e-invoicing – the case against interoperability

e-invoicing – the case against interoperability

Posted by Pete Loughlin in AP Automation, e-invoicing, Electronic Invoicing 03 Jan 2013

The European Commission is seeking input from interested parties on interoperability between electronic invoice service providers. (Look here for more information on how to contribute.) This issue has implications that are much wider than the European Union. As businesses and governments increasingly adopt e-invoicing for a range of reasons, the debate will reverberate globally. Given a cursory glance, interoperability is a no brainer. But take a closer look at the business issues and it’s not so obvious.

In a previous post I presented an argument for interoperability and in this second piece, I’m presenting an argument against. If you have strong views on either side of the debate, leave a comment.

e-invoicing – the case against interoperability

Purchasing Insight logoThe interoperation debate often revolves around the comparison with mobile phone networks. It a good metaphor but it’s not really a good comparison. It’s like comparing e-procurement with Amazon. What works in a B2C scenario doesn’t always translate to B2B. Mobile phone calls are not important business documents. They are, generally, not sensitive and they don’t have the same legal compliance issues that invoices have. If a text message goes missing, it’s no biggy. If an invoice goes missing it requires properly controlled business process to rectify the error. It’s not optional. It’s the law!

And this is the point. Invoices are non-trivial documents and a compliance failure by the sender, receiver or service provider is a non-trivial matter. Interoperation, while a good idea on a simplistic level, involves the distribution of accountability to numerous parties. One of the great strengths of the non-interoperable world is that a single third party, the service provider, can be held accountable for the compliance of an electronic invoice – OB10 for example will even guarantee compliance. That simply would not be possible if multiple third parties were involved.

The cost arguments that attempt to support interoperability don’t really stand up to scrutiny. None of the e-invoice service providers achieved a monopoly (despite their best efforts) and competitive market pressures act as an effective price regulator. Some of the pricing models remain a bit weird but this will rectify itself. Interoperability will play no part in that.

Interoperability is a worthy ideal but its most vociferous supporters are those amongst the vendor community who will benefit most – the relatively new, smaller networks who would be able to capitalize on the investments of the more established players. For government bodies to encourage or mandate interoperability would be a naïve gesture pandering to the pleas of the underdogs and would reflect a lack of understanding of the scale of the compliance issue.

Interoperability – the Purchasing Insight view

The debate is coming to a head. Something is going to have to be decided and all stakeholders with an opinion should express there views loudly and clearly.

So what is the Purchasing Insight view? Are we for or against interoperability? Or do we just sit on the fence afraid of offending our friends?

Watch this space.

Pete Loughlin can be found on twitter @peteloughlin

  • Christian Lanng (CEO Tradeshift) January 3, 2013 at 3:19 pm /

    I find that theory is at it’s best when it’s supported by facts, something you unfortunately fail to do in this piece, but maybe in the next? If you did the below might interest, as mentioned on yesterdays post:

    1) The most successful markets for e-invoicing in the world all have mandatory interoperability: Finland, Denmark, Mexico, Brazil and Sweden so this is not a lofty ideal, it’s reality and it works.
    2) All of the above markets have a much bigger ecosystem around e-invoicing than any other market, with 100+ service providers, software vendors and similar participating. This is better for the industry players, not worse.
    3) OB10’s compliance argument is bullshit and have been for a long time, both PEPPOL and other similar frameworks take care of that argument. Why can 5-6 operators interoperate in Finland of Denmark without any compliance issues? This is just FUD and you should be above reprinting it. To claim that rejection of messages is a complex matter is just hilarious 20 years after simple solutions and EDI messages exist for handling most of these scenarios.
    4) You say we would benefit the most, but the truth is that our network is already larger than OB10’s. Furthermore we have never had any problems converting suppliers from a paid network to a free open one, so where is our disadvantage really? From a business standpoint it would be much better for me to switch those suppliers to Tradeshift rather than interoperate.

    I understand why you would want to argue both sides for fairness, but the ironic part is that this doesn’t even matter as a theoretical discussion, the world has moved on, most buyers we talk to have realized this and the most of the fastest growing markets have realized this.

  • Daron Whisman January 4, 2013 at 1:13 am /

    Really like the topic and makes advanced users wanting to leave a comment.
    Would have preferred a wider breadth of einvoice providers (iPayables, BOA, GHX or Direct Commerce) and saying one provider can “guarantee” compliance is somewhat short-sighted as multiple vendors that have used einvoicing tools have different areas of heart-burn and different definitions sets of the word guarantee….
    The biggest win is when supplier networks have an intuitive tool which is easy it use ad highly reliable

  • Ian Burdon January 4, 2013 at 9:15 am /

    No doubt I’m missing something here but the only thing that seems to me to matter is that the eInvoice format is readable either in your purchasing system, if that is where you match invoices or in your finance system if you match there.

  • Markus Hornburg January 4, 2013 at 9:54 am /

    Pete, you’ve painted a clear picture of the underlying complexity when interoperating and delivering fully compliant e-Invoices. The key element of e-Invoicing – as expressed by our customers and as you highlight – is compliance. This is not a barrier to interoperability if everyone involved does their homework.

    OB10 interoperates with other service providers when our buyer or supplier customers ask us to, and we have over 30 such agreements today. For their benefit and security, we only integrate with a service provider once it has demonstrated that it understands and meets relevant compliance requirements. Interoperability works if this due diligence has been performed. Exchanging potentially faulty invoices will create more problems for customers than paper invoices do.

    While OB10 has been a vocal champion for compliance, neither we nor any other service provider create compliance issues. They come from country-level legislation on taxation, document retention, integrity and other invoice content requirements, and they differ vastly by country.

    We should also not confuse the difference between a service that simply transfers invoices between trading partners and one that controls the content for compliance. It is naïve or irresponsible to describe a concern for this distinction as “bullshit”.

    We expect the work of the European e-Invoicing Service Provider association (EESPA) to also improve operational and compliance standards, and interoperability across its members. As such, we support EESPA’s Model Interoperability Agreement and will likely be one of the first providers to use it.

    Interoperation is in its early stages and, while it has its place, in itself it does not drive growth in the market. In our view, interoperation will continue to grow, but always with an eye on compliance.

    Finally, to my knowledge none of the countries referenced have mandated e-Invoicing interoperability – at least I still need to see this written into law somewhere. Some have mandated e-Invoicing which of course at one points forces existing services to cooperate.

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