Earlier today, Vishal Patel, Director of ePayables Research at Ardent Partners posed an interesting question on Ardent’s new site, Payables Place, regarding the amount of paper invoices in the marketplace today and whether or not that will change.
We’re sharing Vishal’s article here in a virtual simulcast [Sidebar: Those that have a particular P2P or AP interest should add Payables Place to their resource list].
by Vishal Patel
Some years ago, the data capture market consisted of companies such as Kofax, Brainware, Captaris, DataCap, and Captiva, among others. Some of the companies in the space were sizable, many were small, but almost all were independent companies focused specifically on data capture. The current market has changed quite a bit with many of the independents now swallowed up by much bigger fish – for example, IBM acquired DataCap, Lexmark acquired Brainware (read our analysis of that acquisition here), Open Text acquired Captaris, and EMC acquired Captiva. This has created an interesting paradigm or paradox in the market. On the one hand, we now have big players joining the data capture market while the eInvoicing market has also been heating up. This gives us two groups of providers: one group betting on paper and the other betting against it.
Now, it certainly makes sense that the larger providers want a taste of the capture market. From their perspective adding a layer of automation to paper-driven business processes (whether flowing into, out of, or within the enterprise) and introducing structure, higher levels of control, visibility and accountability presents is a sizable opportunity. They correctly see this as a growing market and, in a sense, are betting that paper is not going anywhere within the AP world.
But, there is a powerful argument against paper invoices – they are inefficient and costly, they add additional layers of work in the AP process, they require more resources, and they make it difficult to gather data and improve visibility into the business process. If you believe that view, why go through the trouble of printing paper invoices and then scanning and capturing the data, when an electronic, touchless process can be vastly superior. There are, of course, eInvoicing providers such as Ariba, Basware and SciQuest that are betting against paper in this market. And even though these providers do offer scan and capture solutions/services, their focus on providing eInvoicing solutions and leveraging (and continuously growing) their networks to drive business (and business processes) is a bet against paper.
So who is going to win the bet? In the near term, I’d say both.
It is our view, that in order for an enterprise to successfully transform its AP function, it cannot rely solely on one solution (either eInvoicing or on a scan and capture service), it is a combination of both that will ensure the greatest value. Without mandates such as those in countries like Brazil, Mexico and Argentina, it is very difficult to on-board a large majority of suppliers onto an eInvoicing platform. Now, there are some companies that have been able to on-board a high percentage of suppliers but, these groups can still benefit from a scan and capture service that manages the remainder of suppliers that continue to send paper invoices.
Combining an eInvoicing initiative with a scan and capture service covers all angles. You can attempt to maximize the percentage of enabled suppliers and the percentage of eInvoices that are coming in vs. paper; but, you can also transform the paper invoices into electronic format for easier processing. Most eInvoicing providers offer a scan and capture service or partner with third-party specialists in this area (since the fee is usually a per invoice charge, the investment is manageable). Two providers of scan and capture services that come to mind are Scan One and BancTec.
At the moment, there are plenty of opportunities for both groups in what remains a largely unsaturated market. Of course, there are also promising new markets. Over the long-term, however, if we look at the global trends of (1) government mandates and the implementation of eInvoicing standards, (2) the environmental benefits of removing paper and (3) some corporations beginning to charge suppliers for sending paper invoices, it does seem like a long-term bet against paper is a smart one….. But, this will take some time – much work remains to be done.