The adoption of electronic purchasing, billing and payment by Canadian companies will account for one-third of business transactions by 2008, said a survey by Visa Canada Tuesday.
Jacqui Hurd, senior product manager, commercial solutions
at Visa Canada in Toronto, explained the most interesting part of conducting the study was learning that many companies had not even bothered to determine how costs inherent in the system affect them.
For example, Hurd said, only 25 per cent of companies had learned the cost to their business of issuing and completing a purchase order which, on average, costs about $74.
“”You can move that paper process out of the system, and therefore you’d be saving on processing costs,”” she said.
The study, titled “”How Business Buys,”” found the average value of goods and services moved by each company in the medium- and large-sized segment in Canada was $28 million but did not address growth projections.
It predicted the percentage of orders placed electronically, through e-mail, supplier Web sites, organizations’ extranets, marketplace sites and e-procurement, will grow from 15 per cent of total orders in 2003 to 40 per cent in four years.
Visa Canada also anticipated paper invoices received by companies will decline from 90 per cent in 2003 to 65 per cent by 2008. Electronic bill presentment, or delivery of electronic invoices over the Internet, will grow from two per cent of total invoices received last year to 14 per cent in four years.
Moreover, in a few years, commercial purchases paid for online will increase from 14 per cent to 34 per cent, as cheque payments will drop from 84 per cent to 65 per cent.
As for reducing the number of companies reluctant to part with their paper-based ways, Hurd recommended that they establish a strategy “”right at the get-go”” outlining their goals to reduce purchasing, billing and ordering costs.
“”And with anything, obviously, you have to get senior management to buy in to that strategy. And once you’ve established that, you need to build a business case to prove is it actually cost-effective.””
Spearheading activity in electronic payment, billing and invoicing are industry sectors such as hospitals, wholesale and retail trade companies, transportation and communications companies, and manufacturing, Hurd said.
B2B has begun to “”creep into”” the standard business practices of Canadian companies through one-to-one transactions with suppliers or customers, but for the most part the media has reported little on business-to-business markets or exchanges allowing large numbers of companies to buy goods through a Web site and that were all the rage a few years ago, said Tom Dagenais, a partner in the consulting group of Deloitte & Touche in Toronto.
Dagenais was hard-pressed to name industry leaders in the electronic business-to-business sector. But he did say that at the low end of the market, most of the growth enjoyed by eBay has been fuelled by “”almost every small business in North America selling their wares online.””
Apart from consumer-based surveys conducted over the Christmas shopping period, he said, no significant studies conveying the value of online transactions among businesses stand out in his mind.
Today very few B2B exchanges exist. Portals once run by CIBC, TD or Bell Canada, for example, shut down because they offered no “”compelling value proposition”” outside of cost savings in processing business transactions, said Dagenais. He said they failed to reduce risks of hackers penetrating users’ sites, improve pricing in the marketplace or automate transactions and automatically update users’ systems.
To some extent, Canadian B2B sites were doomed because they lacked the volume of transactions that’s typical of a sparsely-populated country, he said. “”North America is the minimum geography you can service. Most of the banks found that out.””
That said, “”You’ll never get an American to support a Canadian endeavour. It’s always going to be the other way around.””
Many U.S. exchanges succeeded, in part because “”they offered a broader set of value that was not just price. But they were also much, much more narrow in terms of the types of either goods or transactions or industries that they serviced.””