Fujitsu Brings Dynamism and Power of Negotiation to the Electronic Marketplace

Kawasaki, Japan and Sunnyvale, CA, October 6, 2003 -- Fujitsu Laboratories Ltd. and Fujitsu Laboratories of America, Inc. today announced that they have developed an open protocol to bring automated negotiation to the electronic marketplace. Computers representing two sides of an e-commerce transaction can generate and exchange proposals back and forth until they find a set of terms that is optimal for both sides. Experienced negotiators know that when a negotiation is enlarged to include a richer set of business terms it becomes easier for both sides to extract value from the transaction. By using computers to automate the negotiation process, a very large number of business terms can be used. This allows both sides to extract more value from each transaction than ever before. This will make e-commerce transactions more efficient, and potentially create entirely new markets.

Human negotiation is slow, expensive, won't scale to meet the demands of a web services world, and can't handle the complexity needed to maximize the value of each transaction. In fact, human negotiation often can't manage the complexity required to even complete many transactions. Automated negotiation is fast, cheap, scales well, and can handle arbitrary levels of complexity.

Automated negotiation will be crucial in the coming web services world and valuable well before that world arrives. In the web services vision there will be countless automated transactions between numerous business partners. These transactions, which will take place in seconds, cannot be delayed for the days or even weeks it takes attorneys to negotiate the appropriate contracts. It typically takes months and hundreds of thousands of dollars to set up the legal infrastructure for an EDI relationship. This clearly won't scale to the new world of web services. With automated negotiation these delays could theoretically be reduced to minutes, and the costs reduced to insignificance.

But well before contracts can be negotiated and drafted by computer, business terms will be negotiated automatically. The reason is simple. When deals are negotiated automatically both sides get more out of each transaction. This is because computers can handle an arbitrarily large number of business terms (call them 'parameters').

If a buyer and a seller are negotiating a deal and there is only one parameter, typically price, the deal is 'zero-sum'. What the buyer gets the seller loses, and vice-versa. However, if another parameter is added, say delivery time, both sides can do better. The seller might say, "Do you need it right away? If you can wait a week my cost will be lower and I can share the savings with you." With two parameters the transaction can be more efficient and both sides can get what they want for less.

This logic can be extended. Three parameters can generate more efficient transactions than two parameters, and so on. The more parameters there are in a transaction, the better all parties can do.

Currently, with people managing the negotiations, the number of parameters under discussion is fundamentally limited. People simply can't handle that much complexity. This means that value is being thrown away on every transaction. At a time when efficiency counts, making deals where both sides get less than they could is a big problem. Even worse, in many cases a deal doesn't get completed at all. Human negotiators fail to find the combination of parameters that would make both sides happy. Parties end up walking away even though there could have been a deal that benefited everyone.

Imagine a factory. A variety of components are needed to fill the orders that are either in hand or expected. These components can come in different grades, have different delivery schedules, different warranties, form factors, and so on. Perhaps package deals and quantity discounts are also possible. The factory can substitute some components for others depending upon delivery schedule, cost, etc. And, of course, a rich combination of vendors is available to fill the various needs. In this complex space of possibilities finding the optimal combination of terms for all sides is nearly impossible. It is certainly beyond the capabilities of human negotiators.

In the near future automated negotiation systems will allow the factory and its vendors to manage this complexity and find the right combination of components, prices, warranties, vendors, delivery schedules and so on. Not too much later, automated negotiation systems will be able to automatically generate the contracts required to complete these transactions.

With automated negotiation systems handling very large numbers of parameters, both sides can extract considerably more value from each transaction. This kind of 'win-win' is what good business is about. "Automated negotiation might well become one of the truly important technologies of the early twenty-first century," says David Ferris of Ferris Research. Daniel Greenwood, chairman of the OASIS LegalXML eContracts Technical Committee, agrees. "Business processes automation is of demonstrated value. Automating negotiation is one important step in automating and streamlining an ever-growing portion of the business process."

According to Hiromu Hayashi, Senior Vice President, Fujitsu Laboratories Ltd. and President of Fujitsu Laboratories of America, Inc., "Automated negotiation has applications in numerous domains including financial services, manufacture, commodities exchange, insurance, energy, and more. In addition, by increasing the efficiency and dropping the cost of complex transactions, new transaction types and even new markets, can be created."

Fujitsu Laboratories of America has developed an automated negotiation protocol (ANP) that allows parties with competing interests to negotiate deals across complex parameter spaces. They have implemented a system using this protocol, embodied a variety of negotiation strategies, and explored how different strategies perform and interact.

About the Technology

About Fujitsu Laboratories Ltd.
Founded in 1968 as a wholly owned subsidiary of Fujitsu Limited, Fujitsu Laboratories Limited is one of the premier research centers in the world. With a global network of laboratories in Japan, China, the United States and Europe, the organization conducts a wide range of basic and applied research in the areas of Multimedia, Personal Systems, Networks, Peripherals, Advanced Materials and Electronic Devices. Internet: http://www.labs.fujitsu.com/

About Fujitsu Laboratories of America
Fujitsu Laboratories of America, Inc. is a wholly owned subsidiary of Fujitsu Laboratories Ltd. (Japan), focusing on research on advanced VLSI CAD, Internet, and interconnect technologies. Conducting research in an open environment, it contributes to the global research community and the working IT industry. It is headquartered in Sunnyvale, CA. For more information, see http://www.fla.fujitsu.com

Press Contacts

For more information, contact: Youji Kohda Fujitsu Laboratories Ltd. Tel: +81-44-754-2575 E-mail: ans@ml.labs.fujitsu.com Hitoshi Matsumoto Fujitsu Laboratories of America Tel: +1-408-530-4612 E-mail: ans@fla.fujitsu.com

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