What will shine in '09?

As 2008 draws to a close we thought we would take the opportunity to gaze into the EGS crystal ball. We can’t tell you where the FTSE will end the year but we can have a better than educated guess at what the hot topics in procurement are going to be for 2009. Two areas excite us about the next 12 months – here they are.

1. Electronic invoice management

We have seen this issue gradually gather pace in 2008 and we think it masks a bigger issue. The bigger issue is that everyone is desperately trying to rein in costs and is suddenly catching on to how much can be saved by process automation. Traditionally not very exciting, but ask the CFOs of many large and medium sized corporations if they are excited by the huge savings they can make. E-invoicing will lead the way. With hybrid solutions combining true e-invoicing and scanning & OCR, implementation, uptake and therefore savings can be very quick.

2. Outsourcing

Outsourcing comes and goes with fashion – but we think that in the current climate, Chief Execs will be trying to turn fixed costs into variable costs as well as getting infrastructure costs off their balance sheets. So outsourcing of support functions such as procurements, IT, Finance will make a big comeback.

What is for sure is that any company that helps companies to reduce cost will have a receptive audience in 2009. We think the winners will be companies that are flexible enough to break their business model to embrace new opportunity. Those companies that own their own technology will be best placed. The other winners will be those sitting on some cash, for one other likely phenomenon of 2009 is that merger and consolidation opportunities will present themselves.

Whatever 2009 brings for you, we wish you all a very Happy New Year and we hope you will continue reading our opinions in 2009.

OCR & invoice scanning - one small step back technologically, one giant leap forward financially

So it’s official - the holy grail of P2P is finally realisable- a true closed loop from requisition to payment managed seamlessly through an automated and paperless process. It’s true - we have customers putting this into practise and making big savings as a result. Whilst there are still challenges, we think that the technology challenge has largely been overcome, judging by the number of transactions we are seeing our customers process.

One area that has captured our attention lately is electronic invoicing and the readiness and capability of suppliers to engage. Several years ago we built a ‘pure’ e-invoicing solution that enables suppliers of all sizes and capabilities to generate and transmit an e- invoice, whether from a PO Flip via our supplier portal or through an automated xml invoice. Once again no technical challenge - the challenge here that has got us thinking is the speed with which our customers can convert their supplier base to one of the ‘pure’ e-invoicing options. The problem here is that the supplier is required to be proactive when it comes to e-invoicing and will need to see a commercial upside if they are to change their processes to create e-invoices. Naturally they are resistant which can slow down uptake and therefore the savings that flow from it.

We went back to the drawing board driven by one thought; our customers, want to get as many invoices into their automated workflow, as quickly as possible. To bridge the gap we have launched an invoice scanning and OCR service. In English, we are turning paper invoices into e-invoices (not into images of invoices – there is a big difference)) which will provide a means of accelerating the volumes of e-invoices captured. Those suppliers who are slow to move to pure e-invoicing can continue to provide paper invoices which we convert to e-invoices meaning suppliers need to do nothing new.

We do not see this as the ultimate solution, but rather, as an interim one. However from the buyers perspective it has the same effect as virtually total e-invoice uptake. Meanwhile the parallel activity of moving suppliers onto ‘pure’ e-invoicing continues. The fact that the EGS OCR solution delivers invoices into a single validation and workflow, along with ‘pure’ e-invoices, provides customers with a means of significantly increasing the ROI. This additional component of the P2P solution will, we believe, bring our customers even closer to the vision of a truly automated and paperless process that unlocks real savings.

To own or not to own your platform

We often debate in the office whether owning our own platform (as we do at EGS) is the right strategy or not. Surely we would be better off outsourcing it all or using third party software so that we could focus on the sales side of things. Backers of the "third party opinion" were silenced by the events of the last week. Never have we been more grateful to be the owners of all of our code and intellectual property.

With a hastily announced and implemented 2.5% reduction in standard rate VAT, businesses are facing a £300 million bill as they have to change pricing and accountancy systems, not once but twice in just over a year. Offers of help (at a price) are not hard to find from the ever-opportunistic consultancy industry. Those businesses that rely on COTS (commercial, off-the-shelf) software are also at the mercy of their overworked suppliers who may, or may not, view a short-term change to VAT on a small island off-the-coast of Europe as important.

Fortunately at EGS we do not use other vendors products to guarantee HMRC compliance of our eProcurement platform. With only one week to respond to Mr Darling’s announcement, the benefits of having purpose built applications supported by a fully staffed in-house software development team became quickly apparent. Sure we had some late nights and a team worked through the weekend - but at least we had the opportunity to do so. Were pleased that the changes were in place for business-as-usual at EGS on Monday morning, 1 December 2009. Unfortunately some of those relying on third-parties face several more weeks of disruption. Luckily we all have plenty of notice for the next VAT change in 13-months’ time.

e-procurement - a tool for the recession

The last major downturn was caused by the Internet – or more accurately the wild overvaluation of businesses spawned by the new Internet economy. With another downturn looming, this time around, the Internet could turn out to be a force for good.

From the late 1990s until now, peoples' primary obsession with the Internet has been to make money. First it was e-commerce, then email broadcast marketing followed by Internet advertising and pay per click advertising. The list goes on.

Recently, smart companies have started looking at ways they can use the Internet to save money rather than make money. An area where this has been most successful is e-procurement. By automating the process for routine purchases of anything from stationery to IT consumables and office furniture, companies can cut out huge layers of cost. Savings are compounded by automating the receipt and processing of supplier invoices.

Here is the hard evidence. Essex County Council, a customer of EGS, will save £500k a year by automating the receipt and approval processing of their invoices. This year they will process over 25,000 invoices without a person or a piece of paper being involved - this is forecast to rise to over 200,000 invoices in the next year. They are one of many organisations which save money through e-procurement.

But here’s the really good bit. Savings can be realized so quickly, that payback of set up costs can be measured in months. Our largest customer saves 7 times more in a year than we charge them. Even allowing for a few months to get up and running this could translate into a payback in less then 6 months. At a time when capital budgets are being slashed, these economics should stand out in the crowd. We expanded on this in a June press release entitled: "EGS customers achieve rapid Return on Investment". The full release can be viewed on our web site.

We have been beating this cost saving drum for some time. What alerts us to the fact that this message is resonating loud and clear is our recent experience. We have hosted 2 events in the last month; a webinar and a physical conference. Both were over subscribed. People are suddenly very receptive to the e-procurement mantra: “Automate process and make huge savings”.

So we are hopeful that a sea change is taking place. Suddenly the Internet – the villain of the piece in the last downturn - could be one of the heroes of this downturn.

Welcome to the EGS Blog

EGS is one of Europe's leading providers of e-procurement and Spend Management solutions. Over 40,000 users across 100 organisations will purchase in excess of £1 Billion of goods and services this year using an EGS solution. This corresponds to more than 1 Million purchase orders.

The EGS Blog Team draws on a variety of experience from procurement specialist who have managed £1 Billion budgets , through e-billing and invoicing experts to hard core technologists whose aim in life is to make it the fastest most efficient and most secure on the planet.

Our blog will tap this talent-pool to discuss the latest trends, ideas and events in our sector. We hope you enjoy it and find it useful. We would be delighted to get your feedback and hear your ideas.