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Vision on electronic invoicing (business) in the future
The most important theme on the agenda of companies and government bodies at this moment is electronic invoicing. Many companies see electronic invoicing as an instrument to realize cost savings and to improve the socially responsible undertaken - image. Not always will electronic invoicing lead to cost savings but generally it is assumed it will.
My advice is to conduct a thorough investigation of the impact on the organization, systems, applications, processes and information. Such a study should provide a view on the vision on electronic invoicing within the company and deliver information for drawing up the Business Case. Do not forget Electronic Invoicing is part of the end-to-end trade process (Electronic Business). The study will have to mind the overall trade process including purchase-to-pay and order-to-cash.
In addition Electronic Business refers to Exchange Services (exchange of messages) between customers and suppliers. An activity that takes place in the Exchange Domain, the domain area with focus on interoperability and not on the purchase and sales process.
Based on several investigation and implementation projects combined with extensive study of technological developments and innovative business concepts a vision emerged on the future of Electronic Business, more specific Electronic Invoicing.
“My vision on Electronic Invoicing is of an electronic business highway located in the cloud above us.”
My vision on Electronic Invoicing is of an electronic business highway in the cloud above us. Emerging technologies and growing electronic business networks are shaping the future of Electronic Business into an open an intelligent information service highway wherein Electronic Invoicing fits as a tiny little exchange instance that enables smart and fast reach to connected partners.
Actually I mean that intelligent instances on the electronic business highway make it possible to exchange information and establish processes to work together with others that are also using the highway. Companies will focus more and more on the reason of their existence and move core-functions like generate and send, receive and process invoices to the outside or transfer to third parties whom are specialized therein.
The electronic business highway will become a shielded area of the Internet or another IP-network comparable to Internet telephony (Voice over IP). The electronic business highway will be an open and for everyone accessible instance that is in no way identical to the Value Added Network (VAN) from the EDI age.
Three possible scenario's for the emergence of the electronic business highway
It is my expectation that the emergence of the electronic business highway will follow the same scenario's as developed by the World Economic Forum for the Digital Ecosystem. The Digital Ecosystem is about the digital space - the convergence between IT, Telecommunications, Media and Entertainment - where users evolve from mere consumers to active participants and governments face major policy and regulatory challenges.
Three scenarios are developed to gain a better understanding of the possible outcomes of the Digital Ecosystem in the near future. These scenarios deal with answers around two critical questions that influence the realization and adoption of the electronic business highway.
Firstly, will social and economic value creation be industry controlled and led, or organic and community-led. Secondly, will the digital business environment evolve toward a more open or closed system.
To the year 2015 three possible roads will be followed to arrive at the Digital Ecosystem:
1) Safe Havens describes a digital world in which the industry plays an important role and responds by vertically integrating to create secure walled environments that provide all digital services and is based on closed standards.
2) Middle Kingdoms describes a digital world in which consumers, governments and forward-looking businesses push for interoperability, enabling the emergence of a Digital Ecosystem dominated by intermediaries that effectively connect users to like-minded individuals and highly specialized suppliers that can best meet their needs. In the middle of the space between consumers and suppliers lie the kingdom where the power lies.
3) Youniverse describes a digital world in which the rise of organic grassroots communities as powerhouses of economic value turns traditional business thinking on its head. This leads to the rise of new organizational structures and to digital experiences that are highly personalized. This digital world will mainly be based on common standards and open systems. The line between users and producers will be further blurred as open source supporting software and collaborative community structures become more sophisticated.
Who is going to build the electronic business highway ?
The electronic business highway will evolve from safe havens to middle kingdoms whereby governments, communities and/or market sectors will play an important role in the realization of the superhighway. It is clear that in the coming years not everyone need to start building its own electronic business highway but that one umbrella highway will emerge to which every enterprise and existing electronic business (invoicing) network (e-hub) can connect.
It will still take several years before we are that far but this highway will surely be established. Currently suppliers of e-business (invoicing) networks already are confronted with questions from customers to connect trading partners that are not on their network.
