An emerging approach to building software capabilities is to buy best-of-breed software solutions. Instead of viewing traditional backbone operating systems as a one-stop technology shop, forwarders are increasingly considering them as the core platforms on which to attach complementary solutions that help them serve shippers better. This spin of the classic strategy of buying best-of-breed software has paved the way for software companies that act as the glue between different systems. The most notable example is Chain.io, a cloud-based integration software which helps companies integrate data from various providers, for instance, carriers, warehouses and technology providers.
Founded in 2017, Chain.io is a neutral platform for exchanging data. It helps companies integrate data from various tech providers and connect to various TMS, rating and booking platforms, freight payment providers, and other systems. For instance, if a customer sends data in legacy EDI, the software allows forwarders to load the data into a TMS like Cargowise One or Descartes IES.
In an interview with Ti, the CEO and founder of Chain.io, Brian Glick, stated that ‘the amount of integration and the difference in generations between the software in large enterprises and start-ups is very extreme’, creating a need for a solution that enables different applications to communicate with one another smoothly. Chain.io achieves this by building out plugs to the leading software in the industry. Even if different software packages work on different definitions and different business processes, Chain.io can plug them together and make different processes mesh properly.
Chain.io serves software companies, shippers and freight forwarders, all of whom have more IT integration problems nowadays than they did five years ago due to the rise in software solutions available in the industry. The company therefore benefits from a diversified customer segment. It targets forwarders of all sizes; large forwarders typically have more complex integration problems as they are more likely to have a federation of applications that needs to run smoothly. But the company also sees demand coming from small and medium sized forwarders. Even though software building blocks are becoming easily accessible for small and midsized forwarders, they often don’t have the IT expertise to implement the integration themselves, so they turn to integration specialists like Chain.io. Software companies as well as shippers which are often held back by legacy systems also belong to Chain.io customer base.
As it is a neutral connectivity network, it allows forwarders to mix-and-match the best software solutions, making it an extremely valuable player for the best-of-breed model of building software capabilities. The company states that it has tripled its revenue and increased its customers by 50% during 2020. Its software has been deployed across the air and sea freight as well as trucking industries. The start-up has raised $5m in funding in the most recent round, which Glick said is being used to keep up with rising demand. The start-up lands more and more large customers every year, and over the last three months, every contract it had signed has been more lucrative than the previous one, not just because the prices are going up but because the size of the integration problems are also increasing, explained Glick. Demand from large, global forwarders is gradually growing because typically they have a federation of applications that needs to run smoothly and are therefore faced with the daunting task of integrating a high number of different software within their ecosystem.
Drawing on his experience in freight forwarding, Glick argued that “the biggest obstacle to new business for freight forwarders is IT integration”. This applies in particular to forwarders looking to gain large shippers as customers as they need to remove the friction that exists between the plethora of systems used by shippers and their partners.
The value that Chain.io brings to the industry is speed of integration. Glick explained that the entire process of integrating business processes and data, especially in large companies can be months, or even years faster when performed by Chain.io, as opposed to doing it in-house. This is a considerable advantage considering how lengthy the deployment and implementation of new software solutions can be. Third-party software solutions can sometimes take several months or years to roll out globally, depending on the number of users and the capabilities of the in-house IT team, so a solution that can speed up this process is extremely valuable to forwarders.
An interesting point made by Glick is that for emerging technologies to work and bring value in the global supply chains, business processes and data need to be integrated first. Pretty much every software vendor must incorporate these emerging technologies, such as AI, predictive analytics, natural language processing, machine learning, Internet of Things (IoT) etc. Vendors are trying to learn these technologies as fast as they can and incorporate them into their solution. Bringing established forwarding operating system software such as CargoWise or BluJay together with emergent technology is therefore the steppingstone to successful utilisation of these technologies.
Chain.io has identified a gap in the market and is exploiting this gap to assist forwarders with the overwhelming challenge of linking disparate software systems. Glick stated that he has not yet encountered a company that is attempting to solve large scale integration problems within the logistics industry. So, at the moment its direct competitor are the internal IT departments within forwarding organizations, which of course should not be underestimated. One of the main reasons why forwarders might be reluctant to hand over the integration task to a third party such as Chain.io is privacy. But the Philadelphia based start-up looks to overcome this barrier by promising exceptional neutrality. Chain.io doesn’t take ownership of customers’ data and doesn’t do analytics on customers’ data.
As more and more tech software continues to emerge in the forwarding industry and as forwarders realise the value of the best-of-breed model of building software capabilities, integration specialists like Chain.io will grow in importance. The attitudes in the industry are already changing. For instance, forwarders are slowly coming around to the idea that an easy-to-use, branded customer interface is more than just an added perk, it is a differentiator from the competition and the deciding factor in winning business from shippers. As a result, they are looking to deploy white-label software platforms that can be used as an add-on to their existing operating system. Other areas that are increasingly being used as a differentiating point and which have seen the greatest amount of unbundling are quotation, rate management and document automation. This trends towards picking the best systems in a particular market represents a huge opportunity for Chain.io and their business model. It is going to be interesting to watch how successful Chain.io will be in exploiting the huge gap in the market and whether forwarders will become more open to the idea of using a third party to stitch together their disparate systems.
Source: Transport Intelligence, June 22, 2021
Author: Violeta Keckarovska
Ti conducted research into the freight forwarding software market in the Freight Forwarding Software Market Map 2021 report. More information about the freight forwarding software vendor landscape can also be found on GSCi.