A revolution in procurement processes is quietly underway. For more than five years, electronic procurement, or e-procurement, has been a requirement for companies wanting to do business with the U.S. government. Recently, the EU has established a timeline for digitizing all phases of the procurement process within the EU. Even so, for stakeholders already in the game, and for new arrivals, trends in technology are rapidly reshaping how governments and businesses transact business with one another.
As organizations learn how to identify and qualify suppliers, request bids, handle tenders, manage orders, and process electronic invoices, the opportunities are ripe for fintech developers to fill a few niches.
Specifically, e-procurement represents a series of sub-processes, including: e-Informing, e-Tendering, contract negotiation, e-Auctioning, vendor management, catalog management, Purchase Order management, order status tracking, Shipping Notice creation, e-invoicing, and e-payment. Each offers plenty of room for innovation and development.
Let’s look at a few of the trends being driven by technological advances in this growing industry.
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1. Cloud-Based E-Procurement Services for Business
Research indicates that the e-procurement market as a whole will enjoy growth through 2018. The growth will be bolstered by exponential growth in both cloud-based and Software as as Service (SaaS) platforms.
The move away from on-site e-procurement software to cloud and SaaS platforms is being seen mostly in small-to-medium size businesses — the opposite is true with large corporations and government entities, as we will see shortly.
The need for small and medium size organizations to adopt an e-procurement solution will grow as their larger vendors and customers turn to electronic systems. Although the cost to transition to electronic procurement can be a bit much for smaller organizations to absorb, cloud-based and SaaS platforms can prove much more economical and less laborsome to implement than an enterprise, on-site system.
Fintechs with a foot in supply chain technology and with their head in the cloud can find lucrative opportunities offering economical solutions in this emerging market.
2. In-House E-Procurement Systems for Large Corporations
While cloud-based and SaaS solutions can make e-procurement affordable for smaller companies, the trend for large corporations is in the other direction. That is, these mammoth organizations would do themselves a disservice to use an off-the-shelf, or off-the-cloud, e-procurement platform. Customers and vendors expect global corporations to have the resources to develop their own custom platforms. Further, customized platforms can afford an even greater level of security than commercial platforms, assuming they are properly designed.
Obviously, Microsoft is not going to be anyone’s customer in the e-procurement space. Neither are many other technology companies. However, innovative fintechs will find plenty of non-technology corporations that are looking for e-procurement solution providers.
3. Government Adoption of E-Procurement Platforms
Governments spend an estimated 9.5 trillion dollars annually. Finding ways to spend those funds in the most efficient and most prudent manner is of key interest to government officials. In addition to the advantages offered to all users — improved efficiency, reduced errors, increased transparency, and reduced operating cost, e-procurement offers other advantages that make it particularly attractive for government entities. Among them are increased tax compliance, increased trust in government, and greater growth in the public sector as a result of other advantages.
As various platforms emerge, World Bank and other entities are working to develop standards and processes for government e-procurement systems. Developers wishing to penetrate the global market must keep a sharp eye on efforts to standardize e-procurement solutions. Further, competency in Electronic Data Exchange (EDI) is mandatory. Nevertheless, for those fintechs that can overcome the hurdles and take home the winning bids, the earning potential is staggering.
A more approachable market is, perhaps, state and local governments, who have been slow to adopt e-procurement. The reasons can be assumed to be concerns over cost, and a hesitancy to transition such a critical function (procurement) to an unfamiliar technology. Fintechs that can penetrate this largely untapped market can grow a lucrative and stable market base.
4. Big Data and E-Procurement
If there is a technology that seems to have its tentacles in every emerging market, it is big data. Combining gigabit networks with low-cost data storage and powerful data analytics, big data can supercharge a vast array of old and emerging technologies, e-procurement being one of them.
What can big data do for e-procurement? In a few words, big data can enable an e-procurement platform to:
- identify qualified vendors
- identify strong prospects
- respond quickly to secure the best price as soon as it appears
- forecast demand based on historical patterns
- get and maintain an accurate assessment of a supplier’s performance
- identify risks in the supply base
- perform automated purchasing based on preset criteria
Big data lends itself to a variety of applications in the e-procurement market. From e-Information to e-Invoicing, nearly every process within an e-procurement platform can benefit from big data analytics. The innovative fintech developer will root out the many opportunities in this space.
5. Blockchain Ledgers for E-Procurement
If you are familiar with Bitcoin, you are probably also aware of blockchain technology. As a refresher, let’s briefly review how blockchain technology works. A blockchain is a data record, or ledger, that is shared among multiple parties. The data it stores can be anything: purchase prices, vendor identities, bid histories, even entire contacts. All information stored in a blockchain is encrypted and any data item can be tokenized so unauthorized use is virtually impossible. Blockchain technology can do much more that this, and multiple blockchain systems have been developed.
Why blockchain technology is becoming important for e-procurement is because its advantages perfectly suit the needs or e-procurement users. Namely, blockchain technology allows a company or government entity to share huge amounts of information with large numbers of people in the most efficient and secure way currently possible. Vendor requirements, details on the entire supply chain, e-invoices, and limitless other information of interest to buyers and sellers can be shared in a centralized record. With blockchain, transparency is increased and the opportunity for corruption is nearly eliminated. Blockchain can even facilitate any number of digital currencies and is a secure way of handling payments.
Perhaps, the advantages of integrating blockchain into e-procurement platforms are best understood when you compare it with the alternative. Blockchain uses a centralized, shared, secure record for storing data, as opposed to non-blockchain systems that use multiple siloed databases that are difficult to share, inefficient, limited in functionality, and susceptible to unauthorized data tampering.
Blockchain is no longer just a Bitcoin technology. Fintechs that can move in this emerging market can help define how data in every industry is handled in the future.
How Ignite Can Help
Seldom does one’s potential market include national governments and global corporations. For e-procurement developers, the opportunity to tap such lucrative markets is, in deed, close at hand. But charting this course alone may not be the wise thing to do.
Ignite has helped organizations around the world achieve their goals by offering world-class technology solutions at a competitive out-sourcing price. With six R&D laboratories across Europe, our teams have the experience and skills you need to succeed.
Why not contact us, today, for a free consultation?