EIPP (e-invoicing) and StartUp World

ebdex was formed on 25th Nov 2004 with the idea of disrupting the EIPP market dominated by Accountis and OB10. To be fair, OB10 and Accountis had very low market penetration then (and same is true now). But they were the best examples an ambitious startup could look upon. Causeway’s Tradex and Burns e-Commerce’s Bex were ignored due to various reasons. Number of other models were studied including Ariba, Xign, Harbour Payments, Esker, etc.

At the time, the idea was to develop a product that harnessed the best of Accountis and OB10. The key ingredient taken from OB10 was the hub based architecture. From Accountis, it was the purchase-to-pay and supply-to-cash documents with built-in BACStel-IP payment engine. Accountis was really helpful in guiding us to understand how to build the ebdex Document Exchange. And they did not even know they were helping us.

But fundamental to all this is Mr. Mark Morahan of Morahan UK Ltd (plus Morahan International, etc). I bought in to Mark’s vision of the electronic document exchange concept whilst completing my Executive MBA at Manchester Business School. Mark’s vision was to develop an exchange (he called this MI Document Network) that was simple to use and understand. The idea was to charge both parties of a transaction (supplier and buyer) 25p with no set-up fees or annual maintenance fees. Quite the opposite to Accountis and OB10, not to mention the rest of the market! However, whilst it sounds great on paper, delivery was quite a different story. And this remains the fundamental problem with the concept of e-invoicing to date!

Having studied the incumbents’ models, ebdex looked at ways to innovate and therefore differentiate from the rest with the idea of achieving a sustainable competitive advantage over time. I believe we found a way, which I have not yet seen in any of the products in the market today. Unfortunately, just like Morahan UK Ltd, the company I outsourced to developed ebdex Document Exchange, Affno, could not deliver the technology! Whilst nothing good can be said about Suren and his Affno, various software associations in Sri Lanka continue to promote their works by granting them prestigious awards! How ironical is that?

At the end of 2006, it was the crunch time for ebdex. Do I accept £250,000 debt finance and continue to burn cash hoping Affno will eventually deliver or cut the losses and walk away? At the end, I took the wise decision and accepted that its time to stop beating a dead horse.

In 2007, I attempted to turnaround ebdex into a niche consultancy, but found this extremely difficult due to the past finances of ebdex. What I should have done was to terminate ebdex at the end of 2006 and create a new entity to exploit advisory opportunities. I was emotionally attached to the ebdex brand - with the hope that one day, I will be able to rebuild ebdex document exchange. Letting go was hard. But recently, someone has forced me to make this decision. So it is time to say good bye to ebdex. In the short term, ebdex will remain as a dormant company.

Looking back, I learnt a tremendous amount from ebdex, especially to do with outsourcing. It’s time to let go…Goodbye ebdex…

Technorati Tags: Mark Morahan, Ariba, Xign, JP Morgan Chase, American Express, Esker, Accountis, OB10, ebdex Document Exchange, ebdex, Rhys Jones, Affno, Suren Kannangara

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OK, as the title suggests, I thought of capturing the analyst sentiment of FundTech before the acquisition of Accountis. So without further ado, here is a snapshot of analysis from three firms in Jan 2008:

D A Davidson & Co

BUY. Price on 9th Jan $10.60. Price Targets: 12 to 18 months $18, 5 year $40

Verdict: Target market volatility warrants some cautiousness, but risk/reward better than ever. Lowering estimates, maintaining BUY rating.

My Analysis of Analyst: Does not indicate compelling understanding of business proposition. Analysis purely on the back of financials both past and forecasts.

Wedbush Morgan Securities

BUY. Price $10.57 on 16th Jan. Price Targets: 12 months $14.50

Verdict: Downside analysis shows more resiliency than shares have shown; reducing estimates and target but reiterating BUY

My Analysis of Analyst: Mainly on financials but take the trouble to comment on the US economy and the resilience of products to a US economic downturn. No speculation or comments on strategy or growth.

PriceTarget Research

NEUTRAL: Price $10.96 on 27th Jan.

Verdict: Relative to the S&P500 composite, has both growth and value characteristics. Its appeal is likely to be to Capital Gain oriented investors. FundTech is of low investment quality.

My Analysis of Analyst: Quite a lot of information to digest. Need to get some sleep!

Craig-Hallum

BUY. Price $10.87 on 29th Jan. Price Targets: $18

Verdict: SEPA is here. Lowering price target.

My Analysis of Analyst: Obviously published after a key event and therefore carries lot more information than the other 3 analysts in terms of market and economic outlook. Too sleepy to do much more reading

I wish I had more time to go into detail and absorb what the analysts were saying. Above is just to capture some essence of the the conversation taking place. This reminds me of my MBA days when I used to read analyst reports on regular basis. Perhaps, its time to brush up! Good night!

PS: I will revisit these analysts later this month to capture their thoughts! Now wouldn’t it be great if these reports can be found on edocr.

