 9: Playtime Party @ Saint, 90 Exeter Street,Boston, MA

Playtime!

Thursday, December 9, 2010

Saint

90 Exeter Street, Boston, MA 02116

Cover: Say “playtime” at the door. Cover is $5.00 at the door, FREE with the Playtime Mobile coupon found in the Peekaboo Mobile & WHERE Apps.

Contact: playtimeboston@gmail.com

Remember:

1. Say “playtime” at the door

2. A strict “No Work” policy will be in full effect

3. You must be 21+ to attend

Portable power cell maker Lilliputian Systems, Inc., partners with Intel November 22, 2010

Posted by HubTechInsider in Investing, Startups, Venture Capital.
Tags: , , , , , , , , , ,
add a comment

Portable power cell maker Lilliputian Systems, Inc., partners with Intel.

Lilliputian Systems, Inc. has developed the world’s first Personal Power™ solution for Consumer Electronics devices, a revolutionary and disruptive family of products targeted at the $50 billion portable power market. The Company’s breakthrough solution delivers the only viable small form-factor battery replacement that provides the enormous run-time improvements demanded by today’s CE devices.

A compact fuel cell can power consumer electronics, using replaceable $2 butane cartridges. The energy density of butane (a/k/a lighter fuel), of course, is much higher than a lithium ion battery.

Wilmington-based Lilliputian has been slowly improving its fuel cell prototypes. Today they’re announcing that Intel Capital is making an investment in Lilliputian, and that the chipmaker will also produce the silicon wafers — a crucial component of the finished fuel cells — at its Hudson, Mass. manufacturing plant.

The Lilliputian Mobile Power System will cost about $100 and will be sold by partners, says vice president Mouli Ramani. Initially, it’ll be used to recharge devices like mobile phones, Bluetooth headsets, digital cameras, and music players that have USB ports. (Power-thirsty laptops require more than the MPS’ three watts of electricity, and Lilliputian’s initial product won’t be capable of recharging them.)

Lilliputian’s power systems will be integrated into new mobile phones or laptops, rather than sold as accessories. Instead of plugging them into a wall outlet once a day, you’d just jam in a new butane cartridge every week or two.

Prior to the Intel investment, the company had raised about $90 million in venture capital, and taken a $5 million low-interest loan from two state agencies, MassDevelopment and the Massachusetts Clean Energy Center. The company’s backers include Kleiner Perkins, Atlas Venture, Stata Venture Partners, and Rockport Capital.

Web Innovators Group 28 (WebInno28) – Five Year Anniversary: Monday, November 29, 2010 at 6:30 PM (ET) — FREE November 22, 2010

Posted by HubTechInsider in Conferences, events, Investing, IPOs, Startups, Venture Capital.
Tags: , , , , , , , , , ,
1 comment so far

Web Innovators Group 28 (WebInno28) – Five Year Anniversary: Monday, November 29, 2010 at 6:30 PM (ET) — FREE

WebInno is an informal gathering of people interested in internet and mobile innovation – open and FREE to all in the community.

This WebInno is special, as we’re celebrating the fifth anniversary of the event. We’ll both take a look back at the past five years and ahead to next five. Join the entire community in gathering around innovation in the entrepreneurial web ecosystem.

We begin with the doors officially opening at 6:30pm in the Cambridge Royal Sonesta Hotel. At 7pm in the Grand Ballroom we’ll hold our usual format of self-/angel-funded startups demo’ing to the audience in Main Dish showcases, and select an “Audience Choice” winner of the crowd’s favorite. During the entire evening’s event, Side Dish startup companies will provide informal demonstrations to the networking crowd from the Skyline Suites room.

(presenting at 7pm):

FanSwarm (Ayeah Games) – Doug Levin
HowAboutWe – Brian Schechter

Moontoast – Blair Heavey & Marcus Whitney

(demo’ing throughout the evening):

Ginger Software – Miki Feldman-Simon

My-Take – Rich Armstrong & Todd Hoskins

Penmia – Puneet Gangal

SocialSci – Leon Noel

Smashion – Daniel Ruan

Promoboxx – Ben Carcio & Dan Koziak

Woopid – Lester Rosensaft & Craig James

Monday, November 29, 2010 at 6:30 PM (ET)

Royal Sonesta Cambridge
40 Edwin H Land Blvd
Cambridge, MA 02142

Web Innovators Group
The Web Innovators Group (WebInno) is comprised of people engaged in internet and mobile innovation in the Boston area. We aim to support entrepreneurs, visionaries, and creative thinkers in the field by holding events which foster community interaction.
Our regular meetings provide a forum for entrepreneurs from self-funded/early-stage startups to present new services to their peers, as well as an opportunity for everyone in the community to share and exchange ideas.

WebInno was founded and is currently led by David Beisel of NextView Ventures.

Oracle acquires Cambridge based eCommerce software provider Art Technology Group, Inc (ATG) for $1.0 Billion in cash November 22, 2010

Posted by HubTechInsider in Acquisitions, Ecommerce.
Tags: , , , ,
add a comment

Oracle acquires Cambridge based eCommerce software provider Art Technology Group, Inc (ATG) for $1.0 Billion in cash.

