Will Big Buyers and Accounts Payable (AP) Organizations Embrace Free E-Invoicing?

Tradeshift, an upstart electronic invoicing provider that delivers a free electronic invoicing service (and in the future plans to earn revenue off of offering additional services such as discounting/financing on top of its invoicing and supplier network), has won an important piece of business with a NHS shared services organization in the UK. According to the e-invoicing news from across the pond, "The Anglia Support Partnership (ASP), an NHS shared services organisation, is aiming to reduce operating costs through the introduction of an electronic invoicing service...ASP deals with more than 425,000 invoices every year, each of which has to be scanned or entered manually into its workflow system, in order to match invoices with purchase orders. However, it hopes to persuade suppliers to sign up for the Tradeshift service, a web-based business network that provides an electronic invoice service."

What's most curious about the news and competitive win for Tradeshift is that the NHS trust did not see a positive ROI by paying for such a service. A decision maker quoted in the article suggests that they "did a feasibility study, looking at other e-invoicing systems, but the [return on investment] wasn't significant enough for us." Findings such as this should capture the attention of companies like Ariba, Basware, OB10, Perfect, Hubwoo, Transcepta and just about all the other providers of electronic invoicing capabilities and related supplier networks, all of whom have predicated key aspects of their business model on charging either buyers or suppliers for invoice connectivity and related matching. In fact Tradeshift, along with Pagero and just a handful of others, are the exception and not the rule when it comes to providing a free or nominal cost e-invoicing service with the intent of making money off of other means focused on transactions.

For further information on the costs of various networks (including Ariba and others) and the impact of recent supplier fee increases, you can check out our recent analysis on the topic Ariba Network Price Hike: Plan for Increased Supplier Fees in September 2010. It's our view that the basic benefits of electronic invoicing should pay for themselves in enhanced compliance and automation (i.e., AP staff reduction) at the most basic level. Still, we believe that since the benefits disproportionately aid the buying organization (often at the expense of the supplier, based on current revenue schemes), that procurement and AP organizations should offset any cost impact for suppliers -- or absorb the costs directly. Regardless, even if we quibble with the logic behind the NHS decision regarding ROI, the move to a free solution by such a large buying and AP organizations could signal a shift in the e-invoicing market that we should all be aware of.

Jason Busch