Much attention arise for the phenomenon roaming that a number of players in the domain area define as “Roaming is interconnecting networks to provide real cross border reach, in a way that an operator can reach another operator’s users directly, nationally and internationally”.
In other words realizing the interoperability between the e-business (invoicing) networks, the régime of fees that form the basis for the usage of each others services / networks and the way the taxation takes place to the customer / client. Universal reach for clients is one of the most important drivers to realize interoperability between networks and will ultimately lead to a network of networks AND something or someone will in time grab the role of super administrator.
When are you ready for the electronic business highway ?
Many around us have presumably been thinking about going for gmail, yahoo-mail or live-mail abandoning their own e-mail server. A number of companies will take this step in the coming years. In my opinion the predominant argument is “why pull in complexity when others can do it better and cheaper”. I believe that in the near future G-invoicing or Y-invoicing or M-invoicing has much possibility to be successful. Yahoo, Google and Microsoft have the power-to-execute and are able to realize the dream of the electronic business highway.
Why pull the complexity of Electronic Invoicing into your own organization and systems when the only goal you have is “send, receive and process invoices” ? Electronic Invoicing is non-intrusive, in fact the invoicing process will not be hampered, and around us there are strong players that made Electronic Business their core-competence. Perhaps you ask yourself when you will be ready for Electronic Invoicing and where you stand at this moment. The evolution path of Electronic Business (e-Business) provides a notion on the growth and future of Electronic Invoicing.
“Technology is shaping the future e-invoicing world” and demands a growing understanding of technology, standards, data security and control. It should be clear to everyone that Electronic Business goes through a shift from “tightly coupled to loosely coupled systems” .
From left below to right above Electronic Business evolves from Traditional to Synchronization.
1) Traditional: phone, fax, EDI and paper
Paper is still the most important medium for the transmission of an invoice while e-mail has taken up a strong position for the exchange of product information and order data. However the amended European regulations will strongly stimulate the use of e-mail in the next coming years.
Electronic Data Interchange, in the last years became synonym for the exchange of documents via Value Added Networks based on non-XML standards such as EDIFACT and ASC X12. Especially international companies and certain industry sectors have embraced EDI in the past although this not always leaded to the desired success. Nevertheless Electronic Data Interchange For Administration, Commerce and Transport (EDIFACT) is still heavily employed in the automotive and retail industry.
2) Communication: e-mail, online web presentment
Invoices - like other documents - will be transmitted using e-mail in PDF or other format but at the same time Electronic Invoice Presentment solutions are further being implemented. These solutions enable us to present invoices in HTML format in a personalized environment. In addition it is possible to download the invoice in different formats. The said means of communication distinguish themselves in the way the invoice is offered to the customer. When using e-mail the invoice is send to the customer - push-mechanism - while when using online presentment a pull-oriented approach is followed. The customer receives a notification message, e-mail or sms, when there is an invoice available that can be downloaded.
3) Integration: XML standards and web-oriented architectures
The rise of the eXtensible Markup Language (XML) drifted the world of Electronic Business more apart. This seems a contradiction to those that scream XML is the Esperanto of the future. However the different industry-specific XML-based vocabularies that have been developed (OAGI, UBL, PIDX, CIDX, RosettaNet, ...) the past years lead to the well-known interoperability question, the lack of information (data) interoperability. These XML-vocabularies define business information-elements in the context of the industry as such that everyone can understand and process them. The XML-language takes care of defining the structure and the industry-specific methodology for modeling and representing the semantics, the meaning of the information elements.
In the EDIFACT era industry-specific subsets were developed to further restrict the number of data elements. The basis for these subsets is/was the EDIFACT syntax and semantics as defined in the EDIFACT directories (libraries).
The XML-vocabularies on the other hand are based on different methodologies (semantics) and have different structures (syntax). Ultimately these create the luxury problem that most companies wrestle with, “the business standards dilemma”. Enterprises are not able to make a choice between the multitude of standards.