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Whilst I cannot take any credit for the deal between FundTech and Accountis, I feel exhilarated at the service this blog provided in above acquisition. Here are some clues:

• OB10 #8 - Ready to be acquired!
• James Governor # 1 - Learning from a Pro

I actually thought there was a blog post giving more clues, but perhaps not! I believe it all started at a pub near Manchester Airport, where I had the privilege to meet a Representative, who came to know me through this blog. We spoke about the industry, why e-invoicing has not taken off as it should, and the potential acquisition targets in the UK. From the companies we discussed, Accountis had more synergies with FundTech than any other. Some of these being:

• Small company - eager to grow
• Control reside with Founder - makes much easier to deal with one person than a large number including financial backers
• Good technical capability - document exchange plus payments
• Deep understanding of the industry
• Key clients - DHL
• Scalability - ability to scale up quickly with investment
• Cash management - Good utilisation of cash reserves
• Location - significant public sector funding in Wales than in England
• Growth through cross selling - Ability to tap into each others customer base
• New propositions - ability to introduce new services

Since my initial encounter, I had the privilege to extend my relationship with the Representative. I also knows Rhys Jones lot better now than 12 months ago. As I am bound by confidentiality, I have not revealed everything I know. Brace yourselves for another announcement soon from Accountis!

I would like to take this opportunity to convey my best wishes for all involved from both camps. Additionally,

Well done, Rhys! You did it for the second time! What’s next, Sanoodi? If you are interested in learning about Sanoodi, do attend Northern StartUp Mobile 2.0 event on 21st Feb in Manchester eOffice. Could Rhys repeat the same success for edocr? As a start, bit more commitment would be much appreciated by the team!

Over the coming weeks, I will blog more into “what this means for the industry” and “what this means to Accountis”.

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Acquisition further expands Fundtech’s product suite in the corporate banking financial supply chain

JERSEY CITY, N.J., Feb 07, 2008 (BUSINESS WIRE) — Fundtech Ltd. (NASDAQ: FNDT), a market leader in global corporate banking solutions, today announced the acquisition of Accountis Ltd. of Bangor, Wales, a leading supplier of electronic invoice presentment and payment (EIPP) systems. Adding EIPP capabilities to Fundtech’s existing product lines of payments, cash management and settlements systems, expands its end-to-end corporate banking systems, and adds to the company’s capabilities in enabling the emerging financial supply chain.

Under the terms of the definitive agreement, Fundtech paid GBP 3.8 million in cash at closing and an additional amount of up to GBP 2.0 million in cash will be paid over the next three years based on the financial performance of Accountis. Accountis reported un-audited revenues of approximately GBP 1.0 million for the 12 months ended December 31, 2007.

Accountis’ electronic financial document exchange and payment solutions automate the way companies interact with one another through their accounts payable and receivables departments. This significantly reduces the time and expense involved with processing, paying and reconciling invoices. The European Association of Corporate Treasurers has shown that e-invoicing is capable of saving corporations up to 80 percent by eliminating the paper invoice processing, printing and postage costs associated with traditional billing. In addition, suppliers are able to receive payments faster.

The Accountis system addresses many of the key barriers to adoption of EIPP systems among corporations:

– Corporations that are suppliers of goods and services are able to easily adopt the Accountis system.

– Accountis’ Enterprise Accounts Payable and Accounts Receivable systems seamlessly integrate with existing accounting and enterprise resource planning (ERP) systems.

– The system is highly secure, supporting digital signatures and operating over a secure network.

– Compliance with local tax regulations.

– Corporations can make and receive validated payments through UK bank accounts by means of the Bankers Automated Clearing System (BACS).

Accountis has an established customer base of well-known companies such as: DHL, Virgin Retail, Goodyear Dunlop, Marconi, T-Mobile, Warner Bros., ICICI Bank.

“The acquisition of Accountis is an important step in Fundtech’s growth plan as we leverage new technology to expand our market leadership to encompass the Financial Supply Chain,” said Reuven Ben Menachem, CEO of Fundtech. “We welcome Accountis employees and clients into the Fundtech family and look forward to our mutual success.”

Rhys Jones, Founder and Managing Director of Accountis said, “We are pleased to become part of Fundtech’s global organization and join forces to significantly impact Financial Supply Chain automation. Fundtech’s global sales and support reach will help us capitalize on the early market momentum that Accountis has generated.”

Fundtech management will discuss the Accountis acquisition during its conference call to be held after the release of its Q4 2007 earnings on Tuesday, February 19, 2008 at 8:30 AM (EST). The conference call numbers are 1-866-800-8051 or 1-617-617-2704 (ask for the Fundtech call).

About Fundtech

With thirteen offices on four continents, Fundtech Ltd is a leading provider of software solutions and services to financial institutions around the world. The company develops and sells a broad array of products across the “financial supply chain” that enable banks to automate their corporate banking activities in order to improve efficiency, while providing their customers flexibility, convenience and control. Fundtech offers products in five business segments: payments, cash management, settlements, financial messaging, and post-trade securities settlement.

Fundtech is a publicly traded company, listed on NASDAQ (FNDT). The company was founded in 1993. For more information, please visit www.fundtech.com.

Forward Looking Statements:

This news release contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, projections of revenues, income or loss, capital expenditures, plans for growth and future operations, competition and regulation. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. When used in this Release, the words, “estimates,” “expects,” “anticipates,” “believes,” “plans,” “intends,” and variations of such words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties. Future events and actual results could differ materially from those set forth in, contemplated by or underlying the forward-looking statements. The factors that could cause actual results to differ materially from those discussed or identified from time to time in Fundtech’s public filings, including its Annual Report on Form 20-F for the year ended December 31, 2006, including general economic and market conditions, changes in regulations and taxes and changes in competition in pricing environment. Undo reliance should not be placed on these forward-looking statements, which are applicable only as of the date hereof. Fundtech undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this Release or to reflect the occurrence of unanticipated events.

