In the first column in this series highlighting Basware's latest connectivity offerings, I talked on a high level about how this offering fits in the context of Basware's overall P2P footprint. In today's analysis we'll go deeper, examining how Basware's open connectivity solution works in practice, which will explain why the solution represents the company's fastest growing offering and revenue line item. In short, the solution's flexibility and ability to sit on top of other invoicing and document exchanges/clearinghouses/networks has enabled Basware to position its connectivity solutions as a complement to other investments that both buyers and suppliers in a particular customer procurement and payment ecosystem have already made.
Historically, especially on a global and cross-border basis, it has been very challenging for companies to connect all of their suppliers through a single approach, let alone a single network. Basware’s connectivity solutions aim to change this and, in doing so, provide a more complete solution that increases the overall efficiency of A/P organizations, driving new levels of visibility, operational cost reduction, and working capital visibility and levers. Not to mention driving a greater percentage of invoicing activity to a virtual, e-invoicing environment.
As one example, consider how in less than five years Lloyds has shifted the great majority of their invoicing down an electronic path. While today, they still must handle 233,000 paper invoices per year, they now receive roughly 80% of their activity virtually, or some 1.163 million e-invoices per year. This has resulted in a high A/P efficiency level. Consider that a single FTE can manage 129,000 invoices per year at Lloyds and that 9 A/P resources handle all of the firm's invoicing requirements. And compare this with more typical top performing A/P department with electronic workflow which handle roughly 35,000 invoices per year according to Hackett Group and Basware.
The core centerpiece of Basware’s connectivity services is a flexible hub that provides suppliers with multiple ways of connecting to a buying organization. These include a supplier portal approach aimed at suppliers that send fewer than 10 invoices per month. Basware also offers a scan-and-capture approach -- perhaps the simplest solution for suppliers that do not want to change current processes –- to account for paper invoices. Suppliers can also opt to connect to the service by sending emails (often PDF files) that the service then converts to XML eInvoices and sends to buyers for automatic processing. There’s also the choice of a "virtual printer" approach that allows supplier organizations to send invoices by printing via their desktop (the service redirects the output document to the receiver). And last, as a form of direct connection, Basware offers a full XML integrated service that provides the tightest level of integration.
But perhaps more important -- and what differentiates Basware from other providers -- are not just these direct-connection options, which competitors also have answers to in their own offerings. Basware also offers what it defines as a cloud-based connectivity service that integrates with over 60 different e-invoicing and connectivity providers serving the market in different regions. In other words, if a supplier (or the buying organization) is already working with a provider in a local market where a Basware interoperator partner exists, then they can continue working with this provider with limited or no integration hassle. This means that the buying organization can still leverage Basware’s overall invoice-automation and connectivity capabilities without disrupting suppliers in any way. For example, in Sweden, Basware offers connectivity with a range of operators, including EDB, WM Data and Nordea. In Germany, Basware has agreements with providers that include LogAgency, Itella, and Crossgate. And in the US, it's working with Cortex and Elemica, among others.
What Basware realizes is that the underlying component of any connectivity approach must include significant flexibility in overall interoperability (e.g., from the lowest common paper or email denominator to direct XML integration) as well as account for regional variation, practices, and preferred connectivity providers already serving the market. For example, Basware suggested to me that in the US, scanning is still a predominant form of getting companies off of the paper invoice trail. Such is the case in Germany as well, yet legislation within both the broader EU as well as different countries is likely to accelerate the move to electronic invoicing. Already, the further North you go in Europe, the more likely you are to encounter an invoicing and payment environment that is fully digitized.
Clearly, the market for providing invoice automation capabilities as well as enabling connectivity services to capture 100% of supplier invoices electronically (or at least to convert invoices into a digitized format) is one that is just hitting the base of its growth curve outside of the Nordic markets. If Basware can continue to build strong case references in this area with marquee accounts both within and without the EU in 2010, it stands a very good shot at becoming the standard by which other e-invoicing providers are measured. Stay tuned for the final post in this series, when we examine the types of success that Basware's customers are seeing by using its Connectivity Services and underlying invoice automation capabilities.
- Jason Busch