Standardization is one of the biggest hurdles for global adoption of Electronic Business (invoicing) but not the end of Electronic Business. The interoperability question is in fact about systems and people not having a common understanding of the meaning of the underlying data because there is no shared grammar and library on which the meaning is based.
A few international initiatives are started that should lead to one universal grammar library:
- The UN/CEFACT Core Components Technical Specification (CCTS) is a syntax-neutral methodology for the development of a common set of semantic building blocks of information-elements. The Core Components Technical Specification is based on the ISO Standard 150000-5 (ebXML Core Components Technical Specification ebCCTS). More information can be found on the website of SAP, the driving force behind the CCTS, under Message Definition Languages.
- The Open Group Universal Data Element Framework (UDEF) is a method for categorizing information-elements by means of an alphanumeric key (tag) and assigning a simple name to an element.
Those initiatives will not directly solve the interoperability question because none of these will be implemented on short notice in all the available XML-vocabularies. The luxury problem will continue to exist for a while.
4) Collaboration: a process-centric approach stimulated by business processes that interact using standardized B2B protocols containing message-formats, transport protocols and business process management components.
This stage of Collaboration where companies apply all kinds of integration to realize Electronic Business goes through interconnected networks. Especially the e-business (invoicing) networks that support the exchange of messages between trading partners constitute the most important link in this stage.
5) Synchronization: pure peer-to-peer networks that have no central control and where data gets replicated. Further away in the future Ecosystem oriented architectures will evolve. This stage in the evolution path will not obtain the required level of maturity in the next few years to enable major adoption.
What influence do distribution models have ?
The last years several distribution models emerged or were identified by institutions. For simplicity I will identify four models whereby the difference is mostly based on the position of the trading partners.
1) Seller Direct Model
In this model the seller is the dominant party and makes the invoice available to customers via an online presentment environment, web-portal, in different formats (EDI, XML, CSV, PDF, ...). Invoices can also be transmitted in PDF format via e-mail.
The model is most appropriate from the perspective of the seller because of the opportunity to tighten the connection with customers (vendor lock-in), at the same time the seller can recommend more products and services (cross- and up selling) and strengthen its brand name. Moreover the invoice has the same look-and-feel as the paper invoice.
2) Buyer Direct model
In this model the buyer is the dominant party and forces the supplier to enter or deliver the invoice via the online environment or via EDI / XML.
The model is most appropriate from the perspective of the buyer because of the opportunity to tighten the connection with suppliers (buyer lock-in) and reduce the administrative burden when the seller delivers the invoice in a standardized format in the online environment. When this online environment is integrated with the financial system the buyer is able to automatically process the invoice. More benefits can be achieved if the sellers retrieve the purchase orders from the same online environment and also confirm delivery dates and pricing.
The choice for one of these distribution models is partly determined by the bargaining or market power, and the desired wish of flexibility of involved parties. When the power is concentrated in the begin of the supply chain, on the selling side, the result will most often be a Seller Direct model while a dominating customer result in a Buyer Direct Model. Both models benefit from a limited number of standards and transport protocols, leading the highest possible interoperability.
Soon or later both customers and suppliers are confronted with the digital spaghetti architecture.
This structure evolves from the growing number of point-to-point connections and requires increasing efforts to connect new trading partners.
The Seller and Buyer Model in time will not increase the reach of trading partners and certainly not when buyers and sellers are faced with strong dominating partners. For most small and medium-sized companies, but also for dominating buyers and sellers willing to establish electronic business the Consolidator Model is the best fit and less intrusive.
3) Consolidator model
In the consolidator model a third party, a service provider, facilitates the exchange of documents between sellers and buyers providing various exchange services among web-enabled presentment environments and all kind of methods and standards for exchanging messages.
This model is most appropriate for small and medium-sized companies because the provider takes the complexity of different electronic standards out-of-their hands. There is a one time costs for connecting to the network of the consolidator and a transaction or monthly fee for the use of the service depending on the agreements made.
