EIPP (e-invoicing) and StartUp World

Apologies for the lack of recent coverage on eipp/e-invoicing. Thought leadership cannot be provided without undertaking adequate research. Wouldn’t it be great if document/information search time can be reduced. This is one of the reasons why I founded edocr with Rhys, Mike and Chris. So please upload your press releases, white papers, case studies, product information, etc on EIPP/e-invoicing to edocr today. 

Let’s have a quick look at what some of the leading e-invoicing/EIPP providers have been up to recently, starting with OB10 and Accountis:

OB10

In April, OB10 reported that their clients have saved 1,123 trees in 2007, 223 trees more than in 2006. e-invoicing is clearly an environmentally friendly technology. OB10 has arrived its green totals by calculating number of sheets of paper saved via e-invoicing, and then using standard industry figures to arrive at a number of trees saved. OB10 also reports that e-invoicing has also saved 93 barrels of oil, 192 MWs of energy, 2,800 pounds of air pollutants and diversion of 156 cubic yards of paper from eventual landfill disposal. Other figures released by OB10 states that 10 percent of the trees cut globally attribute to paper invoices and production of paper invoices takes as much energy consumption as powering 20 million homes. Plus an year’s worth of invoices take up as much landfill space as 10 football fields. Startling! So what are we doing about it?

Carbon footprint is clearly a topic that is on everyone’s mind from corporate to consumer. e-invoicing clearly is a technology that could help reduce corporate carbon footprint. Whilst what OB10 reported should be congratulated, I just wonder whether they considered the followings in their calculations:

1. The number of buyers (accounts payable) who still demand a paper invoice in addition to e-invoicing.
2. The cost of energy used for operating computer systems both at client ends as well as by OB10 and others.

Whilst you cannot do much about item (2) other than to switch to low energy servers such as those supplied by Sun Microsystems and environmentally friendly data centres, you certainly can control item (1). In this respect, all of us should be playing our part to not print that invoice.

Jamie, I know you did not want to be the first mover with edocr, but please rethink of uploading your press releases, etc, so that I and others can provide additional coverage for your news! In addition, edocr is environmentally friendly, i.e:

1. No need to transfer large files and duplicate storage.
2. Read as many times as you like without printing.

Accountis

As you know very well, unlike OB10, Accountis is no longer an independent company. Accountis was acquired by FundTech, Inc early this year.

Ifor Williams, Sales Director at Accountis, has recently published a great article on EIPP titled "Extending Payments to the Full Cycle”, which can be accessed by clicking the thumbnail. It looks at the opportunity e-invoicing holds for banks and how they can take advantage of it. By combining billing services, specifically EIPP, with their existing transaction services, banks can deliver a unique and valuable end-to-end commercial service. The article was originally published on GTNews.

My understanding from Rhys Jones, Founder of Accountis is that Accountis will remain very much its own entity. Being part of FundTech, it allows Accountis to leverage much larger network of organisations and connectivity for rapid growth. However, we are yet to hear publicly about any new major wins. DHL continues to remain their key European client.

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OB10 is no stranger to making classic mistakes with it’s web strategy. How do you manage expectations of local communities whilst pursuing a global strategy? Perhaps the best example is to learn from HSBC - the world’s local bank. At the heart of HSBC web strategy is the corporate site, followed by country specific sites. In the case of OB10, no provision has been made for a corporate website. Here is the home page of UK website, where the company is head quartered.

And here is the US website. Both attempts to retain a similar look and feel, but fail miserably on certain aspects.

Let’s look at the key differences of these two web pages (just the home pages without taking a detail review):

• Menu bar: UK has a symbol for “Home” where as it is spelt out on US home page. US in upper case, UK in lower case other than first letter. “Partners” position swapped. “About” and “About Us”. No “Customers” on US site. “Government” vs. “Public Sector” is a fair change. “Download” missing from US. “Learn More” and “Support” not on UK site. Almost gives the impression that “much more hand-holding” is required in the USA than in the UK.
• Side bar: different information. Like the “meet our customer” section on US site. Prefer “Join Now” message better than “Register”. News and events combined on US and these are separated on the UK.
• Main image: US is much better than the UK.
• “Deloitte Technology Fast50″ is missing from the US site.

Why is there a necessity for country specific websites?

• Terminology, e.g. Government vs. Public Sector
• Legislations and regulations, e.g. VAT
• Language
• Key messages
• Country specific product and service offerings (and markets where applicable).