SOURCE: Fundtech Ltd.

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Latest to join the e-invoicing startups to be funded by Venture Capitalists is TBiConnect run by Simon Fox. Both OB10 and Burns e-Commerce top the VC funding tables for attracting the most cash to date. Among other funded companies include Accountis from North Wales, but they still require a significant funding round to enable an European expansion. For some reason, I do not see Accountis conquering the world similar to OB10, so their best hopes remain within the Europe, capitalising their key customer, DHL. UK companies looking for VC funding include United Data, which is yet to launch its e-invoicing solution. United Data’s Founder and I go back a long way, and I hope Mark Morahan will finally launch his much anticipated e-invoicing hub this year with a realistic business model than the last time (conquer UK before the world!).

I have known Simon Fox of TBiConnect for well over a year, and I am delighted to hear the closing of the first round of £330,000 from regional venture capital fund, South West Ventures. According to GrowthBusinessUK, TBiConnect is an online payment specialist. As far as I know, TBiConnect does not handle payments, let alone on-line payments. Their expertise lies in the exchange of Purchase-to-Payment documents between the sender and the recipient (the buyer and the supplier), and provision of procurement solutions.

TBiConnect has a similar model to Accountis, i.e. enterprise licensed based product. Both companies claim to have the ability to offer a hub based solution. Given that Accountis has been trading for more than five years, and continue to offer licensed based solutions, my advice to TBiConnect is that think strategically when deciding on the license vs. hub based model. Whilst licenses might be financially rewarding today, it may be prudent to set-up a hub now rather than later. Perhaps it is better for me to cover hub vs. licensed model in another post.

According to the story, the fund has committed its maximum initial investment of £330,000. There is also the possibility of raising a further £330,000 from the same fund after six months. South West Ventures has invested £6.9 million in 24 companies (an average of £287,500 per company) with £18.1 million left to invest. The fund is managed by YFM Group, which over the years have become a VC powerhouse operating in many regions of the UK. Doug Stellman of YFM Private Equity recently spoke at the Northern StartUp 2.0 event organised by me at KPMG Manchester.

According to Nick Simmonds, investment manager at YFM Group:

“TBiConnect has developed a proven solution to address the business need problems faced by many organisations handling thousands of financial transactions. We have been particularly impressed with the excellent management team and are delighted to back this exciting solution”.

As part of the funding package, former Amstrad CEO David Rogers has become the Chairman of TBiConnect. According to David Rogers:

“TBiConnect’s customer proposition is compelling. It delivers immediate cost benefits and control to financial systems. We’ve had immediate positive reception and industry recommendations from early customers on the strength of the ease, simplicity and operational benefit they’ve experienced. Investment from the South West Ventures Fund enables TBiConnect to make a forceful entrance for a long-term future in this emerging market.”

According to Simon Fox, CEO of TBiConnect:

“We are delighted to have secured the investment from South West Ventures Fund to support our vigorous growth plans. The business rationale for our service grows ever more powerful as corporates struggle to increase performance in every department, while maintaining stability of operations and IT.”

Just like many other players in the market, TBiConnect is no stranger when targeting the large buyers. TBiConnect targets medium and large organisations that generate over 100,000 transactions a year.

Whilst technologies are available, no UK company has emerged to provide a compelling solution to the SME. Accountis clearly has the technology but lacks a substantial business model to take the market by storm. Version One has early stage of technology, but requires significant development, which somehow I do not see happening under the current ownership structure. If Accountis is serious about the SME, it needs to consider setting up an independent company and provide the software under license to target the SME customer. The current set-up will not work. Why? Their matrices will never allow direct targeting of smaller customers, e.g. revenue per customer will be so low for sales team to get too excited. What this means is that the market is wide open for an innovative startup to penetrate the SME sector by storm. Who will rise to this challenge is not clear. I cannot see OB10 taking a punt at this market, as it’s ambitions are more global. What about Causeway Technologies?

What a pity! A lost opportunity! Anyone interested in exploring this opportunity more closely?

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Just following up from Will’s excellent post here, I came across a story from ioma, which speaks briefly about the importance of senior management buy-in for successfull EIPP project execution. Anyone who ever ran a project knows that people are the key in terms of successful delivery. Buy-in at the highest level is vital. A real killer for any project is movement of key people, especially the project champion. Give any project, you can always find a champion. Move the champion and you will see the emotional drive disappearing - ever heard of the term “pet project”. One of the key problems with large long projects are promotions. Obviously you want to promote good people to retain their continuous loyalty, but by doing this you end up moving them away from the project, thereby loosing the Champion. How do you manage such conflicting human resource issues?

According to Michelle Ross of RS Electronics (USA), the time spent on preparation of a business case was vital to senior management buy-in and subsequent execution. The benefits she identified include:

• Timely receipt of invoices by customers (increasing the ability to utilise discounts)
• Elimination of “lost” invoices in the mail by customers
• Notification that customer’s shipment is en route
• Reduction of time spent opening incoming mail
• Reduction in all associated mail costs for RS Electronics (paper, postage, clerical time, etc.)
• Possibility of improving RS Electronics cash flow cycle

To me, the greater advantage of any of these technologies are three fold:

• Ability to improve cash flow cycle, i.e. much improved working capital management
• Ability to improve profits by reducing operating costs
• Ability to bring operational efficiency and accountability - reduce wastage and increase value addition

There are lot more reasons than this why you ought to consider e-invoicing/EIPP solution. In some cases, the key driver may not be any of the above reasons, it may well be the most trivial. This again proves that what’s important to one person or an organisation may not necessarily be important to another.

