SPS Commerce is one of the biggest vendors in the retail domain. They act as a clearing house for retailers, connecting them with vendors. The recently published Gigaom report 2nd generation cloud architecture triggered their interest and we had a chat, and here are some of the thoughts and lessons on retail that came as a result.

What SPS does is that they connect retailers to vendors. When a retailer places an order, the order is translated to a format called EDI and sent to the vendor so that it can be processed. After processing, more information is translated to EDI and sent from the vendor to the retailer. Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners.

So SPS has built their business as an EDI clearing house, mediating between retailers and vendors by means of EDI. The perfect order in this context used to be one that was complete, on time, damage free and with complete and accurate documentation.

Today however things have changed. The advent of eCommerce and social networks has brought the consumer in the game, so the perfect order is now a bit different: the consumer wants product information, social validation, inventory information, competitive pricing and convenient fulfilment and returns. While the consumer used to walk into a store and SPS would then connect the store to the vendor, today consumers can interact with many virtual stores as well as each other and their demands shape the way retailers do business.

Even though this does not change the basic mediation technology which remains EDI, it adds more data and integration that need to be performed and it adds process requirements for the intermediary. This is the challenge the intermediary needs to respond to, and this is to a large extent the reason SPS has turned to the cloud to deploy their services. The cloud helps quickly develop and roll out new services, and its elasticity also helps in dealing with spikes in demand.

On the other hand, being the intermediary and sitting on top of all this data also presents some outstanding business opportunities, and SPS seems to realize this. So in addition to being an EDI clearing house, there is a range of services that SPS can offer by connecting the dots in their database that contains information on stores, payments methods, goods, logistics and geography. The applications that SPS develops on top of its database include not only fulfilment, but also analytics, item sourcing, item management and community development.

In essence, SPS wants to act as a marketplace for retailers and vendors, helping them discover and connect to one another, whether on an order-to-order basis or to form more lasting business deals.This plan leverages their unique positioning as intermediary to provide value by means of additional services to customers, and could be a lesson for every company playing an intermediary role and sitting on top of Big Data.