But why leave out such key messages as “Deloitte”, and news items from the UK site? This mistake could have easily be avoided by providing a corporate website that captured all news and events, and other common marketing messages.

Download page could have been improved significantly by embedding document thumbnails. Of course edocr will be glad to provide this service free of charge, if Jamie wishes to collaborate - be an innovator not a laggard Jamie! 

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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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Up to now, the e-invoicing market has been dominated by OB10 due to their global expansion strategy, but this is soon to be threatened by a new M&A deal between two players I have come to respect. I cannot go into detail at present without breaching confidentiality agreement, but I consider this as a monumental achievement for the European e-invoicing industry. Stay tuned for more information.

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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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I started preparing a detailed analyst report on OB10 in September 07. Unfortunately, very few manhours were spent with the end result being an incomplete report. Perhaps, the best way to achieve the end goal is to break it down to bite sizes, just like any other project. There is a high probability of completing the financial analysis first, given that most hours were spent on analysing OB10’s finances. Let’s hope I can get this out before end of this month. Time to place your bets, gentlemen!

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Without a doubt, Bruno is the master of e-invoicing in Europe if not the world. His e-invoicing Quarterly is a much anticipated update of the e-invoicing market. Whilst I have hoped to do something similar for the UK market, I must admit, I am less organised than Bruno. However, I plan to put my e-mail marketing solution from iContact into full swing this year. If you are interested in e-invoicing and have not subscribed to Bruno’s e-invoicing Quarterly, I suggest you do that right away. Here is a review of what Bruno has written.

1. European Market Outlook 2008

The e-invoicing market continues to remain fragmented and small but with potential to be a significant market. Unfortunately, not much has changed since the early 2000’s except for the increasing number of vendors entering the market place, as reported by Bruno. This is obviously a positive side of a maturing market and has led to minor improvements in the overall market share. However, the optimistic predictions of analysts continued to be missed, year after year. We are still addressing the fundamental problem of replacing paper based solutions with electronic systems. We also seems to have forgotten that our key competitor is none other than paper.

Whilst much has been spoken of supply chain finance and the second p (payment) of EIPP, none of these solutions are going to achieve traction until the fundamental problems are sorted out including the significant barriers faced in implementations. This is not to say that the best-in-class companies, as regularly reported by Aberdeen Group, are not enjoying the benefits of e-invoicing. All I am highlighting is that current deployments are a drop in the ocean, when compared to the potential market size, and significant drive from vendors, consultants and governments are needed if this market segment is to be taken seriously. Lack of profits within the service provider organisations continues to dampen the spirit of the enthusiasm.

Niche players such as OB10 has worked tirelessly to promote e-invoicing globally whilst companies such as Ariba has entered the market as part of its product diversification strategy. The scanning and OCR providers, EDI houses and accounts payable specialists all admit that EIPP is the way forward. Many of these companies I have spoken to remain convinced that EIPP is yet to arrive. I do not think they are been ignorant. If a company does not change to satisfy changing market conditions, the survival of the company will be short lived. Their stand is simply based on customer requirements, i.e. none of their customers are asking for EIPP or e-invoicing. So something is missing from the market place. I put this simply down to lack of awareness which can only be addressed by EDUCATION EDUCATION EDUCATION.

Lately, many financial organisations have taken a vested interest in purchase-to-payment or e-invoicing document exchange. Most of the global leading banks are either offering services through partners or currently in discussion with partners to offer these services. At the same time, there are commercial lending organisations such as invoice discounters and factors taking an interest in the segment. This has also created an environment where traditional vendors for the financial sector is taking a closer look at EIPP, e.g. FundTech. Forrester has claimed this is the year for consolidation. No doubt there will be one or two major transactions, but it is more likely 2009 will be the year for consolidation.

What all of above means is that the e-invoicing or EIPP market should start to make progress this year. More work is needed to encourage service providers to collaborate with each other. I would like to see much more activity at Hub Alliance and other initiatives this year. The problem with Hub Alliance is that there is no budget to drive the “alliance” forward. In addition, the members’ aspirations are limited by their own personal needs, rather than offering a “alliance” for everyone interested in e-invoicing. Whilst I remain pessimistic about the market segment, I am hoping that I will be proven wrong this year.