Crawling through edocr library of EIPP documents, I found these three gems written by none other than Accountis. These should help any business think about developing a business case for senior management buy-in as well as recording initial objectives, giving an early opportunity for accountability.  

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It is good to hear that Basware has formally joined the Hub Alliance, increasing the member companies to six, which includes founding members Asite, Causeway Technologies and Burns e-Commerce from the UK in addition to more recent members CertiPost from Belgium and Liaison Technologies form the USA. During my assignment with Causeway Technologies, I undertook the obligation to bring Accountis on-board. Whilst there is significant interest from Accountis in principle, nothing positive has come out of it to date - which I must declare as a personal disappointment given my close links to Accountis’ Founder Rhys Jones - as well as knowing the most of their Executive Team.

It is my belief that an organisation such as Hub Alliance needs to open up to non EIPP hub operators - the key role should be market education in addition to promoting interoperability between hubs. At present, they see themselves as a closed unit of EIPP hubs. I actually think a vital opportunity has been lost. But I am glad to see the growth of the Members, in this case by one.

There are also competing organisations recently been formed in Europe with the same intentions in mind. Does this mean that there need to be a Super Alliance connecting all the Hub Alliances? It’s just crazy - why not join the Hub Alliance? This will certainly improve resource utilisation as well as market awareness.

References:

• BasWare acquires my neighbour Digital Vision Technologies
• Could Hub Alliance be bigger than OB10 and Ariba Supplier Networks?
• Hub alliance to banks? rescue
• Hub Alliance - My first meeting

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It’s good to hear that Transcepta is going from strength to strength, servicing the needs of more than 12,500 companies in such a short time, proving that there is a real market for a simple product offering on EIPP. It’s a great story, and my congratulations go to Mitch, Shan and the team. But I wish they do not get carried away with marketing statements such as “the only solution in the market…”. As I stated before there are number of solutions that constitute printer driver technology. Among these are Accountis and EasyInvoice. EasyInvoice’s business model is perhaps closer to Transcepta than Accountis. At the end, it’s all down to the execution and in most cases, it does not matter how great your technology is. In this regard, Transcepta has done exceptionally well, perhaps better than Accountis as Accountis’ business model is significantly different from Transcepta. 

Having said above, Transcepta has done well to simplify Accounts Receivable (A/R) automation workflow:

1. Supplier (Vendor) downloads and installs Virtual Printer Driver from Transcepta’s web site.
2. Once installed, Supplier selects Transcepta Virtual Printer as the printer and prints an invoice.
3. An electronic message is sent to Transcepta’s hosted data center, which maps, parses and formats the invoice dynamically.
4. Transcepta then transmits the invoice to the relevant buyer.
5. The buyer receives the invoice in desired format and import invoice directly into the Accounts Payable (A/P) system for processing.

Whilst Transcepta handles supplier-end directly, the Buyer (Purchaser) end interfacing is usually undertaken by Transcepta’s partners, such as 170Systems. In this respect, Transcepta’s core competency lies on Supplier-side, similar to that of Esker, where Transcepta’s founders come from. However, Transcepta’s solution is easier to implement and lot less complicated than Esker’s. Transcepta clearly fills a gap in the market. But at the same time, they are constraints by their reliance on partners for A/P interfacing. However, if you flip the model (stick with my argument till the end please and do take a pinch of salt before you read on):

1. 170Systems wins a contract with a large buyer.
2. The buyer has 1000’s of suppliers from large to small.
3. 170Systems has two options, implement data capture through scanning, OCR and ICR, or look for a partner who could connect supplier ends, so that invoices could flow electronically from suppliers’ systems to buyer’s system.
4. If the timing is of the critical essence due to corporate deadline (someone within CxO deciding on an unacceptable deadline), then go with data capture and deal with significant error handling.
5. If not choose a partner who could bring supplier invoices electronically.
6. Now 170Systems got two partners to choose from, OB10 and Transcepta.
7. mmh! Decide on whose solution offers the best financial reward and/or ease of implementation.
8. In addition, who has most suppliers already trading through their network, which reduces the deployment timescale.
9. Now my guess is Transcepta is fully geared for supplier adaptation, but OB10 does both supplier and buyer side implementations, which means management of multiple expectations, which Transcepta is not burdened with. 
10. If I use MBA thinking, then Transcepta has the better chance of coming on top on A/R side than OB10. This is not to say that OB10 is complacent, but their sole focus is not on A/R. As a specialist of A/R, Transcepta has a better chance of emerging on top over time.
11. However, OB10 has a proven track record and longer history, therefore can be deemed as the incumbent.
12. Customers do like dealing with one provider than multiple providers. OB10 can do both A/R and A/P ends but not sure whether they have printer driver technology.

Ignoring few more steps, let’s speculate here thinking aloud. Now I know Jamie do not like me writing this, but this is only a hypothesis and should not be taken too seriously (however if you do take seriously I can bridge a conversation):

1. OB10 will watch Transcepta grow in the US market.
2. Transcepta will be wanting to launch in Europe fairly soon.
3. US is a vital geography for OB10 as most revenue growth will come from there.
4. If Transcepta adopts an aggressive strategy with significant financial backing with improved pricing model for suppliers, they will start to capture vital market share from OB10
5. Now OB10 is faced with two choices - continue to battle with Transcepta or buy them out

Now there are many options to this scenario as it is hypothetical including somewhere down the line “Hub Alliance”. I will leave that for another day.

