Europe’s “Facebook” for Government Procurement

Governments across the world have always known that e-procurement holds enormous potential. Yet with both governments and industry maintaining their own individual standards, each e-business platform becomes an individual island.

While computing technologies have advanced by leaps and bounds, e-procurement and e-business still function on old-fashioned Electronic Data Interchange (EDI) that is dominated by IBM mainframes and pre-Internet protocols. Moreover, businesses still depend on exchanging hardcopies of mostly PDFs, which are not interoperable, on say, Microsoft, SAP or Oracle systems.

Most large organizations (like Amazon, Wal-Mart, etc) have their own technological platforms, all creating numerous e-business islands, that do not function across operating systems. According to experts there are more than 5.000 different implementations of EDI, basically rendering it as an almost unregulated technology protocol.

Consequently, even as many government departments and big businesses can afford to support multiple standards, for small- and medium-sized businesses, multiple standards emerge as huge hurdles in terms of costly investments. And that, say experts, more often than not disconnects such organizations from participating in government e-procurement processes.

That’s bad for the government as well; multiple standards also hit competition and do not allow smaller- and medium-sized businesses to access government contracts and orders. 

Small wonder then that the lack of common standards for electronic data exchange is a significant obstacle for companies to participate, and so efforts are under way to formulate a standard.

Pan-European e-Procurement

In the EU for instance, a standard for electronic data exchange for e-business/ e-procurement has been in the making for the past five years.  Called Pan-European Public Procurement Online (PEPPOL) this new standard -- much like the GSM for mobile telephony -- will be a pan-European pilot solution that, with existing national solutions, will facilitate EU-wide interoperable public e-procurement.

The vision of the PEPPOL project is to facilitate any company, particularly smaller companies in the EU, to communicate electronically with any European governmental institution for the entire procurement process.

The final outcome of PEPPOL will be an interoperational environment build upon national systems and infrastructures supporting the full cycle of e-procurement activities.

The European Commission says that overall, governments are the largest buyer in the European Union, but they lag behind major industries in electronic data exchange with suppliers. Government purchases in the European Union account for around 16 percent of GDP, which is equal to 1,500 billion euro.

EU member states took the decision that “by 2010 all public administrations across Europe will have the capability of carrying out 100 percent of their procurement electronically and at least 50 percent of public procurement above the EU public procurement threshold will be carried out electronically.”

But while PEPPOL is still under development, the Danish government has already developed its own solution. It has started offering a countrywide e-business service on a common platform, which is simply an open e-business framework allowing businesses to send standardized electronic invoices directly from their PCs via the Internet in a secure and reliable fashion.

Called  Nemhandel, this is a national service-oriented infrastructure in the country that functions as an Internet-enabled exchange for business-to-government as well as business-to-business e-business.

However, imagine an e-procurement platform that works like Facebook or Orkut -- a service where anyone can register and conduct not only e-business for free, but can even meet virtually to discuss a deal!

That, too, is operational in the garb of Tradeshift. Launched in November 2009  Tradeshift is a Web-based platform that facilitates electronic exchange of invoices between companies of all sizes. Everyone ranging from small companies to large global enterprises can use Tradeshift to send, receive and administer invoices.

Like Nemhandel, Tradeshift is open source and allows any one to create invoices for just about any product or service and send it to clients and customers for payment. 

“Basically you may say the PEPPOL is the EDI standard and Tradeshift is a service that uses the PEPPOL standard to offer one standard platform to conduct e-procurement.” says Christian Lanng, the 31-year old co-founder of this innovative service.

Lanng incidentally was also part of the team that created Nemhandel, as well as one of the early initiators of PEPPOL.

“Tradeshift is unique. It is not just an e-business platform but also a network that has the social commerce aspect built in by allowing the members to interact with each other,” he says.

“You may also consider Tradeshift to be the FaceBook of e-business,” adds Lanng. “It is not as mechanical as last generation e-procurement platforms. What we found is that small businesses prefer to do business in real life that is meeting in person before a deal. We have focused on combining traditional e-procurement methods like invoicing with more untraditional applications like social networking and the ability to connect personally with other vendors and procurers. So we offer far more networking facilities than any e-procurement solution.”

According to Lanng, the other notable feature of Tradeshift is that it also offers other e-business functions like document trading, analytics, collaboration and more.  “This is a virtual platform where everybody -- like the suppliers, sellers, service providers and procurers or consumers -- can come together to trade,” says Lanng.

Tradeshift is disruptive as well. At its heart lies a dynamic currency exchange where invoices pay themselves through auto-payments which are transacted when the exchange rate is best during that time period, saving money over each transaction.

This service, unlike charges levied for credit card processing and other banking systems, comes free.

That makes Tradeshift “incredibly disruptive,” says Mike Butcher, editor of TechCrunch Europe. “[It] disrupts how banks and credit card companies process payments between any kinds of business, and use[s] the Internet to do it.”

Lanng says Tradeshift which now connects Denmark, UK, Ireland, Germany, Switzerland, and Austria, already has about a million users on board. The site is free for small- and medium-sized businesses and charges a flat rate for large enterprises and governments.

“Tradeshift’s ambitions though are to facilitate e-procurement on a global scale,” says Lanng.  While the site is reportedly talking to the Brazilian and the Sri Lankan government, it aims to introduce this service to the U.S. by 2011 as well, says Lanng.

Nevertheless, given the might of Microsoft, IBM, Oracle, and the likes, Tradeshift may still have long way to go to even make a minor impact on the dominating influence of legacy systems on global e-business.

Yet as an e-procurement solution, the concept of a common language platform -- which forms the base for NemHandel, PEPPOL, and also Tradeshift -- may be its future. 

For, as says Cathrine Lippert, special advisor at Denmark’s National IT & Telecom Agency, that now runs Nemhandel, "a common language platform for e-business not only allows everybody to participate in a government’s procurement process but it also encourages competition. Besides transactions are much faster, happen with almost no errors, and are easier to handle."