1Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.

com

Abusing the Fulcrum1:

The Manipulation of Network Layer Seven to Recoup Lost Margins Prologue Reciprocal traffic exchange conventions GXS Opposition: Who Has What to Lose? Realigning the Perception of Risk in the B2B Communications Sector Understanding (and Addressing) GXS Market Distortion The Power of Hubs GXS Market-Facing Character Reading the GXS Voluntary Filings Network Instability is Antithetical to Growth Industry Sustainability and the Service Provider Model The Future Growth of B2B Communications Begins with GXS Transformation The GXS End-Users: The Action of the Vendor-hubs is the Sure Cure# Campaigns of Direct Action Final summary and generalized recommendations Loren Data Corp ECGrid Background
File Under Technical Prophecy: The entire industry by now knows that GXS is being acquired by OpenText. My greatly abbreviated advice (as an advocate for SMB /E innovators), is for a clean out of the GXS C-Suite, and for the industry, especially OpenText, to begin a collaborative and brutally honest evaluation of the state of B2B communications. OpenText can do this by engaging with those who have spent years investing in this market by creating network messaging platform services with a track record in the market. The author furthermore recommends normalization of all VAN interconnections; the benefits of the reformation will immeasurably serve to rehabilitate the damaged sentiment infecting the EDI specialized comms sector. Serving the community of trading partners, both the large and small, should be THE overarching mission of any B2B communications provider. There should never be value-weighting of any trading partner or of transactions in the EDI communications value chain; the transactions that flow between suppliers and buyers each transaction expecting a response, each further step converging on the transfer of goods, payment, transport, and transaction status. All network based transaction and the peering of collegial providers should be free from all competitive value weighting; compete on merit or not at all. Actions that dishonor a competitive B2B communications provider networks carrying the data of any trading partner, is equivalent to directly interfering in the free-trade of goods. The EDI communications sector, VANs in particular, must proactively reform the technical standards and policies that govern carriage of inter-provider traffic. Maintaining neutral traffic reciprocity is the only way for this networked market to survive, otherwise, customers will flee the VAN sector in favor of solutions that are (in many cases), less convenient and more costly. The foregoing scenario has happened and can happen again, in particular to networks carrying payloads addressed and managed at layer seven2. A monumental investments have been snapped into reversion via the hand of fate, loss of customer loyalty, and by
1

Fulcrum, a technical or human influence that imparts the ability to leverage, and ultimately pivot a market, or conversely, to establish its equilibrium. The dual definition used throughout this report: 1) layer seven interconnection (bidirectional interchange traffic forwarding and delivery agreements) between competing EDI messaging networks (VANs), and 2) the sectors leading EDI comms systems architect, Todd Gould, a bonafide networked market idealist.
1 2

EDI VANs are Layer Seven, Application to Application communications networks. Layer Seven networked markets have strategic vulnerabilities - one of which is that they can be replaced with other A2A schemes that also travel over IP. The endurance of a legacy Layer Seven market depends on the overall convenience and workability of the overall system in serving its subscribers. The manipulation of network Interconnections is poison to these markets - more so than the underlying

2Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

regulatory authorities. OpenText, the new owners of GXS network properties, having skillfully attained the rank of Network of Record, must avoid if possible the abysmal outcome of becoming regulated as a Common Carrier. The imposition of the Laws of Common Carriage on this finely crafted acquisitions over an interconnection dispute (inherited from the previous management) would surely be perceived as a failure of the executive leadership. There is no need for such exposure, however, if OpenText addresses the ECGrid issues first, proceeding thereafter to take the lead on issues of pan-industry VAN interconnection standards and policies - an all win, zero loss strategy that to heal the damaged market sentiment of Old GXS, the resulting wholesome outcome would be doing the rig ht thing, and most of the goodwill would be attributed to OpenText, merely by taking a course of action beneficial for their customers and all trading parties, the industry, and global commerce.

Prologue
GXS, a synthetic venture aspiring to market leadership, was birthed with the power of private equity, totaling nearly one billion dollars in cash and credit instruments. Lead investor Francisco Partners (of the Bay Area) holds the largest share 4 (68%) of GXS equity and corresponding board seats, along with two other PE Funds holding 11.7% each . Disbursing the capital with vigor, GXS acquired three major EDI communications networks and executed takeover of 20 5 enterprise software companies, including one B2B cloud startup with admirable prospects , thus rounding out the GXS opening gambit. Early in GXSs emergence, casual predictions indicated a venture poised to run the table and dominate the unfocused EDI value-added services market. Major analyst bureaus suspiciously failed to identify a single downside to the venture 6 worth mentioning, while the markets first whiff ran cautious to negative . Independent analysts, investment bank research teams, B2B product consultancies, and issue advocacy practices all kept gimlet eyes on the behemoth and, in hindsight, for good reasons. Falling behind (the legacy VAN competition) almost from the outset, GXS ran into a spate of highly reactive customer defections in the first and subsequent years of operation. The GXS management was also failing to cope with a class of emerging on-demand supply chain services providers (B2B SAAS ventures). Lacking a founders vision, or the motivation of a venture-backed team, GXS shed most of the experienced technical management and sales execs from its acquired properties, and proceeded with a C-suite that is patently unequal to the task of steering this amalgam of rolled-up properties. As new-breed B2B service providers took the sector by storm, winning tens of thousands of SMB supplier-spoke accounts, GXS was chagrined to witness the leading service provider (SPS Commerce) IPO in April 2010. This was a rout, and by all accounts, the problems are multiplying in earnest. The following monograph examines how GXS has directly interfered in the message handling between thousands of trading partners and GXSs own clients, in a transparent effort to recapture revenues lost to the more agile and innovative service providers. This leveraging by GXS, and the markets dependence on EDI communications, has exacerbated an already elevated climate of risk aversion within the supply chain IT sector.
transport networks.
3 4 5 6
3

Founded sans founders, not with a vision or a belief in a principals skills or singular, focused portfolio; but rather as a PE exercise o f acquire, consolidate, and harvest via sale or IPO. Golden Gate Capital Management, LLC and Cerberus Institutional Partners (America), L.P., Cerberus Institutional Partners, L.P. Rollstream Regarding the attenuation of competition and price increases.

3Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

Exploiting network services in order to gain leverage over competing networks, regardless of the motivation, has damaged the EDI communications sector. The perception of risk influences those charged with maintaining their organizations supply chains, so we can therefore expect that CIOs and EDI managers will be taking a very hard look at these GXS-induced network-level risks, and will consider evaluating the alternatives.

Dishonoring well-established reciprocal traffic exchange conventions-revealed the exploitative character of the GXS management. It is beyond the scope of this briefing to completely explain VAN interconnects in depth, but the basic definition is as follows: Contemporary VAN interconnects are informal, occasionally contractual, intersystem message handling agreements to deliver a competitors traffic, thus insuring deliverability of EDI transactions between the trading parties residing on any interconnected VAN. Building end user confidence during the sectors formative years would mean respecting end user choice, and maintaining durable, portable addressing. Suppliers trading with multiple manufacturers would never countenance being forced to subscribe to multiple VAN mailboxes. Therefore, the founding VANs by necessity, cooperated by interconnecting - and it was interconnects that became the prime driving force of EDI market expansion. Fortunately, the engineers and communications architects of that era were pragmatists who understood the potential of a stalled market; if the VANs insisted on creating locked-in, captive subscribers, the seeds of the markets devolution would manifest after its formative years. Thereafter, the meshed model of interconnects became accepted and semi7 standardized - but remained unregulated and unmonitored by professional interest orgs, standards orgs, or any entity that could have alerted the community of users and operators to unhealthy practices that would negatively impact pricing, deliverability, access, and competition. We are all familiar with axioms such as, Sunlight is the best 8 disinfectant, however, the author favors, in the dark, a louse is worse than a Tiger . As the market matured, and flourished through the 2000s by maintaining liberal interconnection policies, the pace of growth was sustained until GXS began exploiting the deliverability of messages, and thus the relationships between supplier-spokes, and the GXS resident hubs. This breach of trust, committed against GXS clients, by using their good name and must route to status, as leverage used to force trading partners off Loren Data ECGrid (properly SPS Commerce and ECGrid). Had any of these companies been alerted to such subterfuge, there would have been hell to 9 pay at the very outset of the Loren Data v. GXS antitrust case. What has emerged is the axiom that, the size of an organization is an utterly meaningless measure of stability or credibility. The abrogation of reciprocal traffic exchanged between the trading partners residing on a competitors peer network is a breach of end user trust. Once the GXS clients began to understand that they are being used as implements of leveraged, many will (or should) abandon GXS for any network honoring the meshed interconnect model. The cold truth is that GXS did not earn the loyalty of these clients.

A Flight from Apparent Stability Turns Into the Fight for Better EDI Networks Keeping supply chain communications resilient and operational is a promise made by the VANs furnishing EDI
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X12.56 Mailbagging was the last and perhaps the only,imessage traffic control standard to be sponsored within ASC X12 Quote of G.I. Gurdjieff, Views from the Real World, in citing his fathers aphorisms. The author fully expects future lawsuits by more than a few GXS Clients, many who are Fortune 1000 brand marques.

4Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

messaging services to their subscribers - a promise that comes before features and enduring The deliberate abrogation of an internetwork route, treating /the professional populace with disdain, brandishing intellectually bankrupt ideas, is antithetical to maintaining a healthy networked market. Inflicting the sector with 10 instabilities, and justifying these actions using a coined term-of-art, i.e. daisy-chaining . If GXS operated under the laws of common carriage, there would be a tariff governing inter-network routing, and penalties against mediation of access. This is still done in the telecom markets, even in the post reform era. Alas, t he 11 FCC considers the VANs to be enhanced services , This briefing would not be and abuses have painted GXS with the taint of zero credibility . The effect of such posturing has been disbelief and questioning by GXS clients (and their trading partners), all of whom are threatened with supply chain disruptions. The debacle belongs to GXS, a company that has resorted to network-effect leveraging and access mediation in order to maneuver against competitors. GXS did so against ICC, and other B2B companies, some of whom sued and settled, one or two companies sold out. The visceral response of respected industry colleagues, some who could be honorifically titled EDI Emeritus, stems from the fact that VANs have maintained interconnect agreements for decad es before GXS was birthed in its PE test tube. For companies that are currently unaffected, GXS motivations are entirely suspect, and the question becomes, Will my VAN or service provider be next? There is no answer, as the depth of GXS desperation is unknown. As for the development of next generation platforms? The B2B IT sector is simply not soaking in the capital resources found during the social media boom. The future possibility of introducing rich, contextual interactions and services for building cohesive vendor communities may follow after this era of deliverability strife has been reckoned with. But who will build these next-generation B2B architectures? The initiatives to build and market such systems will be considered worthy of investment risk when their proposed functions become vital to the CIOs mission, or sufficiently worthy of upside risk to attract at least an angels investment only then will the semi-limbo permeating the B2B communications sector be dispelled.
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GXS Opposition: Who Has What to Lose? The rivals of greatest concern to the GXS C-Suite are as follows: 1) SPS Commerce, the largest supply chain SAAS venture. SPS leadership, having gestated an understanding of the endgame, must now choose a path to the future. Shortterm remedies, such as direct connections to the hubs, are stopgap measures, inadequate for dealing with future GXS countermoves or the unrevealed bad actors in the VAN sector.
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The ersatz term was coined in the midst of the GXS responses to Loren Data over the business model of being the VAN serving the supply chain service providers, hence, daisy chaining. Dont get me started, see FCC et al . GXS Coined the term, daisy chaining, at some point in the companys defense of the Loren Data antitrust lawsuit. The case was based on the Sherman Antitrust Act, where the ersatz term may have influenced one Justice on the Appellate panel. Within the EDI messaging industry, the concept that packets and messages cannot be routed via intermediate network providers has been seen for what it truly is, a smoke screen. Good networks, at any layer, hop well.

5Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

The GXS client hubs will require a credible exit from GXS in order to take decisive action. The hub strategy compounds all actions to obviate future GXS routing exploits, in addition to capitalizing on pent-up negative sentiment building against GXS for over a decade. There is opportunity waiting to be uncovered. 2) Loren Data Corp, piloted by the sectors leading messaging system architect and thought leader, Todd Gould. As a software engineer and a communications systems specialist at the top of his game, Todd has provided GXS with more sleepless nights than any other challenges faced by this ersatz mega VAN. Mr. Goulds seminal work creating an advanced EDI network messaging system, ECGrid (and the VAN OS API ECGridOS), has substantially contributed to SPS Commerce establishing its preeminence as the service provider of record. No other company has ramped spokes more successfully than SPS Commerce, and part of that success was underwritten by Loren Data Corp. As the progenitor of the first distributed EDI communications meta-network, which evolved to meet the message handling requirements of SPS (and several other service providers and Virtual VANS) in its critical growth stages, Loren Data Corps accomplishments are recognized as being no small feat. Servicing the SPS model at scale simply exceeds the practical grasp of the VANs. VANs typically service low-churn enduser constituencies. SPS, as host to the most diverse population of trading partners, also has unique and demanding support requirements. Provisioning across several VANs and direct connections may work for a time, but it is essentially a squandering of the opportunity, in the form of GXS failing in the very endgame. Professional observers of the EDI communications sector remain consistently curious of SPS leadership: Will the company evolve as an advocate for a healthier B2B communications market? Or will SPS steer a middle course toward temporal self-preservation? All further actions taken by SPS may be reduced to countering the GXS breakage of interconnections. By tampering with the delivery of trading partner interchanges, GXS has marked itself as a bad actor that has compromised the operations of tens of thousands of supply chain participants. It will be very difficult for GXS to redeem the reputation it never deserved or even properly owned. SPS Commerce, even with mixed sentiment scores sampled from its subscribers, still enjoys a very favorable rating by the marquee brand hubs. Will SPS take the opportunity GXS has unwittingly created? What about IBMs investment in the sectors #2 VAN, Sterling? Is IBM agile enough? If IBM is up to the task of playing the walk-on role of industry savior, there are many enterprise class GXS customers up for grabs. This is a real opportunity for IBM-Sterling, but many industry analysts are concerned that IBM has lost its ability to make a lightning-fast, preemptive move. Realigning the Perception of Risk in the B2B Communications Sector Enterprise IT management has a uniformly low tolerance to change-induced risks. Examined more closely, we see risk aversion extended onto OS, server, and application updates. Within the B2B IT sector, perception of risk influences behaviors, resulting in a market subject to substantial distortions. Aversion to risk has affected the entire IT value chain 13 at times, even entering into the vernacular as Dilbertesque IT humor. When discussing an investors tolerance of risk, or an entrepreneurs instinct to invent, the B2Bi sectors failure to meet
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No one was ever fired for Choosing IBM unknown source.

6Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

expectations leads us to GXS network machinations. The exploitation of network effects (quashing the bidirectional deliverability of interchanges) was instigated by GXS to recapture revenues lost to service providers. These agile competitors,such as SPS and their ilk, bested GXS by quickly ramping and capturing a critical mass of supplier spokes. CIOs and the IT departments managing capital line of business services are perhaps a bit more risk-averse than their counterparts babysitting generic back-office systems. This is due to the real-time, transactional nature of EDI messaging, and the bottom-line impact of logistics interruptions caused by an EDI network (VAN) outage. These issues are critical anxiety-producing, and explain why supply chain dependent businesses are often loathe to migrate even in such dire circumstances reason to a superior providers. The options for network messaging have never been better, but the EDI sector finds itself subject to the synthetic perception of scarcity, where end users find themselves corralled towards an image of projected stability, which has reinforced the status quo of a laggardly VAN sector, against anyones true self -interest. Solving the underlying causes of a number of misapprehensions is absolutely necessary to commence the realignment of end user perceptions, specifically: 1) Clarifying the value delivered by differentiated EDI services, network-platform environments, and the promise of B2B cloud services. 2) Regaining true to market competitive pricing of like services. The KC model is outmoded, having outlived its usefulness, and end users agree that metering by KC is an anachronism. 3) Removing inhibitions to market entry caused by network-effect manipulation, thereby reestablishing the pace of innovation in B2B messaging. Understanding (and Addressing) GXS Market Distortion Within GXS, pressure continually built to find momentum toward a salvageable harvest via sale or IPO. As a decade wore on, GXS became marked as an underperformer within an active portfolio whose placement exits averaged three to five years. Paving the way for suppliers to comply with their hubs, SPS created a market driven by an admirable first mover advantage. The siphoning away of GXS margins, simply by offering SMB-class vendors a superior alternative to VANs, has resulted in SPS becoming the most vexing issue facing GXS. Loren Datas ECGrid architecture and superbly efficient network operations were adapted to a rapidly growing SPS Commerce. In this real world R&D lab, Loren Data compiled a nearly flawless, 13 -year track record of uncompromised message handling, which substantially underpinned the successful IPO of SPS Commerce. This IPO became a thorn in the GXS maw, while in the C-suite, the chastisements of Francisco Partners became entirely understandable. Omitting for the moment the legal escalation of GXS interconnect abuses and the failures of two, nay three, regulatory 14 15 agencies , as well as a disengaged federal judiciary , which leads us to an EDI market utterly devoid of even a self14

USDOJ Mergers Bureau was briefed as to the likely outcomes, which have come to pass, and further updated on all of the subsequent toxic actions of GXS that came afterward. The DOJ's failure in policing pre-merger causation of antitrust is forever tarnished. The FCC was briefed on the damage being done to all commercial electronic messaging services. EDI is not an enhanced service, but is rather a hybrid, service deserving of oversight, (see the agencys own Computer Inquiry remands. FTC was happy to not be involved in such an arcane, non -consumer technical market dispute.

7Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

serving sense of advocacy. However, with GXS now publicly on the record to terminate message routing between ECGrid and the GXS networks, the market will be forced to confront the issues. The only questions remaining concerns the methodologies on offer to mitigate GXS-induced client risk; these tactics should present the trading partners, large (GXS Client Hubs) and small (service provider spokes), with beneficial choices to improve their network messaging services, minimize risk, and at the same time, leverage GXSs financial, reputational, and technical weaknesses. The Power of Hubs Managing perceived risk is key to gaining the cooperation of the powerful cohort of GXS client hubs. While the natural instinct is toward industry advocacy and directly confronting the laggard incumbent via intense innovation and head-tohead competitive action, there is simply no way for Loren Data, or any EDI Communications operator, to overcome the GXS hold over message deliverability between influential, risk-averse hubs and their multifarious vendor spokes who are largely concentrated on SPS (and a few other VANs and service providers). If the market sentiment surveys are credible, then GXS clients are not bound by any sort of organic loyalty, nor by high satisfaction ratings, according to multiple surveys of major retailers and Fortune 1000 EDI services consumers. This particular survey, conducted on behalf of the investment banks, sampled end user opinions on GXS market leadership, to aid the underwriters in their evaluation of a potential GXS IPO.. The result of the survey indicates that GXS does not enjoy intrinsic client loyalty , and underperforms across the standard panel of IT service organization benchmarks, e.g. support issue resolution, uptime, system outages, and percentage of transaction errors. GXS Market-Facing Character The size of its workforce (~2600), means that GXS can position its sales and professional services globally, which is an attractive attribute for the channel partners. As of this writing of this report, no public severances (between GXS and its channel partners) have been uncovered by the authors reporting group. The company has not avoided all negative scoring, as GXS sentiment sampling has been trending negative since 2007 (for messaging services). GXS Integration and professional services as scored by the vendors are reported as mid curve with no further comment. Such comprehensive surveys are very limited in scope, and take many months to complete - which explains why field surveys are falling out of favor. New survey methods are evolving to score cloud IT and managed services. B2B market sentiment is measured by sampling social media and specialist forums that concentrate the opinions of technical specialists, and indicates GXS has failed to attain thought leadership or the loyalty of the professional corps. GXS employee surveys are even more damning, as Glassdoor.com amply documents -. GXS CEO Siegert scores
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The appellate court found the justification (see Daisy Chaining) of GXS as a valid business reason for cutting off a competitor, and this may have been the first time an antitrust defendant had its justifications taken on face, without discovery, which is suspicious judicial behavior. This attitude and these judicial standards permeated the case from the district court to the USSJC; the only conclusion one can synthesize is that this is the end of the trust- busting era antitrust is now an obsolete forgotten market protection, the Sherman Act a footnote of the post-Telecom Reform Act era.
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See GXS Customer Video page, where the most uncomfortable and forlorn lower-level employees act as if they are being forced to read a script they do not agree with, or at minimum, pitch something they have absolutely no enthusiasm for

8Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

among the lowest of all employee rankings of IT market CEOs. GXS negative employee reviews outpace all comparable organizations. Reading the GXS Voluntary Filings Voluntary SEC disclosures by GXS (as a privately held company aspiring to exit via IPO) are opaque to anyone but a corporate finance specialist. What is known is that one billion dollars of sunken cash, complex debt instruments, and interest payments totaling $80+ million annually are but a small portion of GXS 10Ks and the associated asset and balance sheets. All financial statements are unaudited, and the filings are signed by Siegert, Clevenger, and one other executive. Operating now for over a decade, reportedly delaying sales incentive bonuses , and having had ample resources for acquiring any talent and technology, the company is finding it difficult to explain its slim profitability. GXS, as of 2013 Q4, continues to struggle with realizing tangible profits in proportion to its investment. The resources brought to bear in acquiring three VANs, two dozen enterprise software OEMs, and RollStream should have resulted in a sustainable business. There were reasonable expectations that GXS would build a brand and the goodwill of the industry. The opposite holds at present. GXS receives very little or no approbation from any of its top-line hub clients. Idling at revenues of $450 million annually, GXS shuttles accounts between its messaging and managed services accounting centers. While there is no inherent flaw in marking a ledger in this manner, there are other confounding items scattered throughout the 10K and 10Q filings: 1) Messaging services have been undergoing attrition at a rate of -10% of gross revenues yearly. 2) Failing to completely consolidate the subscriber populations of GEIS, IBM IE, and Inovis has contributed to poor marks on the ventures positioning and confuses new clients as to the company's mission. The loss of messaging revenues has started to paint GXS with net negative perceptions. 3) GXS mishandled the move of major clients from IE to the TGMS VAN, causing manifold problems and end user defections. Inovis client defections were so notable that the GXS CEO and CFO have coined a standard rejoinder to 18 explain the phenomenon . The above items are well known and verifiable via source material. GXS is top-heavy with real property assets, complex international trade agreements, outstanding legal issues, and an immense payroll. Less than stellar performance of GXS core services has contributed to inefficiencies that degrade revenues. Glassdoor.com employee reviews of GXS identify a culture of management that is disparaging of personnel, who in turn describe the executives and work environment as disconnected from the industry and the technology, and abusive of new hires. Some of these reviews are shocking. [see glassdoor.com]. The messaging business unit is plagued with problems, although independent auditors (SAS70) state there may have been some progress toward making TGMS slightly less brittle. Year over year, full-time GXS watchers say that customer complaints and support tickets are leveling off. The AT&T-provided infrastructure for GXS SAAS performs adequately.
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GXS has delayed bonuses, causing discontent among the sales ranks. See Glassdoor.com for more compensation-based grumbling.

Bob Siegert: We knew in advance of acquisition, that several Inovis clients going off co ntract had already made alternate plans to find new VAN accommodations.

9Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

The continuous attrition of GXS VAN services, the business unit known as Messaging Services, still tallies up as being one half of the companys gross revenues (240m?). Factoring the quarterly decline of 6-10%, one has to wonder how this is being accomplished. Network Instability is Antithetical to Growth GXS shows extraordinary tone deafness in conducting adversarial internetwork relations. Advocacy on the issues has GXS owning its share of the sectors negative opinion, and the B2B pan -industry eyeball has not been swayed by the GXS daisy chain doublespeak. It is as yet unknown if the hubs, the true influencers, have been moved. This is not a salutary overlay for an active portfolio company holding the capital resources of a PE in stasis. Rising negative sentiment will make an exit all the more difficult for GXS, and this is not lost on their financiers. Risk capital is not chasing the B2Bi sector, either. The legacy VANs underwent their lockstep orgy of discounted exits. A stripped-down Easylink sold to Opentext, Nubridges, and Softshare fell to Liaison. Mighty Sterling was sold in a backroom deal to IBMs WebSphere division; one had to look closely to find any reference to Sterlings EDI messaging services on IBMs websites, although IBM is notable for conducting long -duration asset integration cycles. The sale of the legacy VANs evidences a lack of appetite for investment or innovation in B2B. Faced with an openly hostile GXS, several competitors took rapid exits, including Easylink, Sterling, NuBridges, Softshare, and Inovis.

Industry Sustainability and the Service Provider Model SPS grew its business, came of age, and IPOd smack in the center of a networked messaging sector (the VANs) that was substantially hobbled by an implied threat that GXS would cut off the message transit of any VAN serving SPS or any service provider (above the radar). For the past 13 years, Loren Data Corp acted as shield to SPS, negating the need for direct transit negotiations with GXS, which would have resulted in a much earlier cutoff of transit between SPS and the GXS VANs. SPS therefore owes its IPO and run-up in shares, at least in part, to Loren Data Corp. The SPS Commerce model depends on a healthy and diverse communications market. SPS (all B2B SAAS providers) has outlived its tenure as a disinterested buyer of wholesale messaging. Most analysts agree that GXS will use network leverage against SPS Commerce at some point in the future. GXS management viewed the outcome of the Loren Data Corp antitrust case as a net win. Such hubris was expected and will probably serve the company ill in the mid-term. Here is the consensus of market influencers: 1) SPS will find a network-level confrontation with GXS unavoidable.
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By analysts covering Enterprise B2B IT.

10 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

2) Other EDI networks, even IBM-Sterling, cannot be considered as permanent safe-haven alternatives . 3) Direct connections to GXS hubs will result in the shortest-horizon, least-flexible, stopgap measure of communications stability. The antitrust case (LD v. GXS) most likely left GXS feeling somewhat immune from further antitrust lawsuits, which 21 would be a false conclusion . GXS remains vulnerable to new lawsuits brought by other parties, to state actions, and to 22 regulatory oversight , which has not been ruled out officially by any agency. GXS still has issues to resolve if it intends to continue using the leverage of its routing borders. Direct connections result in a less flexible routing infrastructure, although it is tempting to believe that direct connections are the answer to any future transit problems occurring between SPS and GXS client hubs. For dealing with unforeseen failures or network-leveraging tactics (by other networks, which is certain to occur in the future), direct connection is a long-term strategy for sustainable EDI communications. The industry is ready for a messaging infrastructure built for stability, reliability, and enhanced functionalityin short, for the long-overdue enhancements found everywhere, except in the EDI communications sector. SPS CEO Archie Black, is aware that Loren Data Corp can address many of the problems that have been creeping up on SPS for a very long time. Some of these are purely technical, a few strategic; but the most important relate to the character of GXSs managementthese are the most exploitable cleavage issues. A decisive win over GXS can be gained by invoking the goblins that haunt GXS management - their boogeyman,and the person most equipped to call the play is Todd Gould, Loren Datas President. Todd has had more direct contact time with GXS management, weighing various responses of formal and informal GXS agreements, requests, demands, and negotiations.

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The Future Growth of B2B Communications Begins with GXS Transformation If reliability is the first seal of network assurance, then stability is considered its secondary deliverable. In the case of EDI messaging networks,.stability, reliability, and effective intersystem network relations, are a clients comprehensive checklist. When uncertainty permeates a sector as the result of network effect leveraging, the fallout washes over the entire end-user population - even powerful institutional consumers of B2B IT services, who are risk-averse in the best of times, will halt in their tracks and take a defensive posture. The end-users natural defensive instinct is to capitulate or keep quiet. However, this beh avior only exacerbates the problems and hastens the sector-wide chilling effect. Reestablishing the markets ability to function and innovate, or even to attract its fair share of venture capital could take a decade or more. This is an accurate summation of the current situation existing within the EDI communications sector - the network instabilities induced by GXS were solely instigated to claw back vendor-spoke revenues lost to SPS Commerce, via a first strike of blocking the message traffic of ECGrid, the VAN servicing SPS Commerce. The preceding summarization could not have been composed with greater brevity.

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Until such time as standards or tariffs are applied uniformly to EDI message bailment (rights to deliver, penalties for refusing to deliver). LD v. GXS did not conclude with a jury verdict or judicial decisionthe case did not progress past motions. FCC Wireline Enforcement Bureau and the Common Carrier Bureau, in particular, as well as direct actions by the commissioners .