2. European ExPP Summit

Many thanks to Bruno for organising an exceptional event. Also thanks for the X’mas present, which shows what a gentleman Bruno is! I look forward to participating in this years event. However, my personal feelings for the last year’s event was that it missed a trick. As I continue to say EDUCATION EDUCATION EDUCATION, I felt that the last year’s event was very much organised for the vendor community and not for the potential users. I cannot remember meeting a single person who was looking to purchase a solution. This is also down to the marketing of the event. As an admirer of Bruno, My blog is freely available for any promotion activities of ExPP. This year I can also offer edocr free of charge. A real possibility exists where all ExPP documentation could be hosted by edocr including special interest groups for discussion of various topics prior to and after the event, so that this year’s event become a collaborative event instead of a traditional event. Anyone else got any more bright ideas?

3. Accelya

Thanks for the story Bruno. I must admit, ADP Clearing was not a company I tracked before. As I understood from the story, Chequers Capital has acquired ADP Clearing and has renamed the company as Accelya.  Accelya specialises in invoices, travel reservations, airline tickets, payment instructions and credit card collections, and consider themselves as a leading Business Process Outsourcing (BPO) service. This classification put them immediately in competition with large BPO providers and less in competition with niche players such as OB10. With annual revenues of $70 million and over 8 million e-invoicing transactions, further review is necessary to understand their business model and product offering. Level of e-invoicing transactions seems to be low compared to the revenues, suggesting deployment of a less optimum model than the niche players. The web site has a modern feel but significantly lack in information to undertake a quick review. Looks like they have not found out about edocr yet.

4. Partnership between Basware and Crossgate

Ah! This is a story I knew about and planned to cover, but never got the chance. Crossgate is a user of edocr, but Basware has not yet taken the advantage of edocr. Would you believe, I am yet to do an e-mail marketing campaign on edocr to e-invoicing (EIPP) service providers or to anyone else for that matter. All documents related to e-invoicing on edocr can be found from here. I am not going to cover the story now, other than to say that the inter-operator connection allows over 74,000 companies to be reached.

What is uncertain from this press release is that whether this number takes into consideration of companies connected to Burns e-Commerce, Causeway’s Tradex, Asite, Certipost and Laison, who are all members of the hub alliance. Whilst I was providing advisory services to Causeway Technologies in 2007, one of the channel partners I introduced was looking to achieve the same result. Under current arrangements, this company do not qualify to be a Hub Alliance member, as they do not operate a hub.

But if discussions are successful and if they became a partner of Causeway’s Tradex, then they could indirectly exchange purchase-to-payment documents electronically with companies that are connected with any of the Hub Alliance members.

The importance of this realisation is that Hub Alliance should be at the centre of e-invoicing debate and not at the side. You do not need to be a member of the alliance, but simply need to be a partner of one of the members to benefit from the upside. Whilst this sounds all too easy, significant efforts are required to make this successful. I strongly believe its time that Hub Alliance members appoint an independent person to promote and administer the interests of all those concerned. Let’s hope 2008 is the year this happens.

5. Swisscom IT Services with international e-invoicing campaign

Once again, not a story I tracked. Interesting to note is that my friends at TrustWeaver is working with Swisscom to make this transition a success. Trustweaver has significant expertise in the legal requirements of different countries so that their expertise can be leveraged in order to ensure compliance during the launch of services a

cross 20 European companies in the first stage followed by another 20 countries in Europe and the world. Certainly, an ambitious project, and the market needs more of these initiatives to win market share from paper.

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I read recently that it take the average British citizen 40 days to get a Visa to the United States. 40 days! England, our time honored ally pretty much since the end of the War of 1812, a country that speaks the same language, has heavier-handed privacy laws (not to mention the practical elimination of rabies), is required, as a whole, to waste over a month getting a Visa to the United States of America. Wow.

Imagine how long it must take most people? Now, I know Manoj is British so maybe I shouldn’t be using the Royal We here - The country that I hail from seems to be pushing the envelope on Visa restrictions and roadblocks to international business in general, and this likely has a whole boatload of obvious consequences.

Not the least of which is the following scenario: “Oh geez, our International Cross-Functional Team needs to do a face to face to fix a minor problem that will be a major problem in three and a half weeks if it doesn’t get sorted out.” “Oh, ok, cool. Where is that Team headquartered?” “The always wonderful Minneapolis, Minnesota.” “Well it’s going to take the British Treasurer 40 days to get a Visa, the Hungarian Controller 60 days to get a visa, and the personnel at the new branch in Dubai three months.” “Oh. Well I guess this is about to be a major problem.”

