e-invoicing – the case for interoperability

e-invoicing – the case for interoperability

Posted by Pete Loughlin in AP Automation, e-invoicing, Electronic Invoicing, EU Commission 02 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 has distinct advanges. But take a closer look at the business issues and it’s not so obvious.

Here, I want to present an argument for interoperability and in a following piece, I’ll present an argument against. If you have strong views on either side of the debate, leave a comment.

e-invoicing – the case for interoperability

Purchasing Insight logoInteroperability in simple terms is the ability for disparate systems to operate seamlessly with each other like mobile phone networks. If an AT&T customer phones a Vodafone customer, neither users needs to be aware that they are on separate networks. All kinds of business use interoperable systems all the time. The world couldn’t function without interoperability between systems and networks. Without it, we wouldn’t have the internet. We couldn’t trade globally – not as easily as we do today in any case – and as electronic invoicing adoption gathers pace, interoperability is a complete no-brainer.

Today, there are e-invoicing networks that will interoperate. A supplier sends an electronic invoice via their service provider and it is received by the buyer via their, different service provider. Similarly, acknowledgements and disputes can be managed across the different networks. There is a distinct benefit in this approach. Suppliers only need to subscribe to one network and they only need to incur one set of costs – or in the case of networks like Tradeshift – no cost. Without interoperability, suppliers incur costs many times. The result: increased cost of doing business, which offsets the efficiency gains made by e-invoicing. It is self-defeating.

To understand why anyone would argue against interoperability – look to see who presents the arguments. Is it suppliers? Is it governments? No. It is the larger, well established networks and the reason is obvious. They have a vested interest in maintaining the status quo. For them, owning both ends of the transaction allows them to charge twice – they generate revenue from both the buyers and the suppliers. This ownership of the end to end transaction allows abuse as the network provider is able to charge inordinate amounts to suppliers who have no choice but to use the network of their customer’s choice.

When considering whether interoperability should be encouraged or even mandated, it is not the commercial interests of the network providers that should take priority, it is the interests of buyers, suppliers and the wider interests of the economy that should inform any recommendations. The whole purpose of e-invoicing is to contribute to a reduction in the complexity and consequently the cost of doing business and interoperability can help delivers that.

Pete Loughlin can be found on twitter @peteloughlin

  • Christian Lanng (CEO Tradeshift) January 2, 2013 at 9:19 pm /

    I think you are overlooking the biggest argument for interoperability, it works. These discussions tend to be very theoretical, but if you look at the facts, it’s hard to argue against the effectiveness of interoperability, when it comes to the number of suppliers using e-invoicing, buyers having a great business-case or number of vendors supporting e-invoicing in a given market.

    Case in point, 5 markets that all have enforced interoperability:

    – Finland: Most mature e-invoicing market in the world, e-invoicing is default for all Finnish companies, more than 200+ service providers, software partners and solutions that support Finvoice.

    – Denmark: Largest e-invoicing penetration in EU, with more than 95% of companies using the common interoperable EasyTrade infrastructure. More than a 100 different service providers are providing interoperable services, software plugins and other services around this ecosystem.

    – Brazil: Largest e-invoicing penetration of any country outside EU. A huge and thriving ecosystem of service providers and out of the box support for Nota Fiscal from companies like SAP and similar.

    – Mexico: Fastest growing market for e-invoicing in Latin America.

    This should not be a theoretical or philosophical discussion any more, it’s hardcore facts. The markets that are the most well functioning when it comes to e-invoicing all have one thing in common, enforced open standards for interoperability. This is not just a fluke in some Northern European countries, it’s global. I’m looking forward to the piece that argue against this and especially which facts can be used to build a case against interoperability (not just theory).

    /Christian

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