e-procurement in Europe – why PEPPOL cannot address the fundamental economic realities

e-procurement in Europe – why PEPPOL cannot address the fundamental economic realities

Posted by Ian Burdon in e-Procurement, P2P Europe 28 Jun 2012

In my recent article, “e-wheels on my Wagon” I explained why I think PEPPOL is a decade behind the curve. Actually, I want to go further than that and explain why PEPPOL fails to address one of its primary targets – stimulating cross-border trade, particularly by and for SMEs. e-wheels on the wrong wagon in fact.

For European Institutions, cross-border trading is not mere ideology, it is theological orthodoxy. It is a pillar of the creation myth of modern Europe itself, created ex nihilo by mysterious forces.

In the beginning there was chaos and the European market was without form and void, until, the Treaty of Rome reveals, it was resolved to ensure the economic and social progress of their countries by common action to eliminate the barriers which divide Europe, recognising that the removal of existing obstacles calls for concerted action in order to guarantee steady expansion, balanced trade and fair competition and desiring to contribute, by means of a common commercial policy, to the progressive abolition of restrictions on international trade.

Who would gainsay those noble aims?

Purchasing Insight logoIn practice though, treaties, directives and regulations do not themselves change the world. They are aspirational statements of intent which shepherd profane activity towards the desired state of bliss. Overcoming the forces of darkness ranged against that aim has to include some deeper analysis of what those forces are.

Imagine that I am an small/medium sized enterprise (SME) based in Portugal and I identify an opportunity in Poland which is within my sphere of expertise. What would stop me bidding?

Firstly, I probably can’t support myself doing business there. Even if I speak Polish I probably don’t have basic supply chain or other resources in place to support operations there. Putting those resources in place adds an immediate cost to doing that business.

Secondly, if I am an ambitious SME with a clear growth plan, I know that I can overcome the initial cost issue if I can secure working capital. I simply need to arrange some form of trade credit advanced at an acceptable interest rate from my Bank. Aye, right!

Thirdly, if I bid for a Government opportunity I know the buyer is going to select either the lowest priced tender or the most economically advantageous tender. So I am already at a competitive disadvantage compared to local tenderers because of the oncosts incurred which I have to build into my price. Even in an exemplary, non-discriminatory process, general economic pressures mean that my tender is unlikely to be either the lowest price or the most economically advantageous.

Fourthly, procurement is – or should be – an activity that supports the successful delivery of policy outcomes. In “normal” times these outcomes include political imperatives of supporting local or national economic growth. In the context of an international liquidity crisis, which undermines national economies, the focus is on national economic survival and so the political imperative to source locally is magnified.

And so I probably won’t submit a tender. Things would be different if I have a better channel to the market – for example as a subcontractor to a Prime bidder – but that institutionalises the role of larger enterprises which is not the stated policy goal.

The problems with cross-border trade are economic and structural. They are business problems. Putting in place a pan-European Government eProcurement system has no relevance to those problems – that addresses the wrong issues in the wrong way for the wrong reasons.

Ian can be found on twitter @IanBurdon

  • Michael Bruening June 28, 2012 at 10:36 am /


    are you serious? Did you really think that a standardization effort and an IT infrastructure solves business and political problems?

    PEPPOLs intention was never to ment to be the solution to overcome problems with language, interest rates, supply availability, varying labor costs or national growth intentions. PEPPOL is not decades behind, it even may be decades to early because it facilitates execution of a business which has yet to blossom.


  • Ian Burdon June 28, 2012 at 10:43 am /

    Yes, quite serious. Your first paragraph is exactly my point. PEPPOL is marketed as a way of addressing issues in cross border trade, but the issues in cross border trade are not e-procurement issues. Ian

  • Richard Fitzwilliam June 28, 2012 at 12:40 pm /

    Sorry Ian, I disagree.

    I understand there are always exceptions but the strength of the German economy is largely because of their exports; something PEPPOL will only make easier. Likewise based on your points China should not be successful.

    I agree that for services cross border is less likely however for manufacturing PEPPOL will be an excellent opportunity for companies throughout Europe to compete easier.

  • ian Burdon June 28, 2012 at 12:50 pm /

    Thanks for the comment Richard. It is difficult to see why PEPPOL will make it any easier at all. If I am in Scotland and want to place an order with a German manufacturer I can already do so. If I am in Germany and want to know what opportunities are available in the Scottish public sector (over and under EU Threshold) I can already do so. What does PEPPOL bring to the table? Ian

  • Christian Lanng (CEO Tradeshift) June 28, 2012 at 3:11 pm /

    This is one of the weirdest articles I’ve read in some time.

    PEPPOL is a standardization effort, arguing that it should be a policy effort is not going to make it true, arguing that it should be a policy effort and then arguing it has failed at that is double odd.

    Full disclosure: I was part of the initial PEPPOL team and served on the governance board of PEPPOL for the first two years. Nowhere where we tasked by the commission to solve the policy side of procurement, but to create an interoperable framework for others to use in the procurement space to use. I think PEPPOL succeeded if you look at it in that way:

    – Software vendors and operators are all aligning towards the PEPPOL standards (the same thing happened in DK earlier where all software vendors now support UBL)
    – That creates a level playing field where anyone can build a piece of e-business software and expect to interoperate with government standards.
    – More than 14 countries are setting up PEPPOL gateways, so without a doubt PEPPOL is on track to become the defacto EU government e-business standard.

    Now I agree that PEPPOL did not solve the challenges of poorly formulated procurement policies, it did not solve the challenge of access to trade capital or fix the broken tendering process, but then again it was never tasked to do this anymore that GSM was tasked with changing roaming prices between mobile operators in europe or create virtual providers. That was all stuff that was done later, on a policy level by individual government telco regulators.



  • ian Burdon June 28, 2012 at 3:29 pm /

    Christian, thanks. My point is that it didn’t -and doesn’t- address cross border trade either because that is not a problem amenable to eprocurement. As addressing cross-border trade issues, particularly with SMEs is offered as the normative benefit of PEPPOL, it follows that there is a fundamental issue because the “solution” and the “problem” don’t match. The alleged relationship with cross border trade is long standing (I was at those early pre-PEPPOL meetings too) and current (it was heavily canvased in Rome last month). As I said in response to my last post, what I found in the early meetings in Oslo, Copenhagen and Paris was that in the margins people would agree with me but wouldn’t say so publicly. Interestingly I had exactly the same response in Rome last month. Ian

  • Christian Lanng (CEO Tradeshift) June 28, 2012 at 4:13 pm /

    But claiming that PEPPOL don’t address the fundamental economical realities, is wrong. It is solving what it was designed to very well – the other issues was never in scope of the project, and the only thing it can fail in that regard is people’s wrong assumptions, so the correct title for this post should be: “How PEPPOL succeeded, but expectations failed”

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