Ease of mobility is the first rule of business growth, and in a globalized world, it is absolutely shameful that it takes the rest of the world more than a month to be granted access to the United States. Oh, I’m sorry, I am aware that Canada has sort of special rights, but come on…

This whole problem became evident to me the last time I entered the European Union in October having come from Jordan by way of Lebanon. By way of Lebanon! And they didn’t bat an eye. In my own industry, there’s a lot of talk about the possibility of OB10 entering the American EIPP market with a vengance. Well, good luck to you guys, because I hope you like travel-related paperwork. Maybe you can get your system to stop being so good at VAT calculations and start being real good at boiling tea while you’re sitting around waiting.

At a recent conference in Vegas (which will go unnamed) a presenter (who shall also go unnamed) who was a Controller for an international AP functional group, admitted she couldn’t find Berlin on a map, and had a hard time thinking of where Australia should be. She wasn’t kidding. The old joke about Americans goes, “A tri-lingualist speaks three languages, a bi-lingualist speaks two, and a mono-linguist is an American.” Har har. I’ll admit, my poor Arabic wouldn’t get me much farther than ordering a caua arabia ma sucra, and my Spanish failed to get me across town in a Barcelona taxi cab (in my defense the driver was insulted I didn’t speak Catalan), but at least I make an effort, and I think we need to all admit that America, the supposed center for commerce and home of the incredible shrinking dollar, needs to wake up and smell the coffee.

We live in a globalized world, but that’s not really so new. Copies of Maimonodes’ books were found in Pakistan dating to only 20 years after his death. Maimonodes wrote in Spain. That’s pretty impressive. Likewise, I could have rented a car in Spain and driven all the way to Poland, and though the VAT rules would change, at the very least I wouldn’t have been confronted by an angry Italian police officer with a machine gun demanding to see papers (unless I ran somebody over). Now that’s impressive.

The hypocracy was fully obvious to anyone paying attention during the Dubai Ports debacle. Stephen Zunes, in his article in Foreign Policy in Focus, wrote

The hyperbole of some Democrats has bordered on racism, with New Jersey Senator Frank Lautenberg claiming that the transfer of title of operations at one of Newark’s four terminals constitutes an Arab “occupation,” adding that, “We wouldn’t transfer the title to the Devil; we’re not going to transfer it to Dubai.” In response to criticism of his comparison of the Dubai government with Satan, Lautenberg defended his remarks by noting the failure of the United Arab Emirates (UAE) to support U.S. policy toward Israel and Iran.

That’s how we will decide our financial management in America? (and that’s really all it was - The port deal was nothing more than a dollars and cents issue until some morons turned it into the political debacle of the century and the supposed end of Anglo-American civilization) We’ll slam the UAE (which by the way is a serious American ally) and the ten quadrillion dollars we hand them in oil and gas every year because of a disagreement over Israel and Iran when that has quite literally nothing to do with the UAE? And more to the point, we’ve decided to start referring to our good friends in the Gulf that are so integral to our ability to keep our Humvees on the road as the Devil? Now that’s good business!

The international business community, especially those of us who work in the ever-more-complicated global financial sector, needs to start making a serious effort to highlight the challenges it faces when doing business in and with America, and America and its citizens need to start smelling the caua. We need to speak more languages, do more to make internationalists welcome in our country, and we need cut the crap with this “everyone’s a bomb-wielding suspect” routine.

Comments? Leave one then!

Quick note - After the fact, I Found this article at the International Herald Tribune discussing similar issues. 

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I spent a little while today discussing web-based auto-enrollment payments in the credit and collections industry, as well as what we call the “Payment Tsar” and the “Payment Quotient.” While I was doing so, it occured to me the extent to which electronic financial tools for the individual consumer are changing the nature of expectations and deliverables in corporate financial process optimization.

For example, EIPP has been around, but hasn’t entirely taken off. The technology has obvious advantages, but even major players like Ariba and OB10 don’t exactly have the market penetration that would reflect the service they offer.

But what I’ve noticed is that as customer banking tools are becomming more sophisticated, the expectations for what is possible in the corporate world are driving the discussion in a new and exciting way.

For example, it was the innovators who drove the EIPP technology into the forefront, because they saw the savings and process advantages. However, as more and more people saw they could achieve an enormous amount of visibility into their own finances with on-line banking and auto-bill-pay, now C-Level types are scratching their heads wondering why they can’t get the same Spend Analysis across their entire company.

This issue of innovation-drive is really a key when it comes to solutions available for corporate financial automation. The market, by and large, has not yet demanded the sort of solutions that “put it all together” until fairly recently, which is why Manoj continues to be an EIPP Evangelizer and not yet an EIPP I-Told-You-So-er.