The main advantage for enterprises lies in the speed of connecting a large group of partners that already use the network of the consolidator. Especially when the service provider is running an extensive network of companies in the same market sector. Such an e-business (invoicing) network can be decisive in the choice of a service provider.
A provider who understands the problems in an industry sector is able to respond faster and provide additional services closely related to the business domain. For example in the world of Telecommunications and Utilities (energy, water,waste) Expense Management Solutions will add significant value to connected users.
The increasing number of e-business (invoicing) networks requires extra efforts from these network operators (consolidators) to ensure reach of trading partners over these networks. This gave rise to the networked environments (multiple connected hubs). The networked environments enable hub-owners to respond quickly to requests for exchanging messages with partners that use another network.
The network operators are now facing the same challenges that originally, not so long ago, gave birth to the e-business (invoicing) networks and are still the main reasons for their existence. E-business (invoicing) networks need to ensure widespread interoperability and interconnectivity to better serve - and keep on serving - senders and receivers.
Main aspects to address are cross-network addressing and routing, (message) content standards and transformation rules (format conversion), authenticity of origin and integrity of content. Answers are needed for questions such as how can a sender and receiver be uniquely identified, which message standard or grammar will be used as the common library, and how to ensure authenticity of origin, integrity of content and security.
Currently e-business (invoicing) network providers are tackling these questions by establishing bilateral agreements to ensure interoperability and interconnectivity. The Hub Alliance, an affiliation of Business-to-Business e-Trading Service Providers (or 'hubs') who have implemented a ground breaking initiative to interconnect different hubs ensuring that electronic trading is easier for all the hub users. Participants are a few of the big players in Europe: Certipost, Basware, Burns Business Exchange, Liaison, Causeway and Asite.
The Alliance was established to enable hub-to-hub interoperation and to encourage the wider use of electronic messaging between businesses. Members are currently prohibited from charging additionally for documents that are processed between hub members. Message standards, communications protocols, service levels and responsibilities are all defined by the membership and are intended to be as broad as possible to encourage the ease and speed of interconnectivity.
4) Four Corner model
The last model is the Four Corner model where the banking world will take care of the exchange of invoices between customers and suppliers. The already mentioned benefits of a consolidator apply and additionally banks provide possibilities to directly issue the payment of an invoice. There is not yet a working example of this model but it probably will not take years.
Mapping the distribution models on the evolution path ?
Now that the distribution models passed the revue let us look on how these models are plotted on the evolution path.
Some valuable and informative business and technological considerations to take into account.
Small, medium-sized and large companies should carefully investigate the business models and technologies of available solutions and service providers. The current e-business (invoicing) service providers are coming from many different backgrounds. Some players literally are involved in the gaming industry like B2Boost, the leader in transaction management.
Others rolled into the game of e-business and e-invoicing because paper-based invoices in the future are no longer an option:
- Output & Document Management Solution providers: StreamServe, Bringing Documents to Life, and Bottomline Technologies.
What all of these players have in common is that during the past years they developed solutions for solving the lack of interoperability between their clients with the objectives to reduce the amount of spaghetti. These solutions are based on different architectures, standards and types of software.
Two architectural approaches are generally followed:
1) Firstly, the use of a Common Information Model as the backbone for the solution.
The standards and models from clients are transformed into the common information model in the middle which is mostly based on a proprietary standard. Data is stored in a relational database or in an XML file system or database.
2) Secondly, the digital spaghetti structure is transferred into the solution
The existing point-to-point connections between trading partners are restated in the solution. There is no common information model and the power resides in the transformation capabilities of the underlying software. For each information flow between supplier and customer two transformation mappings are developed.
Not the most cost effective and efficient approach to solve the lack of interoperability between trading partners. As long as these providers can live up to their promises and ensure 100% client satisfaction this approach will work.
Will standardization solve the business standards dilemma ?
