Purchase to Pay, P2P and Dynamic DiscountingFor Ariba read OB10 and for Basware read any number of open eInvoicing networks. It’s a critical question. When embarking on an electronic invoicing strategy, do you choose an open network like Basware for it’s interoperability with other networks or do you choose Ariba for the size of it’s “private” network. The right answer isn’t obvious but there is a right answer emerging and, depending on how the landscape evolves over the coming years the right answer might not be the one you think.

The Case for the Open Network

There are distinct disadvantages with either point to point or closed network models. Basware refers to these as the 2-cornered and 3-cornered models respectively. The 2-cornered model (e.g. EDI) is expensive to maintain because any changes have to be made at both”corners”. In contrast, the 3-cornered model houses the complexity of communication within a hub. This is easier for buyers and sellers to maintain but it is proprietary and subscription and transaction costs may have to be born multiple times. The open network brings the economies of scale of the mobile phone network to e-invoicing allowing buyers and suppliers to speak to any other interoperable network while incurring only a single set of costs. What’s not to like about it?

The case for the closed network

Remember why you are putting e-Invoicing in place – it is to eliminate paper and manual processes by receiving electronic invoices from your suppliers. And this is the critical point. Getting suppliers to send electronic invoices is your biggest challenge. You already have the business case that says that a successful project will save you money – but success depends on getting the electronic invoices in and it doesn’t matter what the transaction costs are, if you cannot get your suppliers on board – it’s all a waste of money. The e-Invoicing networks that have already signed up most of your suppliers and who will support your efforts to sign up the others are the networks that will will help you succeed.

So which electronic invoice model is best?

The devil isn’t always in the detail – sometimes the big picture is the most important factor. How do you choose between these two fundamentally different approaches? Each model has its strength but the argument boils down to this – open or proprietary. In the past, you could have had your fingers badly burned by buying into a long term proprietary transaction based service – and many did. Once the network owns both ends of the supply chain and all points in between, why would they not make the most out of that dominant position. So an open network is attractive.

But this is 2010, not 1990. We don’t need private networks to guarantee delivery and authenticity. The world is more open and with the growing maturity of the cloud and the on-demand model, it’s becoming more and more interoperable and it’s easier to jump ship if your technology platform out grows your business.

The case for interoperability and roaming is becoming blurred and less compelling than it was 10 – 15 years ago. As long as you go into your negotiations with your eyes open and don’t get tied into a non flexible long term arrangement, the size of your e-Invoicing network should be your dominant selection criterion.