11 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

If the GXS clients have a hope of keeping their supply chain operations stable, then these powerful, brand marquee institutions should forcefully express their displeasure to their GXS account reps, and elevate the complaint to the GXS C-Suite. If action is not taken to rectify the connectivity issues that GXS deliberately caused, then these powerful GXS clients should, without delay or concern, move to ECGrid directly, or to any other VAN that honors interconnects across the broad mesh of cooperative commercial EDI networks, in other words, all VANs except GXS. The GXS End-Users: The Action of the Vendor-hubs is the Sure Cure
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It may be counterintuitive, but confronting a networked market manipulator is the surest means of taking back control for the end users. When the bad actor is the one holding the means of communications blackmail, the market requires the most powerful institutional end-users of VAN services to wield their true market power. With GXS mired in debt and 24 operating on wafer-thin margins, the defection of only two or three marquee hub-clients to any competing VAN would facilitate a multitude of corrective actions, and possibly even lead to GXS mending its ways. The ample buildup of negative sentiment measured across social media and professional forums has created a pressurized environment for end the users to provoke a corrective response from GXS. GXS must be coerced from acting as network manipulator, and cease interfering in the delivery of commercial interchanges between contractual parties. Finally, with the approbation of SPS Commerces CEO, Archie Black, in his historic and overwhelming endorsement of Loren Data Corp ECGrid, fortune 1000 Hubs on GXS can look directly to Loren Data Corp as a credible and safe haven for EDI messaging services. Leaving the troubled GXS VANs could be viewed, overall, as the most effective form of corrective action applied to the bad behaviors of an avowed communications monopolist Correcting any organizations misdeeds requires a popular response by people of good conscience, in the most diverse circumstances (among competitors, customers, and financiers). The regard of the industry is the fertile ground where shame takes root. Maybe. The GXS C-suite is seemingly unmoved by its peers or the professional populace , and yet still cannot ignore the potential fallout. GXS management is not homogeneous, and the opinions of Influencers will eventually stimulate results, as the wake-up call has already commenced within the trades editorial organs. Opinions are starting to be converted into actions that the GXS Execs will be unable to ignore. Campaigns of Direct Action Effective advocacy starts with nominated influencers contacting GXS Clients, targeting those with trading partners on SPS Commerce, and by extension, ECGrid. The goal is to have CIOs understand the options on offer, explaining how their participation is the most direct route to rectifying GXS-induced breaches. GXS client hubs have always possessed the power to curb GXS network-level manipulations; but are the hubs willing to wield their influence in chastising GXS? We shall see. To have power is one thing, wielding the influence and credibility of ones company is another.
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GXS Major Clients. honoring the standard, non-settlement interconnect regime, which is almost the entire industry Some would say long-overdue LinkedIn Forums and the Yahoo EDI-List are rife with negative comments about GSX.

12 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

As it stands, GXS is presently unfettered, and the Companys subterfuge reduces to nothing more than a targeting of SPS Commerce. GXS chose to act against Loren Data Corp, a small company by any measure, while SPS remained satisfied in distancing itself for a longer period than anyone thought prudent. As the GXS dispute ground on, SPS potentially dire situation became magnified, and SPS could no longer stand to be uncommitt ed. SPS CEO, Archie Black stands with Loren Data Corp President Todd Gould, and agrees with Mr. Goulds vision of how connected markets should behave and work together as good stewards of the network. Most important is that SPS and Lore Data together oppose the notion that Daisy Chaining (a synthetic term of art) represents any kind of real deficiency in networked systems, as GXS would have one believe - but the polar opposite is true, because as we all know,: Good Networks Hop Well. All networks relay traffic by design. SPS Commerce has finally.spoken out in public support of Loren Data Corp, underlining the competency and operational excellence of Todd Goulds super-lean, efficient, and innovative VAN. Such rare approbation is a signal that more stable times are potentially within reach. SPS and Loren Data, these two upstart companies with very dissimilar but equally obstinate leaders, are now working together, and will act in concert to improve the stability of the sector, as well as combining their influence to seek the safeguarding of EDI message deliverability across all collegial VANs and service providers 27, This partnership should reassure nervous CIOs and supply chain managers - those who seek a path past these GXS induced network discontinuities, that there are options for the disillusioned soon-to-be ex-GXS customers. Several companies, perhaps a majority, act as though they will remain unaffected by GXS network foreclosures, and then realized very late in the cycle that they do have trading partners on SPS, or another service provider. If GXS would foreclose on Loren Data, they would likely cut interconnects with just about any service provider fitting their daisy chaining model . The hubs resident on EasyLink, IBM-Sterling, any VAN for that matter, would be wise to commence their campaign of self-serving market activism, specifically addressing sector-wide interconnect normalization .However, if the GXS clients refuse to act with alacrity, there will be a great and unavoidable upheaval. The risk of capitulating, or playing an intermediate position, leads to hastening the GXS endgame of attaining a stranglehold on the EDI messaging sector. SPS is the one wildcard holding immense concentrated leverage as a natural counterweight to GXS clienthubs28. Acting with other VANs, or independently, these companies share in the common goal of regaining network stability to ensure the deliverability of all customer interchanges placed on the wire, With the foregoing realized, the industry can move forward with its business. There are now a few remaining questions that cannot be answered as of the release date of this report: 1) Is SPS Commerce and the legacy VANs taking this issue seriously? (SPS, yes, as of 11/1) 2) Is the B2B communications industry leadership 29 equal to the task at hand? (There seems to be precious little advocacy from any of the legacy operators, and end users are frustrated with the lack of comity among brand name B2B companies).
27 28 29

in this particular case, between GXS and SPS, via ECGrid

SPS is overwhelmingly suppliers -- GXS is nearly all Hubs, there is therefore a tremendous transit of messages carried over Loren Data ECGrid to SPS and other service providers and Virtual VANs, such as NetEDI of the UK IBM Sterling, Easylink. IBM has always acted as a peerless industry steward in each and every sector they compete in. Many sector analysts are asking each other, Where is IBMs stewardship now, in the matter of GXS breaking the accepted VAN-VAN interconnection peering regime? This issue will come to Sterlings doorstep when Francisco Partners desperation for exiting the stalled GXS investment overcomes GXS managements fear of confronting IBM. The telegraphing move shall be GXS taking a threatening posture against Liaison; when that happens, we can expect a confrontation with IBM Sterling shortly thereafter.
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13 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