Once again it is a misunderstanding that XML is the solution, the Esperanto of the future. Some people even say XML is just plain text and does nothing. XML was created to structure, store and transport information. The XML-language takes care of defining the structure, the syntax, and the industry-specific methodology for modeling and representing the semantics, the meaning of the information elements.
The biggest challenge for all of us is solving the lack of interoperability between XML-based vocabularies and EDI libraries. True global electronic data interoperability requires more than an XML-based vocabulary.
For establishing global electronic collaboration and information exchange there must be a common understanding of the underlying data, the semantics of business information elements should be based on a standardized grammar, commonly available for everyone.
Many industry consortia and standardization committees have defined specific XML-based vocabularies. All of these vocabularies are based on different methodologies for representing the semantics of the business information elements. As such similar information elements in vocabularies are designed and named differently. This makes it hard to automatically translate these elements from one vocabulary to the other instead a mapping definition is required.
Due to the many XML-based vocabularies this becomes difficult and expensive, often identified as the business standards dilemma.
Standardization of the Content is not the breaking stone. It is not about speaking the same language but about understanding what we speak. Therefore standardization should focus on grammar, transformation rules and tools as such that both humans and machines are able to understand and work with it.
Initiatives that have been launched are:
- the UN/CEFACT Core Components Technology Specification (ISO 15000-5 ebCCTS)
- the Open Group Universal Data Element Framework
Adoption and incorporation of the UN/CEFACT CCTS methodology is agreed upon by most international standards but real cross-use of core components is not yet visible. Furthermore the UN/CEFACT CCTS is becoming a bit too complex with the extensive object-oriented approach propagated by the UN/CEFACT standardization committee.
Nevertheless it is the best initiative available at this moment and when the focus is brought back to the right perspectives, simply grammar, things will work out fine. The best architecture for an e-business (invoicing) network solution that has no problem with the business standards dilemma in the communication with other networks looks as follows:
This will also be the underlying architecture framework for the electronic business highway.
Will the electronic business highway fulfill the interoperability requirements ?
First of all it is imperative that the electronic business highway provides access to all sending and receiving trading entities and allows for inclusion of different e-business (invoicing) network providers.
Moreover there are common and open technology standards needed for message content and transport protocols including transformation and/or format conversions. These could best be based on a shared grammar and library such as the UN/CEFACT Core Components Technology Specification. These standards should be globally available to everyone without restriction and cost, or for a reasonable fee, 'en principe' no enterprise should feel excluded.
On top of these requirements enterprises need a smooth transition path from their existing integration approach to the new vibrating driving-experience on the electronic business highway. This demands ease of use, the ability to accommodate different existing and new solutions and free choice of service provider.
The road to Middle Kingdoms requires 'government' policies promoting innovation and competition, measures to encourage the industry to voluntarily contribute their best technology and to participate in the development of open standards.
Governments on a pan-European and international level with support of international standardization committees need to develop Common User Identifiers for addressing that are portable across Europe, similar to telephone numbers, open and independent from a service or network need to be developed. Two initiatives to mention are: the OASIS Customer Information Quality Technical Committee (OASIS CIQ TC) and the eGreen Pages Association.
The OASIS CIQ TC develops a set of XML specifications for defining, representing, interoperating and managing “PARTY (Person or Organization) CENTRIC INFORMATION” that are truly open, vendor neutral, industry and application independent, and importantly “Global” (ability to represent international data formats such as different types of party names and addresses used in 241+ countries).
Basware and Itella Information Oy are establishing a centralized directory containing messaging profiles and electronic addresses of ebusiness partners used for automated discovery and pairing of partners and routing of messages. The Open Initiative for Global Address Book in B2B Messaging -
eGreen Pages - will be run by an open, non-profit e-invoicing operator association.
Is there a Business Case for e-business (invoicing) ?
Stay on board, more will come in a few days
Tags: EDIFACT, electronic data interchange, Interoperability Frameworks, UBL, UDEF, e-Invoicing
[Last update: 26-11-2011]