At the same time, I don’t think that day is too far off now. With the acquisitions of Xign and Harbor, and as well the startling growth of OB10, Transcepta and Ariba, it is clear that many in the industry are beginning to believe EIPP and other next-generation tools are the next big step in business process improvement. It is quite possible we’re seeing a serious movement of next-generation automation technologies migrating from “early adopter” status to wide-spread implementation.

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Here is a collection of two recent documents published on to edocr on EIPP and related subjects:

Causeway Technologies: A Case Study describing how a plant hire business, GAP, successfully adopted electronic invoicing solution from Causeway Technologies, and achieved both a reduction in operating costs and an increase in sales.

Paystream Advisors A webinar from Paystream Advisors on reasons why automation pays off, where does Imaging and workflow fit, hot trends in Procure-to-Pay(P2P) automation, learn from the innovators, and getting results.

 edocr also hosts a full collection of public-facing documents from Accountis, in addition to covering Nacha, DDC HRO, Ariba, United Data to name a few.

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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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According to VentureCast, a production of Library House, one of the most accessed companies recently is none other than OB10. The company profile from VenturePedia (another production of Library House) can be downloaded for �50 from here. As you know company’s current financial backers include Cargill Ventures, Fleming Family & Partners and Lynx Capital Ventures.

One of the key reasons for increased interest by predators is the recent announcements by OB10. Among these are the press releases about teaming up with GXS and Abbey/Santander. At least, I met one predator (I know he will dislike the use of this term - and he is really a nice guy) who is talking to OB10 and others in this space.

As far as I know, the last round of funding was completed in Q4 06 (press release on 24/10/2006). The additional capital raised at that time was $13.6 (�7.3) million from FF&P Private Equity, the private equity division of Fleming Family & Partners, which was one of OB10’s major existing investors and became the Company’s largest individual shareholder after this round of investment. The funding was mainly for geographical expansion and ongoing development of range of products and services. At the time Jamie Gunn, CEO of OB10 stated:

 ”The fact that a group as illustrious as FF&P should choose to underpin our growth in such a substantial way is a great compliment to OB10 as a company. With the support of our investors, we have delivered exactly what we set out to do over the last 18 months. That includes the continued expansion of our sales force and channel in the face of sustained market demand, and the consistent performance of our sales teams in all territories.”

So 10 months after the announcement, have they delivered? On profitability, perhaps not. On revenues, improving. On sales force expansion, yes - understood to employ over 60 sales/support personal, which is seen as a key differentiator by number of OB10’s partners. Most of them being native language speakers, this diverse sales/support personal gives the ability to deploy OB10 network across multiple supplier bases simultaneously for large corporate clients. In fact, OB10 now gives guarantees for meeting supplier enrollment targets. I am not aware of anyone else who does the same. This has been a key reason for winning some of the most recent large contracts.

In the same press release, David Donnelly, CEO of FF&P Private Equity stated:

“e-Invoicing certainly offers an attractive business proposition, since it enables companies to cut the cost of handling invoices, while also improving their on-time payments and providing much greater control over cash flow. After seeing the OB10 network continue to grow in both membership and transaction volume following our earlier rounds of investment, we feel confident that additional funding at this stage will support even greater growth”.

OB10 Chairman David Newlands, who invested substantially again at the time stated:

“Without a doubt, this latest investment is a direct result of OB10’s recent successes and progress since its last round of funding. The confidence that existing investors have in the company will not only enable OB10 to develop its business even further, but also negates the need for OB10 to tap into external markets, as the company’s investor base boasts an incredible strength and breadth of its own.”

OB10 is no doubt one of the most interesting EIPP service providers based in the UK. They have achieved significant competitive advantage due to high investment and some of the well respected financial backers in the industry. Their continuing trust on the company at a time of continuing losses is vital for the survival and continual growth of OB10. OB10 is gambling on the fact that through sheer global presence and targeting larger buyers with improving supplier roll out times, they can win at the end and be profitable. The signs are positive. Though it is hard to see how long OB10 will remain independent, given the recent acquisitions of Harbor Payments and Xign by financial institutions. Holding on for the highest possible valuation at this point seem to be the best option.