3) What is the next move if GXS becomes increasingly recalcitrant and unreasonable, under the duress of its financiers, Francisco Partners? Will SPS Commerce stand firm and call the GXS bluff? If the major hubs have had enough of GXS, will they move to Loren Data ECGrid, Sterling, Easylink, or any other VAN honoring reciprocal interconnections across the global mesh of cooperating VANs? The author closes with the final point and thought exercise: 4) If GXS fails in the face of concerted actions of SPS Commerce and Loren Data, it may resort to scorched earth tactics. GXS has forayed into network effects leveraging, and that strategy is in its early phases of failure, if the trading partners stand their ground. The ill-intent of GXS is now firmly offset by the gravitational power of SPS Commerce and Loren Data Corp. Add to this the reluctance of trading partners (regardless of size or brand equity) to move anywhere, period, unless really motivated. The numerous vendor spokes on SPS paired with dozens of GXS hubs, has also elevated the value of cross-network message transit data, which is a type of data that can only be interpreted by a skilled communications architect with the ability to source, analyze, and act. Todd Gould is one such architect with the skills to uncover the revelations within that cross VAN data. Final summary and generalized recommendations. The author recommends normalization of all VAN interconnections; the benefits of pan-industry reform of inter provider traffic will immeasurably serve to rehabilitate the damaged sentiment infecting the EDI specialized comms sector. Serving the community of trading partners, both the large and small, should be THE overarching mission of any B2B communications provider. There should never be value-weighting of any trading partner or of transactions in the EDI communications value chain; the transactions that flow between suppliers and buyers each transaction expecting a response, each further step in the chain converging on the transfer of goods, payment, transport, and partner status. All should be free from competitive or value weighting. Compete on your merits. Any action to dishonor networks carrying any trading partners data, is equi valent to direct interference in the free-trade of goods. The EDI communications sector, VANs in particular, must proactively reform their policies governing the carriage of inter-provider traffic. Maintaining neutral traffic reciprocity is the only way for this networked market to survive, otherwise, customers will flee the VAN sector in favor of solutions that are (in many cases), less convenient and even more costly. The foregoing scenario, although uncommon, can happen to data transport networks with their payloads addressed and managed at layer seven. A monumental investment made in order to aggregate value could be snapped into reversion - by fate or by the stars, by the loss of customer loyalty, or by regulatory authorities. Any company that has skillfully attained the rank of Network of Record, can easily avoid the most abysmal outcome, which would be having the Laws of Common Carriage imposed on a finely crafted aggregation of networked properties. However, there is no need for such exposure, if only the normalization of pan-industry interconnection policies are given proper attention. Normalizing interconnections between VANs, above all else, honors the community of trading partners, who will perceive this undertaking as an honorable, pro customer action.

Questions to the author may be directed to abmadw@gmail.com

14 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

Loren Data Corp ECGrid Background Todd Gould founded Loren Data Corp, in 1987. The company delivered innovative EDI applications and hosted 30 services, including the first browser-based Javascript application for EDI web forms, called World-Wide EDI . Loren Data Corps featured network messaging platform, ECGrid, was conceived to provide network operators with utility-scale message routing and subscriber management.The design and build of the system began in 1999 , and 31 entered testing in early 2001, just as the company responded to a pair of RFPs for VAN services . Both RFPs described similar, outsourced wholesale network messaging services, and contained language that hinted at what 32 problems the nascent service providers needed to solve . This convergence might have been considered remarkable, but for those familiar with Mr. Gould, ECGrid was the culmination of a born innovators highly-tuned intuition. For those bereft of intuition we can see that service providers are 33 now the nominal counterpoise to the surviving legacy VANs, especially in regards to suppliers. .. Todd Gould saw this premonition prior to SPS (then called Saint Paul software), morphing the model into an agile webbased platform for supplier to hub services. The revelation was that service providers connectivity would depend on the availability of cost-effective message routing and multi tenant mailbox management - at great scale. Whereas most VANs earn revenues by connecting large hubs (end-user) to hundreds or thousands of vendor spokes, the service providers made their mark by aggregating and automating the processes of managing suppliers; this off loading is very attractive to retailers and manufacturing hubs, due to the repetitive and labor intensive process of onboarding, data layer manipulation, and support. As undertaken and streamlined by service providers, (such as SPS Commerce), the industry works more efficiently. ECGrid, by providing back-end messaging services for B2B SAAS, has marked itself as a dangerous actor in a market tightly controlled by a few legacy VANs. The non-trivial addition of the ECGridOS Web Services API, was a preemptive strike against artificial market constrictions, and created the momentum for permissive market entry for all who so 34 desired.. Sophisticated analysis is not required to see why GXS felt pressured to use the sharpest tool in the monopolists warchest - network effect interference at layer seven, and tampering with clients supply chain message delivery. The implied ability to scale and support the projected needs of supply chain service providers is a hallmark of ECGrids architecture.The ability to cope with high-churn, demanding network operations is another. ECGrid serviced SPSs rapidly growing subscriber base, as the technology matured within thisreal-world R&D lab. In serving SPS Commerce over the past 13 years, ECGrid has compiled a nearly flawless track record of uncompromised message handling, which substantially underpinned a successful IPO of SPS Commerce in 2010. Mr. Gould continued to operate Loren Data Corp independently, with SPS Commerce and other service providers as loyal clients. Loren Data Corp is closely held by Mr. Gould and a few seed investors; the company has not (yet) licensed ECGrid technology. Loren Data Corp is incorporated in California and maintains colocation facilities in Los Angeles, CA, and Portland, OR. In servicing such a dynamic client with tremendous traffic requirements, ECGrid has earned its reputation for professional internetwork operations, stability, and solidity among an elite cohort of primary routing peers (VANs).
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WWEDI is still active and used by a dedicated number of Loren Data Clients to access the DLA (Defense Logistics Agency) Submitted by SPS and ESG For a discussion of what distinguishes a VAN from the new service providers, see http://wp.me/p17xBg-cb by Todd Gould. Hubs are high leverage high margin accounts. Spokes are low leverage, low margin, but in sufficient numbers, are very profitable. With such lavish PE backing, GXS had more to lose.

15 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

ECGrid is also the only VAN, to the authors knowledge, with the advantage of having its code-base under the continual management, improvement, and supervision of the original architect-designer and his hand-picked operations staff. ECGrids interconnect automation has allowed Loren Data Corp, a small organisation with three support FTEs, to meet the challenges of servicing a growing roster of E2.0 clients, Virtual VANs, and software OEMs building EDI 35 communications into the fabric of their applications. ECGrid-ECGridOS is unequivocally the only factorable, callable, VAN OS, invokable via Web Services. ECGrid can be completely reconstituted and extended via its library of API functions, given an alternative UI, or be embedded into servers, ERP Software, databases, accounting, or integrated into a system management console. ECGrid and ECGridOS provide functions for commanding and monitoring the complete palette of VAN functions, thus placing the power of ECGrid completely in the hands of the engineer or programmer. AS2 communications and interconnect routed VAN messaging are treated as identical objects, using identical methods for payload management, distinguished only by meta data; this greatly reduces complexity and streamlines the comms management of heterogeneous vendor populations. ECGrid AS2 Certificate management is freshly and thoughtfully designed for maintaining the sanity of ECGrid subscribers and Loren Data Corp netops support. The uptime record of ECGrid speaks for itself: In 13 years of operation, ECGrid averaged less than four hours of planned and unplanned downtime annually..

Building ECGrid From Scratch? VANs, as they are understood today, are non-standard messaging systems carrying standardized document payloads. Duplicating ECGrid in its present form, would require three to four man-years of build and testing. Building a distributed system in the class of ECGrid is a major design challenge: there are no COTS or OEM analogues on the market; and end-user targeted systems, such as Cleos VLTrader, are designed for lowsupport-delta requirements, not for high-churn rate subscriber populations that make up todays dynamic supply chain service providers. The talent pool for software architects specializing in EDI Communications (with an internetworking focus) could very well be in the single digits, while professionals with a verifiable track record of writing and maintaining a VANs core supervisory and routing engine modules (plus ancillary UI, logging, etc.), could be as few as a dozen, which includes retired and inactive older specialists. The pool of experienced operator talent is also minuscule; new support personnel are usually trained as if from ground zero. Minimum Build Set/Market Aligned ECGrid Services Hosted multi-protocol communications architecture Message routing via interconnections

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See http://ecgridos.net and the live WSDL at https://ecgridos.net/v2.3/prod/ECGridOS.asmx

16 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

Mailbagging via X12.56 standard (ANSI ASC X12) Subscriber management: identity and message/object storage

Leading Services Not Available in Current VAN Market Directory services Expert rules engine for interconnection setup, to/from ISA segment adaption, and soft-failing of malformed message bodies A Web services programmable platform (API) Transparent, unified VAN & AS2 Channels (with X400) Supplier registration workflow that is aware of trading partner spoke account relations A node-based, distributed architecture, with full layer 7 routing (ISA envelope address segment routing, soft failover).

Intellectual and Intangible Assets of the Company and Its Leadership

There is no better acquisition or licensing deal in the current VAN market than the intellectual portfolio of ECGrid and ECGridOS. Developer API facilitates platform growth beyond end user constituency, by handing the power to a new generation of Service Providers and virtual VANs, in turn enabling software OEMs, (embed in comms ++ into software and B2B SAAS). The ECGrid platform exceeds the performance expectations of the largest hubs, while reforming the cost and reliability model for suppliers.

ECGrids routing architecture and callable directory services could be operated as a CIX style traffic exchange. Commercial Internet traffic exchanges, (CIX and the thousands that came after) addressed the same access mediation problems that presently threaten the EDI messaging sector. CIX centralized the brokering of BGP services for companies that were unable to afford carrier-class peering infrastructure, and for those unable to acquire costeffective bandwidth needed to service multiple peering points. CIX was the first effort, among others, that flattened out the access issues for early competitive ISPs. Layer seven (A2A) service markets, such as VANs, (and to a certain extent SMTP), have their own unique problems, and markedly different technical challenges. As they are operated today,VANs use communications, facilities provided by Internet transport services providers. A VANs physical infrastructure is concerned with supporting applications, storage, managed services, etc.

17 Alan D. Wilensky, Analyst. bizQuirk, The Innovators Advocate 203 Washington St. #131 - Salem, MA 01970 abmadw@gmail.com

The creation of an EDI message exchange point is a far-seeing initiative, addressing the most vexing issues plaguing the EDI communication sector: 1. 2. 3. 4. 5. 6. Settlements Reciprocity Route Validation, ID Portability Migration Errors Metered Traffic accounting,

Before any conclusions are drawn, industry stakeholders should examine the range of problems that exchanges might address. There are many ways to envision a post-exchange EDI sector - especially in regards to regulatory risk avoidance. EDI messaging services are, in fact, heirs to Telex and TWX , formerly well-regulated and tariffed wireline services. The reform act did not negate the laws of common carriage. Layer 7 exchanges can be operated with corporate sponsorships, or memberships with paid enhancements, etc. Executives and BODs running the show should gain their appointments via a consensus vote.
Having access to ECGrid Technology, as well as the expertise of founder, has the potential to reduce support labor by automating the core messaging facility, for example, ECGridOS API Services are market proven: the prime example: NetEDI of the UK launched a virtual VAN business with nothing more than their frankly top-notch skills, and ECGridOS API as the engine of innovation. NetEDI: a documented use case

This report was researched and authored by:

Alan D. Wilensky, Analyst bizQuirk, the Innovation Advocates 203 Washington St. #131 Salem, MA 01970 412-353-9269 skype: awilensky abmadw@gmail.com

A Company backgrounder for Loren Data Corp can be viewed, here.36

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<http://drive.google.com/open?id=16xA9nTlJjC7Ll5eFSdqRRVzWb7fb48VHdzyiEl0DpVw>