Cambridge, MA based ATG provides high end eCommerce software that is used by more than 1,000 customers globally. By combining forces, Oracle and ATG expect to help businesses grow revenue, strengthen customer loyalty, improve brand value, achieve better operating results, and increase business agility across online and traditional commerce environments.

“Driven by the convergence of online and traditional commerce and the need to increase revenue and improve customer loyalty, organizations across many industries are looking for a unified commerce and CRM platform to provide a seamless experience across all commerce channels,” said Thomas Kurian, Executive Vice President Oracle Development. “Bringing together the complementary technologies and products from Oracle and ATG will enable the delivery of next-generation, unified cross-channel commerce and CRM.”

“The addition of ATG, which brings market-leading products used by some of the largest and most well-known retailers and brands, furthers Oracle’s strategy of delivering industry-specific enterprise applications,” said Bob Weiler, Executive Vice President, Oracle Global Business Units. “This acquisition builds upon our dedication to offer the most complete and integrated suite of best-of-breed software applications and technologies required to power the most demanding companies in the world in every industry.”

ATG’s revenue for the third quarter of 2010 grew to $50.3 million, a 16% increase over third quarter 2009 revenue of $43.4 million. Oracle will pay $6.00 per share in cash for the company. The transaction is subject to stockholder and regulatory approval and other customary closing conditions and is expected to close by early 2011.

Woburn’s Ramp, Inc., a maker of workflow optimization platforms, raises $3.5 Million November 22, 2010

Posted by HubTechInsider in Startups, Venture Capital.
Tags: , , , , , , , ,
add a comment
Image representing RAMP as depicted in CrunchBase

Image via CrunchBase

Woburn’s Ramp, Inc., a maker of workflow optimization platforms, raises $3.5 Million from a group of investors including Accel Partners, Fairhaven Capital, General Catalyst Partners, Peacock Equity, General Electric, NBC Universa.

What is EDIINT? What is AS2, and how does it differ from AS3 or AS4? November 2, 2010

Posted by HubTechInsider in Definitions, Manufacturing, Supply Chain Management.
Tags: , , , , , , ,
add a comment
Internet Map. Ninian Smart predicts global com...

Image via Wikipedia

What is EDIINT? What is AS2, and how does it differ from AS3 or AS4?


EDI, or Electronic Data Interchange, is a format used by large enterprises for exchanging digital information about purchase orders, invoices, and other business supply chain related information with other companies, businesses, and enterprises.


EDIINT stands for EDI over INTernet.


One of the concerns and needs of the large business enterprises using EDI for electronic transactions throughout the 1990’s was the burgeoning requirement from these enterprises to be able to exchange EDI formatted data streams over the public Internet, securely. Towards the late 1990’s, EDIINT using a secure digital transmission conduit over the public Internet, called AS1, technology was standardized and released by the web standards bodies.


The AS1 protocol leveraged SMTP (standard Simple Mail Transport Protocol, or Internet email) as the foundation for exchanging communications. During this early phase of EDIINT deployments and AS1 protocol adoption, several software vendors emerged, offering to eliminate the de rigeur (for the time) VAN (Value-Added Network) fees that were commonly levied against large enterprises by the VANs then in existence. The development of the AS1 protocol, which allowed transfer of EDI messages and transactions securely over the public Internet, should have enabled these large enterprises to use AS1 to connect point-to-point with each other securely over the public Internet without need of VANs or their fee structures.


But although the ideal of AS1 was certainly promising, the promised elimination of VAN network access fees never really materialized, and the AS1 protocol unfortunately did not encounter widespread adoption and acceptance by the larger enterprises’ IT organizations. Several common reasons were behind this shunning of AS1 by corporate IT departments. One reason was the fear of larger enterprises that moving away from the liability endemnification of the VAN networks to transmissions over the (albeit secured) public Internet using AS1 was not quite ready for wholesale adoption by large scale enterprises in mission critical transaction environments. Another reason was some corporate IT departments were fearful, with considerable justification, of overloading enterprise email servers with EDI traffic as a result of the AS1 protocol’s dependence upon secured SMTP packets, which would route through corporate Microsoft Exchange or other SMTP email servers. In addition, SMTP email did not encorporate enough feature robustness to ensure the real time delivery of SMTP email and, more critically, enforce the non-repudiation features of the EDI standards then in common use.


The next incarnation of EDIINT emerged in 2001 with the new AS2 protocol superceding the earlier AS1. AS2 was designed from the start to address the same needs and requirements of the earlier AS1 protocol, but with the major distinction that AS2 was based upon the HTTP protocol instead of AS1’s reliance on the SMTP protocol. AS2’s use of HTTP instead of SMTP provided a more direct and realtime connection for transmitting EDI data between companies. The use of HTTP, combined with the growing acceptance of the Internet as a serious venue for international commerce, led to AS2 gaining a much stronger foundation upon deployment and saw AS2 gain a significant foothold into corporate IT departments in terms of adoption and implementation that AS1 had never enjoyed. But although interest in AS2 was greater than it had been for AS1, AS2 still did not reach mainstream wholesale adoption from large corporate enterprises.


