e-invoicing/EIPP hubs #1 – Dangers of Customisation

All of us are in business (with respect to B2B) to provide a product and/or service to satisfy a business need and in most cases to relieve a pain suffered by a business customer. In doing so, we all have two broader options that could be followed, these being:

1. Provide a solution combining product and/or services to meet the customer need near to 100%.
2. Offer a standard product and/or services with minimum or near zero customisation.

The above two approaches attract many different challenges for the supplying organisation.

Fully Customised Offering:

1. Your ability to standardise your offering becomes a near impossibility.
2. You would need to maintain a broader skill base attracting a higher wage cost.
3. Maintaining up to date technology and knowledge becomes a costly exercise.
4. Suddenly the overheads start to go up.
5. Your offering becomes expensive for the customer.
6. Your offering becomes affordable by only the largest customers.

Standard Offering:

1. Convincing customers to change their business processes to meet you standard offering is prone with challenges.
2. Your standard offering must work in most circumstances. Simplification becomes the key to success.
3. Overheads can be kept low.
4. Therefore, it becomes affordable by large number of customers.
5. Becomes an affordable solution for smaller companies as entry price can be kept low.
6. Possibility of the competition getting an upper hand overtime diminishing any current market share becomes higher.

I acknowledge above is not an exhaustive list, but I hope you get my point. Now bring the e-invoicing/EIPP hubs into this environment. Let’s look at those that falls into the customisable and standardise offerings (two examples for each to keep this article short):

Customised hubs

1. Accountis – I picked them not because of their customisable functionality, but because of their offering of dedicated hub for each large purchaser. This approach is certainly not one preferred by me, but if it generates revenues and profits for Accountis, then who am I to object. The problem with this approach is that it involves hardware installation (ok, Accountis may offer a partition within an existing server bank and/or may house it in the same rack in the data centre) as well as multiple entry points for companies that wants to trade with number of Accountis’s customers. I know they have a solution to reduce this nightmare. But I simply think that they have made their life difficult by taking this approach – perhaps driven by the first customer. This has also influenced their strategy to an extent that this has become their de facto offering, i.e. they would not dream of offering a single hub for multiple customers. So it has become one-to-many offering with possibility of many customisation requests.
2. Causeway’s Tradex – Over the last few months, the platform has evolved to be one with a rich list of connectivity options, incorporating paper to data as well as data to paper options. Yes, you heard me right! In addition, Tradex Active will give it that extra edge in convincing SME/SMBs to join. Being a founder of the Hub Alliance, it can exchange documents with businesses connected to 4 other hubs, 4 Europeans (2 British) and 1 American. It already exchange documents through the two British hubs. I have also been instrumental in collaborating with another competitor to explore the possibility of offering even more ambitious SME/SMB offering. The outcome is a single hub with many connectivity options as well as increasing number of value adding functions, e.g. receiver side business rules. This is great for the customers, as it provides a large number of priced options, to meet ever increasing customer needs. However, this approach makes the life difficult in terms of maintenance and support as well as sales and project execution. For example, for one particular option, I believe there is only one customer. I am not commenting here on profitability of each option, but the difficulty in managing them going forward whilst spreading the scarce resources too thinly. Without adding further human resources will continue to challenge them going forward.

Standard hubs

1. OB10 – Runs a single hub similar to Causeway’s Tradex. Up to now, they have catered for invoices only. Target has always been the larger customer that could generate high transaction volumes. As part of their bid strategy, they continue to give guarantees for trading partner roll out, e.g. bringing x% of transactions electronically within y number of months. Difficulty of giving such guarantees is that if you keep missing these, OB10 will end up paying significant penalties as well as loosing credibility in the industry. To overcome these, they need to have a standard proposition (i.e. product and services) that could be applied each time with minimum or near zero customisation. Otherwise, these projects will face significant difficulties to complete on time. OB10 takes a global view of the market unlike Accountis (global wannabe!) and Causeway’s Tradex (UK). With this in mind, they have set-up offices in the USA, UK and Malaysia covering the three time zones. So, their challenge is more of meeting multinationals’ global expectations. I always questioned their strategy with respect to single product. I believe they are now developing additional products with value adding functionality to meet customer requests and perhaps reposition the company. While this is great news for customers, this approach will no doubt create further challenges internally – managing multiple expectations. Will OB10 raise further funding to support growing resource requirements?
2. Transcepta – ah! the new kid in the block. Senior guys seem to know where their market ends, leaving specialists to undertake accounts payable automation. They are going after transaction volumes, which is directly proportional to revenues. If that is the case, their proposition must be simple and standard. At present, just like OB10, they cater exclusively for the invoice. Uses printer driver technology to extract and push the invoice to their portal (they do not favour the term, hub due to historical reasons). This has allowed them to bring customers (A/R side) on board within hours, leaving the harder work to their partners, i.e. A/P side. As a young company, this is a very sensible approach. In addition, they offer payment solutions through ACH, thereby offering an easy solution to settle payments. The challenge will come when customers’ demand more, and they will need to find ways to add new functionality whilst increasing the number of partners for A/P integration. Expansion outside US will present another set of challenges. On this regard, their closer association with Esker no doubt will be very helpful.

As your business continues to grow, you need to take a step back and identify potential business process failures or set-backs. This could be in sales as well as project execution (over sales is a nightmare!). Offering additional functionality without understanding their impact on your business will result in creating additional bottle-necks. A clear step by step approach to global domination ought to help ease these difficulties.

Longer post than I anticipated. Please let me know whether above makes any sense.