In Search Of The Paperless Contract

How efficiently does your business use technology to buy and sell products and services? Odds are the process is an archaic mix of telephone and fax communications, multipart purchase orders, paper invoices, and checks.

Many large companies are replacing paper with electronic forms to simplify business within the enterprise. Some large corporations have managed to extend this "electronic document interchange" (EDI) to cover dealings with big vendors and customers. But the growth of EDI beyond corporate walls has been slow because each business-to-business relationship has to be custom-engineered.

SPONTANEITY. Now, a group of about 50 northern California companies, banded together into a consortium called CommerceNet, is trying to change that. "We're headed toward a world where a corporation can spontaneously do electronic business with entities they haven't dealt with before," says Robert Winn, vice-president for global-payment services at Bank of America, which plans to provide financial services on CommerceNet. But the experiences of the four-month-old experiment suggest that this goal may prove elusive.

Two major hurdles must be overcome to make spontaneous electronic business a reality. Proposals, bids, price lists, and purchase orders contain sensitive information, so companies need assurance that data transfers are secure. Plus, every company in the U.S. uses different forms and procedures--and each wants to do it its way.

CommerceNet hopes to make transactions work over the Internet so easily that a company in Palo Alto could put out a request for proposals in the morning, receive bids from all over the world by evening, and send out an electronic purchase order the next day.

The key is a program called Mosaic, available free from the National Center for Supercomputing Applications at the University of Illinois, that allows text and graphics--even, in theory, sound and video--to be displayed on a wide variety of computers, including PCs, Macintoshes, and Unix systems.

So far, just about the only actual commerce taking place on CommerceNet is sales of software and hardware by the on-line Internet Shopping Network. Members of the consortium have devoted their efforts to developing a secure version of Mosaic that will keep transactions safe from prying eyes and provide for the digital equivalent of legally binding signatures on documents. A preliminary version of the program is being circulated among participants, and planners hope that the first transactions will be flying across the wires sometime this fall.

But daunting problems remain. The program has to be nimble enough to deal with dozens of different approaches to business. A major difficulty, says one person close to the effort, is that smaller companies are willing to adapt their procedures, but lack the technical expertise. Big corporations are technically savvy but bureaucratically inflexible.

PASSING NOTES. The U.S. export controls that place severe limits on the international use of the cryptographic technology needed to secure the system may present a greater impediment. "We need a solution that works for us internationally," says Sandy Whitson, EDI business manager for Hewlett-Packard Co., another CommerceNet stalwart. "Otherwise, this won't go much of anywhere."

CommerceNet isn't the only open-EDI push under way. AT&T is working with Lotus Development Corp. and Novell to develop services that will allow companies to more easily link their Notes and NetWare networks more easily, creating another path for open EDI.

In many offices, a typewriter is kept around just to fill out the forms--often those that have to go outside the company--that can't be handled easily by computer. That typewriter's days may be numbered, but you'll probably have to keep it around for a while.

Before it's here, it's on the Bloomberg Terminal.