References:

• OB10 #7 - OB10 teams up with GXS
• OB10 # 6 - Abbey UK Partners with OB10 and becomes a customer at the same time!
• OB10 #5 - Teams up with KeyMark
• OB10 - steaming ahead with e-invoicing
• capturing the essence of e-invoicing by OB10
• Jamie Gunn on Sky Radio
• East Riding of Yorkshire Council selects OB10

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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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Yesterday, I had the pleasure to speak to Marcus Hughes of Abbey UK Corporate Banking, and learn bit more about the solution they have brought to market jointly with OB10. Abbey calls this reverse factoring. Let’s review the business process:

1. Supplier sends the invoice to buyer through OB10 e-invoicing platform. I assume everyone knows how this works, so no point in repeating it here other than to say, like every vendor out there, OB10 also claims that they can take data out from any back-office system, translate it and present it in the desired format to the recipient’s back-office system. The general rule of thumb here is that as a vendor, if you have not supported a particular format in the past, the hub/network operator (in this case OB10) will build a connector to read/write data accordingly. Sad news is that no one makes this point publicly clear (including ebdex). Readers should be aware that there are cost and time implications associated with interface development work. It is not always plain sailing unless your back-office system is a popular product such as Sage Line 100, SAP, Oracle, etc (even that’s not straight forward sometimes!).
2. Buyer process the invoice and if there are no anomalies (or if there were, after resolvement), forwards the invoice confirmation to Abbey for payment.
3. Accordingly, Abbey transfers the invoice value less commission to Supplier’s bank and forwards the remittance advice to OB10.
4. OB10 forwards the remittance advice to Supplier.
5. Purchaser pays invoice value to Abbey as per agreed payment schedule

(click image to enlarge)

I like to question why is that the “invoice confirmation” has not been routed from Buyer to Abbey through OB10? The above configuration requires an connector between Buyer’s back-office system and Abbey’s front end. Or the Buyer to upload invoice confirmation manually to Abbey. Maybe there is a valid reason that I could not think of why it has been designed this way.

For the business process to take place:

1. Supplier must have an account with OB10 and pay subscription and transaction fees.
2. Buyer must have an account with OB10 and pay subscription and transaction fees.
3. Supplier must have an agreement with Abbey for charges/commissions
4. Buyer must have an agreement with Abbey for accepting invoice confirmations and release of funds prior to payment by Buyer.

Now here is a perfect illustration of a time line, which shows:

1. Payments to supplier within 6 working days of invoice receipt by Buyer. Obviously, this is the ultimate scenario once everything is running smoothly (at supplier end, buyer end and Abbey end). OK! in reality, getting paid within 6 days might be tricky, but this product can certainly make sure it happens within, say one calendar month. What you cannot automate is those actions still undertaken by humans - the exceptions management, handling unexpected volumes, people off work, etc.
2. However if the Buyer behaviour is to change in such a manner that approval is split into parts. Pre-approval being “yes it looks like an invoice from one of our approved suppliers - I am happy to forward the invoice confirmation to Abbey and then pick up any anomalies later”. This behaviour can ensure definite payment on Day 6. But this can increase the query/dispute resolutions and financial reconcilliations.
3. Buyer actually pays on day 55, 10 days after his norm. Who finances for this period? Looks like it is the supplier.

(click image to enlarge)

Few characteristics of above product:

1. Aimed at large UK buyers
2. Supplier needs to fit into “key supplier” category for above to function - the 20% of suppliers, who happen to be large and regular.
3. This may not work well with 80% of the supply chain due to their infrequent invoicing. Setting up above agreements may be unjustified or too complex if supplier is invoicing few times a year.

Simple solutions works! This looks like a simple solution irrespective of some of the potential drawbacks I highlighted. This solution is clearly provided for the buyer, but bringing equal benefits to the supplier. There are number of ways to improve one’s working capital arrangements. Abbey can easily reverse this “reverse factoring” to “invoice discounting” or “factoring” services without too much of a hassle. But it will certainly complicate the product’s simple approach, but on the other hand, can bring even greater supplier benefits including to those 80%. Now that might be a first!

I am excited about this product. Whilst Burns e-Commerce seems to cater for this market, to date I have not seen any case studies nor real sales and marketing campaigns. So, perhaps this is the first in the UK market! We want more of these solutions.

References:

• OB10 # 6 - Abbey UK Partners with OB10 and becomes a customer at the same time!

Update 1

I had number of communications with Marcus Hughes, and now have a better appreciation for the product and service offered. Few clarifications, according to Marcus:

1. The deduction is a small discount (i.e. interest) charge from the payment to the supplier, which reflects the credit quality of the buyer, who is Abbey’s principal client.
2. This opportunity will attract more than 20% of suppliers, since many of the smaller suppliers will be willing to key invoices onto the web portal or use a PO flip module in order to get the faster cash flow at a lower cost of finance than they themselves can achieve direct from their existing bankers or factors.

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