Walmart and the adoption of AS2


The lack of enthusiasm at the corporate level for AS1 and AS2 adoption largely came about because of the lack of a “Market Maker”, or a powerful intermediary enforcing adoption and deployment of AS2 for EDIINT. Two companies were required to decide together to use a protocol such as AS1 or AS2, as either protocol necessitates coordination on both ends. This meant that although an enterprise might make the decision to work with a significant partner or primary systems integrator to deploy AS2, for most of that enterprises’s supplier, customer and vendor business relationships, the payoff would hardly be worth the effort.

All of this changed overnight in 2002 when Walmart announced that their entire EDI transactions and transmissions program would be moving over to the AS2 protocol and that *all* of their suppliers were expected – required absolutely, in typical Walmart fashion – to follow suit. Walmart’s decision was the tipping point for AS2’s widespread adoption and deployment across many industries and enterprises of various scale. Walmart’s reputation as a supply chain industry thought leader, as well as their renowned strong-arm tactics with their suppliers and vendors, forced other large enterprises to follow their lead. Walmart’s dictat led to positive feedback loops and various other network effects as a large number of Walmart suppliers fully AS2 enabled led to a growing ecosystem of AS2 -enabled vendors and supplies in the marketplace. Thus it became even easier for recalcitrant suppliers to justify jumping into the EDIINT, AS2 pool. AS2 enabled suppliers were able to easily extend their transactional AS2-based EDIINT systems into a vibrant community of AS2 enabled enterprises. As a result, by 2003 AS2 became one of the most popular data protocols for EDI transmissions within North America.


Europe and the Odette File Transfer Protocol V2, or OFTP V2


Despite the rapid spread of AS2 in the United States, Canada and Mexico, however, AS2 adoption lagged in Europe. The major reason for the discrepancy of AS2 adoption rates between North America and Europe was the lack of a European market maker ala Walmart in the United States. Without a key champion like Walmart driving the rapid adoption of AS2 in Europe, AS2 usage has taken a much longer time to spread into Europe’s major enterprises.


Into this vacuum, a new standard has emerged in Europe which may supplant the adoption of AS2 entirely if enough enterprises of scale in Europe decide to adopt it. The standard’s name is Version 2 of the Odette File Transfer Protocol, or OFTP V2, and it is a very similar protocol to AS2 in the fact that it leverages both the public Internet and HTTP for connectivity. In Europe, large automotive enterprises such as Volkswagen, Volva and PSA are driving the adoption of OFTP V2 in an industry-wide effort to reduce costly VAN networking fees. This wave of automotive suppliers supporting OFTP V2 should follow a similar pattern, although perhaps on not quite as large a scale, to the adoption of AS2 in North America by retail suppliers and vendors in response to Walmart’s urgings and data integration requirements.


Future EDIINT Standards: AS3 and AS4 and SOA


Future standards likely to emerge within the next iterations of EDIINT are likely to include AS3, which is based upon FTP, and AS4, which is based upon web services. Each of these newer variants contains benefits not available to users of AS2, for instance, AS3 does not require an ‘always on’ connection and could potentially handle large files better than AS2. AS4 can integrate with SOA (Services Oriented Architecture) software infrastructures with relative ease, something that is prohibitively difficult at present with AS2. Despite these technological advances, if a large enterprise or company is trying to determine which protocol is more apropos to use for EDI transmissions, they are likely to choose AS2 despite its limitations simply because the large community of companies already using AS2 versus trying to forge an uncertain path trailblazing the use of AS3 or AS4 in the absence of a market maker as mentioned above.


So until another market maker emerges to drive the adoption of AS3 or AS4 as Walmart did with AS2, AS2 will continue to be the de facto standard for EDI transmissions over the Internet. Instead of companies and large enterprises across different industries moving to AS3 or AS4, AS2 is instead adopting features that address the benefits available in those other standards. For example, an effort is under way to add “Restart” capability to AS2 that was announced recently, and this would provide some of the better support for larger file transfers that we have seen in AS3.


HubTechInsider.com YouTube Channel

Subscribe to HubTechInsider.com YouTube Channel

SEO Made Easy 2013 FREE Special Report!

PHP for Beginners

Google + Domination for Business

LinkedIn for Business Training Course

Mastering WordPress Video Training Course

Twitter Business Magic Video Tutorial Series

Want to know more?

You’re reading Boston’s Hub Tech Insider, a blog stuffed with years of articles about Boston technology startups and venture capital-backed companies,software developmentAgile project managementmanaging software teams, designing web-based business applications, running successful software development projectsecommerce and telecommunications.

About the author.

I’m Paul Seibert, Editor of Boston’s Hub Tech Insider, a Boston focused technology blog. You can connect with me on LinkedIn, follow me on Twitter, even friend me on Facebook if you’re cool. I own and am trying to sell a dual-zoned, residential & commercial Office Building in Natick, MA. I have a background in entrepreneurshipecommercetelecommunications andsoftware development, I’m the Director, Technical Projects at eSpendWise, I’m a serial entrepreneur and the co-founder of Tshirtnow.net.

%d bloggers like this: