In recent discussions with European EDI providers and clients (these took place on LinkedIn here , and in German language on Xing here as well as Face to Face and by phone), I asked the question what will be the impact on the EDI marketplace of the upcoming introduction of new eProcurement standards in Europe. Please feel free to join in the conversations.
Why should anyone care about new EDI standards in Europe?
My view of the 2014 EDI marketplace in Europe is kind of similar to the time around the mid 1990s years ago when both analogue and GSM digital cellular phone networks co-existed and competed against each other for customers. Those early customer adopters of cell phones suddenly found themselves on out-dated analogue networks, with more limited range, and compatibility than the newer GSM standard which was much more widely compatible, but not yet widely available. If provider competition and consumer demand in the marketplace had not energised the new standard, the old analogue providers had little incentive to upgrade, as it meant big infrastructure costs for them, and costs for their customers to change handsets.
It would have suited analogue network providers better if they could continue to convince their customers to remain on the older technology, which was still bringing in great revenue, and the infrastructure costs were long since written down. Individual customers or groups of customers may have even considered that the old technology was meeting their needs and resisted change believing that any possible benefits of the new standard were undermined by the discomfort of having to change over to it.
Since 2005, there has been a European Union initiative underway to simplify and standardise public sector eProcurement, and the current status in March 2014, is that this will become fully mandatory for public sector procurement across all of Europe between 2016 and 2018.
While there are still some details not yet finalised , what is already clear is that the new standard will be based upon and fully compatible with the current PEPPOL (www.PEPPOL.eu) (Pan‐European Public Procurement Online) EDI Interoperability standard which has been widely piloted within the project across Europe over the past several years, and which itself has already been already made mandatory in several European countries. http://europa.eu/rapid/press-release_MEMO-14-179_en.htm?locale=en
Isn’t PEPPOL only for Public Sector?
It is important to bear in mind that PEPPOL is not only a public sector topic of interest, as can be seen from the example of Norway, where it's been mandatory to use PEPPOL for trade with central government entities since July 2011, and has seen approx. 90% of the trade to date being done by private sector companies. In fact, out of the first million transactions exchanged over the PEPPOL network, nearly 50% were Business-to-Government, and so slightly more than 50% was Business-to-Business. http://www.peppol.eu/news/electronic-invoicing-in-norway-a-story-of-success
How has this worked until now?
Traditionally EDI has commonly been driven by strategic initiatives within large companies looking to generate cost savings by streamlining their supply chain and invoicing.
Trading partners of these large companies are often dependent on them as either customers or suppliers and are effectively forced to sign up for whichever eCommerce or trading solution chosen by the bigger partner.
In a vacuum this might not be so bad, if the smaller companies were not also likely doing business with other larger partners, who will likely have chosen other, and most probably mutually non-compatible, eCommerce providers or tools for their needs.
So a small business could easily end up tied into a whole mire of restrictive and incompatible eCommerce relationships, and have to pay to get set up on each of them, as well as pay again to maintain the integrity of the setup, say if there is a change needed in the ERP system of a trading partner which then requires their interface to be reprogrammed to maintain the connection.
A small company may find incidental benefits that some of their trading partners are also reachable on some or other of these tools / platforms but they will not have the financial leverage of a big enterprise to compel their trading partners to all unify on one or other platform, so they have nothing to guard against exponentially growing complexity.
The eCommerce partner / platform chosen by the big company will not be complaining, since they are probably being handed a list of the big company's suppliers and clients who are being told "get on board with this trading solution, or risk stopping doing business with us"
So actually, the last thing a small company in such a context wants to hear about is another trading partner who is considering transitioning to electronic trading, as each additional trading partner added increases the cost and complexity, potentially exponentially.
What’s the alternative?
Wouldn't it be great if these smaller companies could be unchained from these disparate, restrictive and incompatible relationships, and be able to expand their electronic trade beyond their key partners without disadvantage?
What if there were a way where they could make themselves "available" for electronic trade, based upon a widely used standard, so they could trade with any standards-compliant business or public entity, without any further cost.
Furthermore, they should then be able to seek to expand their electronic trade with compatible partners, as this would deliver actual Return-on-Investment on the investment made to become compliant with the standard. Every additional electronic trading partner accessed via the standard would lower the Total Cost of Ownership, and deliver to them economies of scale and per transaction savings reserved till now only for the big companies who could "force" their supply chain into some kind of de facto standardisation.
Many EDI providers promise EDI-driven savings of €30-€60 per invoice compared to paper-based methods, but such savings are unlikely to be within the reach of any company that cannot shift most of their trade onto an electronic basis. The need for manual processing of large numbers of small clients and associated
As clients begin to now demand access to open and interoperable EDI standards such as PEPPOL from their EDI providers, these savings can finally begin to materialise.
Here is how it can work: http://bit.ly/PEPPOL_early_adopt_use_case
You can chat with me via instant message (active when when I'm at work) at: https://ibm.biz/ChatGer
Visit my IBM Homepage: https://ibm.biz/GerClancy
See also my LinkedIn PEPPOL Blog: The PEPPOL Tipping Point #NotJustPublic