Thinking back, am I irresponsible in writing above. I do not think so. I merely stated a possible scenario that CxOs always should think about. What if..Unfortunately, CxOs are busy delivering and may not necessarily have sufficient time to think through such crazy forward looking scenarios. And no one can be complacent. I also need to establish whether OB10 has printer driver technology. If not they need to seriously consider it, as it could take a lot of the pain away.

This is where ebdex’s market brief and advisory services become valuable resource to vendor community. Good to have a sales pitch somewhere.

References:

• Transcepta #2 - The product
• Transcepta #1 - A breath of fresh air

Technorati Tags: Transcepta, OB10, Accountis, 170 Systems, EIPP, A/P, A/R, e-invoicing, easyInvoice

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The 3rd ExPP Summit was held on 10th and 11th of September at Millenium Glocester Hotel in London. I attended both days as a guest of Bruno Koch of Billentis. Bruno who organised the event with Johannes von Mulert of Vereon AG is to be congratulated for hosting an excellent gathering of European e-invoicing community.

In the evening of the 1st day, I had the opportunity to speak to both Bruno and Jahannes. Whilst Bruno brings the e-invoicing domain expertise and industry connectivity, Johannes brings skills and resources necessary to organise such a large event. Together, they have delivered a superb conference packed with users and providers of e-invoicing solutions as well as other stakeholders such as banks, regularity and legislative authorities. Johannes was fascinated by web 2.0 activities in the UK and is attempting to create a buzz in the Switzerland. I introduced him to OpenCoffee concept as an excellent way to promote technology entrepreneurship in Switzerland. I also discussed with Johannes of my ambition to hold two e-invoicing seminars in the UK, one in the North and the other in the South.

This idea was generally well received by number of UK based vendors. My thoughts are of holding an event solely focussing on the corporates, perhaps inviting 30 or so prospects with five service providers. Keep it small, but effective. I know I have the full support of Henry Ijams at Paystream Advisors.

The only criticism I can draw on ExPP Summit is that it was not meant for users of technology but for providers of technology. Whilst EDI has been around for 40 odd years and XML based products has been around for seven or so years, we have achieved very little traction in terms of penetrating the market. According to Bruno, this sits around 3%. If that is the case the priority ought to be “education education education” and not about technology. Especially not about features and functionality. Unfortunately, ExPP Summit miss the opportunity to address this vital issue. Hence my thoughts of organising two events in the UK.

I spent significant amount of time speaking to vendors, notably Accountis, OB10, Ariba and JP Morgan Chase. Ifor Williams of Accountis made some key introductions to those who are trying to address the issue of roaming. I personally do not like this terminology, but 100% behind the desire to interconnect e-invoicing networks.

According to Bruno, there are about 250 vendors operating in the European market, and he predicts this number to increase to 400 in 2009, a 60% increase with 15% market penetration. He also believes most vendors will achieve low penetrations of under 1 million transactions a year, resulting in eventual market consolidation. This belief has resulted in Bruno offering mergers and acquisition services. As you have already read in this blog, I have also discussed acquisition opportunities with one US company recently. I hope Bruno’s prediction will come true. This will certainly increase the level of activities injecting further funding into the sector, which will fuel development of new services as well as expansion both in terms of geographical coverage as well as provision of vertical solutions.

I always consider Bruno as the real guru of e-invoicing. Over the years Bruno has gathered significant market data. I will comment on this later once I get my hands on the relevant slides.

I also had the opportunity to meet Jamie Gunn, CEO of OB10 and Anders Hellermark of Trustweaver on 12th. I will cover these separately, as well as bringing more posts on the Summit. This is really a quick note to cover the event in brief as I have not kept up with blogging recently.

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Over the last year, we noticed two key acquisitions in the EIPP and Payments space, these being purchase of Xign by JP Morgan and purchase of Harbor Payments by American Express. Recently, I had lunch with a US Company looking for an acquisition in the UK. And now CheckFree is to be acquired by Fiserv. This clearly shows the importance and the increasing maturity of this segment. So according to the press release:

Fiserv, Inc. (NASDAQ: FISV) will acquire CheckFree Corporation (NASDAQ: CKFR) in an all-cash transaction valued at approximately $4.4 billion, and the CheckFree shareholders will receive $48.00 in cash for each of common stock.  

CheckFree is not strictly an EIPP solutions provider, but a significant player in the Payments space from provision of ACH solutions to transaction process management. On the other hand, Fiserv provides information management services to the financial and insurance industries. The combined organisation is expected to deliver wider range of products and services with the ability to bring new solutions to the market faster.

Few facts from the press release:

1. Fiserv serves almost 6,000 clients and all top 100 banks in the USA.
2. CheckFree serves 21 of the top 25 financial institutions in the USA and process more than 1 billion transactions per year.

According to Jeffery Yabuki, President and Chief Executive Officer of Fiserv:

“CheckFree’s industry-leading payment and Internet banking capabilities will significantly accelerate our strategic transformation, extending our service platform to the largest financial institutions. This combination allows us to deliver the best available solutions to all of our clients to enhance growth today, and into the future. An important objective of the transaction is to tightly integrate electronic bill payment and settlement capabilities with our core account processing and risk management solutions to create a unique value proposition unrivaled in the marketplace today.”

According to Pete Kight, CheckFree Chairman and Chief Executive Officer:

“By joining our complementary technology and capabilities with Fiserv and its unparalleled footprint, this new combined entity will broaden Fiserv’s offerings to customers worldwide. In particular, it will significantly accelerate the delivery of next-generation services to financial institutions and their customers. CheckFree’s broad range of offerings will also enable Fiserv to round out its ability to deliver solutions that address the challenges of an evolving U.S. payments landscape and help facilitate the growth of the managed accounts industry.”

Kight will join Fiserv Board of directors. So what are the synergies of this transaction and the justifications?

1. More than $100 million in annualized cost savings.
2. More than $125 million in annualized revenue synergies.
3. Pro-forma revenues of $6 billion

Who would be the next to be acquired? Could this be a UK company? My views about the “Significant 4″: May be on another day.

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Whilst there has been much talk, I believe Abbey is the second company to offer a supply chain finance solution in the UK after GMAC Commercial Finance, which uses Deskom. Between the two propositions, I believe Abbey has the best chance of making an impact. I have not heard or seen much publicity of Deskom and GMAC’s joined proposition recently and wonder its degree of actual success beyond the marketing hype.

Let’s review the team responsible for delivering the expected results for the Santander Group.

 Marcus Hughes, Financial Supply Chain Solutions, Abbey UK Corporate Banking

Marcus is a specialist in financial supply chain solutions, covering financing, cash management and e-invoicing. Marcus spent 20 years in banking and trade finance, working in UK, Spain and France, as well as other international roles. This experience has recently been complemented by five years at a payments and e-invoicing solutions provider, giving him a valuable understanding of how technology can deliver business objectives. Having recently joined the Santander Group and Abbey UK Corporate Banking in London, Marcus is now helping to globalise Santander’s extensive product capability in supply chain finance, which in Spain, Portugal and Latin America, is generally known as Confirming. Marcus graduated with an MA from Cambridge University and is fluent in Spanish, French and Italian.

Obviously, Abbey does not want to declare where Marcus gained his experience from, but it is very well documented. Yes, he was with Bottomline Technologies.  Being fluent in Spanish will no doubt have helped communications with UK based team and Santander. I plan to meet Marcus sometime in September 07.

Whilst Marcus run around promoting Abbey + OB10 proposition, who is setting the overall strategy for the UK corporate banking?

 David Goucher, Abbey UK Corporate Banking

So what do we know about David:

David joined Abbey in 2006 with responsibility for business development within the new UK Corporate Banking business. He also leads the international development and expansion of Santander’s financial supply chain solution business. David has previously worked at RBS, Standard Chartered and Chase. Prior to joining Abbey, he was head of strategy and business development for RBS in New York.

So what is next? What about the announcement of signing up the first client? When will RBS bring a similar solution to the market? Is Rhys John’s loosing his touch? Hope not, I am counting on him for the success of edocr.

References:

• Abbey?s Supplier Payments # 1 - Process Unravelled!

• Introducing Deskcom - A French EIPP Player

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Note (1st October 07) - I have tone down the following article which was posted on 27th July 2007.

There has been numerous occasions when I wanted to write about Mark Morahan but have resisted the temptation. But this article caught my eye. I came to know Mark through Morahan International, he set-up with few colleagues in 2003/04. Instead of talking about his previous business, lets look at his new business. One thing I can congratulate Mark on is about “never giving up”. Unfortunately or fortunately (depending on your view point) I have become bit like Mark, but in my case you get what you see. The purpose of this article is to review his new business and not the past business which I know very well of. So, let’s get on with it!

The new name of his business is United Data Ltd and the product is called ExDox. Mark is a great sales man, and a great persuader. I can criticise every sentence he has written on this job advert. But that would not help you or me.

According to Mark:

“When an organisation receives a structured document, such as an invoice, it has to employ data entry staff to copy the fields of data back into their accounts package. The cost of this is typically �1 to �5 per invoice. Until now, there has been no cost effective way of linking computer systems so that those invoices could be sent electronically. With the launch of ExDox � in June 2007, that is about to change. An organisation just needs an internet connection and a piece of software called a ?connector?. It can then send and receive invoices electronically. The result: An organisation receiving 250 paper invoices per day would need to employ two to three people to complete the data entry. This same task can no be completed in minutes, simply by pressing a button. The cost? There is no capital outlay, organisations pay for what they use, which is 25p per transaction. This is cheaper than the stamp they use!”

I for one fully agree with Mark except for making it sounds so simple and the claim for being the first in the market place. Extracting data from a system is much easier than writing into. You could use data import/export facility built into accounting and financial systems as well as APIs. Most APIs were developed without any consideration given to data exchanges with trading partners. They were meant for simple exchange with spreadsheets and similar office applications. The other route is through the printer driver, which is gaining more attention. But printer driver technology only works one way. I for one would like to see more clarification on how ExDox intend to exchange documents. Other competitors in the market place for printer driver technologies includes Accountis and Transcepta, both proven with real customers.

In the case of ExDox, I have not yet seen any case studies. Given that it was intended to be launched in June 2007, most likely the deadline would have not been met, given my experience of software development. But in any case, I welcome another player to the market, especially one that has similar thoughts to myself. Based on my understanding, ExDox (whatever the name used now) would have taken more than 3 yrs to built. I can only congratulate Mark on surviving this long with his original idea. Most people would have given up way. But hey! that’s part of the startup scene.

Let’s look at the franchise model Mark continues to sell. The idea seems to be that you sell franchises to number of local businesses who would enroll customers on to ExDox platform. I assume they are on a revenue share model. The price for each franchise used to be couple of grand in 2005 but this may have gone up considerably (remember Mark is a great salesman!) by now.

Mark also states:

“We already have thousands of organisations across the country that will be MANDATED to join ExDox. Trials have shown that there is an 80%+ closing rate. The Partners role will be deal with those organisations that have been MANDATED to join. United organise the appointment for you. You will typically earn �1,000 to �5,0000 per annum for every mid and large sized organisations that you sign up to become a member of the ExDox network.
United will organise one to four seminars per month. Typically these will attended by 40 to 60 SME organisations to learn more about ExDox and to undertake training on how to use ExDox. Your role will be to present those seminars. You would get paid between �1,000 and �1,500 for every seminar.

Who can resist above! Great once above actually starts to take place. At this stage you are selling dreams. I understand that there are lot of “letter of intents”. But doing it for real, overcoming deployment challenges and those human beings at the other end is the nightmare scenario. Over optimism sometime could turn round to bite you, making people frustrated and wondering what happened to their investments.

Mark goes to say:

“After passing a three month probationary period you will receive an exclusive licence for your area. You will be given a limited company, which you will have a 100% shareholding. This will be yours to sell in the future. Your earnings will in excess of �100,000 p.a. in 12 months or you will be below target. This figure will grow substantially in the next two years. You will be in at the start of a business opportunity that many have stated will be the fastest growing sector since the advent of the mobile phone industry? A significant shareholding in United Data GB Ltd, subject to reaching qualifying targets. The intention is to go public in four to five years. Those shares, if we reach our targets, could be worth seven figures.
A Regional Director will assist you in every conceivable way, in building your business.

And lastly:

“Who we are: A consortium of IT / document management & business services companies throughout the country formed United Data GB Ltd. We need other like minded people and companies to join us in this partnership. Your skills and attributes: Above all we want people who share our vision and want to build a business not just perform a ?job?? We especially welcome applications from people who have run their own companies and have exceptional communication skills.? Hungry to succeed.? Extensive experience of presenting to tier 1 organisation OR selling to the SME market OR within the training industry. ? Can work unsupervised, setting own targets and priorities.? No IT experience is necessary. This is a business services sale. Full training will be given. Apply via email to Mark Morahan with a covering letter stating your suitability”

From my point of view - history is history. No one else would dare attempt to franchise a document exchange hub. So, Mark is without any doubt a first in this!. I wish him all the best! I am for one like to see much more competition in this market place. I am a great believer of partnerships. Selling direct is hard, but convincing other companies to sell on your behalf is even harder. I will continue to watch the space with interest. Perhaps I will also do an article on Robin Colla and the team, the other startup to emerge from the past business.

Disclaimer: I have not reviewed the website, but will do on another occasion including introducing other personalities driving this initiative forward.

Technorati Tags: Mark Morahan, Morahan International, MI Document Network, ExDox, United Data GB Ltd, eipp Hubs, eipp, e-invoicing, Robin Colla

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All of us are in business (with respect to B2B) to provide a product and/or service to satisfy a business need and in most cases to relieve a pain suffered by a business customer. In doing so, we all have two broader options that could be followed, these being:

1. Provide a solution combining product and/or services to meet the customer need near to 100%.
2. Offer a standard product and/or services with minimum or near zero customisation.

The above two approaches attract many different challenges for the supplying organisation.

Fully Customised Offering:

1. Your ability to standardise your offering becomes a near impossibility.
2. You would need to maintain a broader skill base attracting a higher wage cost.
3. Maintaining up to date technology and knowledge becomes a costly exercise.
4. Suddenly the overheads start to go up.
5. Your offering becomes expensive for the customer.
6. Your offering becomes affordable by only the largest customers.

Standard Offering:

1. Convincing customers to change their business processes to meet you standard offering is prone with challenges.
2. Your standard offering must work in most circumstances. Simplification becomes the key to success.
3. Overheads can be kept low.
4. Therefore, it becomes affordable by large number of customers.
5. Becomes an affordable solution for smaller companies as entry price can be kept low.
6. Possibility of the competition getting an upper hand overtime diminishing any current market share becomes higher.

I acknowledge above is not an exhaustive list, but I hope you get my point. Now bring the e-invoicing/EIPP hubs into this environment. Let’s look at those that falls into the customisable and standardise offerings (two examples for each to keep this article short):

Customised hubs

1. Accountis - I picked them not because of their customisable functionality, but because of their offering of dedicated hub for each large purchaser. This approach is certainly not one preferred by me, but if it generates revenues and profits for Accountis, then who am I to object. The problem with this approach is that it involves hardware installation (ok, Accountis may offer a partition within an existing server bank and/or may house it in the same rack in the data centre) as well as multiple entry points for companies that wants to trade with number of Accountis’s customers. I know they have a solution to reduce this nightmare. But I simply think that they have made their life difficult by taking this approach - perhaps driven by the first customer. This has also influenced their strategy to an extent that this has become their de facto offering, i.e. they would not dream of offering a single hub for multiple customers. So it has become one-to-many offering with possibility of many customisation requests.
2. Causeway’s Tradex - Over the last few months, the platform has evolved to be one with a rich list of connectivity options, incorporating paper to data as well as data to paper options. Yes, you heard me right! In addition, Tradex Active will give it that extra edge in convincing SME/SMBs to join. Being a founder of the Hub Alliance, it can exchange documents with businesses connected to 4 other hubs, 4 Europeans (2 British) and 1 American. It already exchange documents through the two British hubs. I have also been instrumental in collaborating with another competitor to explore the possibility of offering even more ambitious SME/SMB offering. The outcome is a single hub with many connectivity options as well as increasing number of value adding functions, e.g. receiver side business rules. This is great for the customers, as it provides a large number of priced options, to meet ever increasing customer needs. However, this approach makes the life difficult in terms of maintenance and support as well as sales and project execution. For example, for one particular option, I believe there is only one customer. I am not commenting here on profitability of each option, but the difficulty in managing them going forward whilst spreading the scarce resources too thinly. Without adding further human resources will continue to challenge them going forward.

Standard hubs

1. OB10 - Runs a single hub similar to Causeway’s Tradex. Up to now, they have catered for invoices only. Target has always been the larger customer that could generate high transaction volumes. As part of their bid strategy, they continue to give guarantees for trading partner roll out, e.g. bringing x% of transactions electronically within y number of months. Difficulty of giving such guarantees is that if you keep missing these, OB10 will end up paying significant penalties as well as loosing credibility in the industry. To overcome these, they need to have a standard proposition (i.e. product and services) that could be applied each time with minimum or near zero customisation. Otherwise, these projects will face significant difficulties to complete on time. OB10 takes a global view of the market unlike Accountis (global wannabe!) and Causeway’s Tradex (UK). With this in mind, they have set-up offices in the USA, UK and Malaysia covering the three time zones. So, their challenge is more of meeting multinationals’ global expectations. I always questioned their strategy with respect to single product. I believe they are now developing additional products with value adding functionality to meet customer requests and perhaps reposition the company. While this is great news for customers, this approach will no doubt create further challenges internally - managing multiple expectations. Will OB10 raise further funding to support growing resource requirements?
2. Transcepta - ah! the new kid in the block. Senior guys seem to know where their market ends, leaving specialists to undertake accounts payable automation. They are going after transaction volumes, which is directly proportional to revenues. If that is the case, their proposition must be simple and standard. At present, just like OB10, they cater exclusively for the invoice. Uses printer driver technology to extract and push the invoice to their portal (they do not favour the term, hub due to historical reasons). This has allowed them to bring customers (A/R side) on board within hours, leaving the harder work to their partners, i.e. A/P side. As a young company, this is a very sensible approach. In addition, they offer payment solutions through ACH, thereby offering an easy solution to settle payments. The challenge will come when customers’ demand more, and they will need to find ways to add new functionality whilst increasing the number of partners for A/P integration. Expansion outside US will present another set of challenges. On this regard, their closer association with Esker no doubt will be very helpful.

As your business continues to grow, you need to take a step back and identify potential business process failures or set-backs. This could be in sales as well as project execution (over sales is a nightmare!). Offering additional functionality without understanding their impact on your business will result in creating additional bottle-necks. A clear step by step approach to global domination ought to help ease these difficulties.

Longer post than I anticipated. Please let me know whether above makes any sense.

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Having said how great Transcepta is with respect to helping the small guy, let’s quickly look at their accounts payable and accounts receivable products and services.

Accounts Payable (A/P) & Accounts Receivable (A/R) Automation

Once again, there are no surprises here with respect to Accounts Payable (A/P) integration. The target is the large company having an ERP system, i.e. your average Oracle (including PeopleSoft and JD Edwards) and SAP user with high transaction volumes and high number of suppliers (and customers).

However, its a different scenario at Accounts Receivable (A/R), where printer driver technology is used to extract data from supplier/vendor applications. This is what I called the secret weapon in my previous article. In the case of Transcepta, the translation from printer spool file to XML takes place at the hub. Whereas in the case of Accountis‘ ebPrinter, this takes place at client end. In the case of ebdex, this was supposed to have taken place at client end. Out of the two solutions, the cleanest is the solution from Transcepta. Different thought processes go into deciding where translation takes place, e.g. translation at client end means less resource utilisation at the hub end, but this also means potentially more things going wrong at client end.

Why not treat a company both as a Supplier/Vendor and Purchaser/Buyer?

This must be the ultimate goal of any e-invoicing and EIPP vendor, i.e. treat your customers both as a supplier/vendor and a purchaser/buyer. In a nutshell, integrate their accounts payable and accounts receivable systems, thereby increasing the transaction volumes and subsequent revenues. Here is a simple 3 step strategy of achieving this overall goal:

1. Bring suppliers on board as web form/interface users - perhaps offer this as a free service. In one respect, you are going after the typical Freshbooks customer.
2. Extract data from suppliers through printer driver technology - this is not as straight forward as one might thinks. You need to know how to read printer spool files and then translate this to XML (or similar) format for interpretation by the hub.
3. Develop a direct interface between the Supplier’s application and the e-invoicing/EIPP hub.

On the other side (i.e. accounts payable end), you have no option but to integrate purchaser’s/buyer’s application with the e-invoicing/EIPP hub on Day 1, as the solution perceived will deliver maximum benefit first for the Buyer/Purchaser. As the Supplier/Vendor moves to stage 3 above, the value will start to increase.

References:

• Transcepta #1 - A breath of fresh air

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Differentiation

Very rarely you find a company that wants to provide a value proposition for the small guy, especially in the e-invoicing and EIPP space. I believe Transcepta is one of these companies, who underst