How to select your e-invoicing solution provider – in an overcrowded solution provider landscape
Transformation of the e-invoicing solution provider landscape
August, 1st, 2024
As the market for electronic invoicing expands, more providers are entering the field. According to market research by the e-invoicing authority Billentis, this trend is expected to accelerate with each new e-invoicing mandate, predicting an estimated 50 new providers for each requirement. In Europe, the implementation of VAT in the Digital Age (ViDA) is predicted to result in approximately 1.000 active providers in the e-invoicing sector.
It is unlikely that many solution providers will be able to operate on a global scale within a short timeframe. Instead, it seems more probable that existing companies will form partnerships to consolidate services and applications from various sources, offering customers a new, integrated service.
As e-invoicing services become fully regulated over time, competition among solution providers could become intense. Differentiating from competitors offering basic e-invoicing services might be challenging. Thus, acquiring such services from third parties and focusing on delivering value-added services that meet consumer needs could be a wise strategy.
There are currently about 5.000 e-invoicing solution providers worldwide
From growth to consolidation – 5.000 solution providers
Based on the Global Payments Report 2023 by Boston Consulting Group, there are currently about 5.000 e-invoicing solution providers worldwide. This number is expected to decrease significantly over time. Solution providers must act quickly to achieve a critical mass within their target markets to remain competitive. In the short term, growth will turn into consolidation, making it crucial for providers to strategically position themselves in the market.
Traditional postal services, letter shops, and scanning services are among the sectors partially replaced by e-invoicing. The move to mandatory electronic invoicing is a big challenge for these providers and might reduce a large part of their current business.
For traditional Electronic Data Interchange (EDI) providers, the transition to e-invoicing may only require minimal technical adjustments, mainly related to data formats. However, they too must increasingly adopt four-corner models to stay competitive and relevant in the evolving market.
Where to start when selecting a solution provider
In theory, there is a lot to choose from, with thousands of e-invoicing solution providers on the market. Selecting the right e-invoicing solution provider is crucial for ensuring smooth financial operations, compliance with (e-invoicing/e-reporting) regulations, and achieving process efficiency. Here are some key considerations to keep in mind during the selection process:
Requirement Gathering:
Involvement of Key Departments: Engage finance, tax, and IT departments to gather comprehensive requirements. Each department will have unique needs that must be addressed.
Framework for Requirements: Utilize a structured framework, such as the MoSCoW method, to prioritize requirements. This helps in identifying critical needs versus nice-to-have features.
Request for Proposal (RfP) Process:
Clear Documentation: Prepare a detailed RfP document that includes the scope, business overview, key priorities, and specific questions for vendors. This ensures clarity and helps vendors understand your needs.
Stakeholder Review: Have stakeholders review the RfP to ensure all requirements are captured accurately and to build consensus on the list of potential vendors.
Vendor Evaluation:
Response Analysis: Analyze vendor responses to the RfP systematically. Focus on how well they meet the specified requirements and their ability to comply with regulatory mandates.
Demonstrations: Organize demo days where shortlisted vendors can present their solutions. Use a consistent agenda for these demos to allow for fair comparison.
Scorecard Evaluation: Develop a scorecard for stakeholders to rate each vendor based on predefined criteria. This helps in making an objective decision.
Workshops and detailed assessment:
In-Depth Workshops: Conduct workshops with the top vendors to delve deeper into their capabilities and experience. These sessions provide insights into the vendor teams and their technical expertise.
Real-World Scenarios: Ask vendors to demonstrate how their solutions handle real-world scenarios pertinent to your business. This can highlight practical strengths and weaknesses.
Technical Compatibility and Integration:
System Compatibility: Ensure the solution is compatible with your existing IT infrastructure. This includes checking for integration capabilities with your ERP and other financial/CRM systems.
Data Security and Compliance: Verify that the vendor complies with relevant data security standards and regulatory requirements, such as GDPR for European companies.
Scalability and Support:
Scalability: Assess the solution’s ability to scale with your business. It should handle increasing volumes of invoices without compromising performance.
Vendor Support: Evaluate the level of support offered by the vendor, including availability of customer service, training, and technical assistance.
Cost and ROI:
Cost Analysis: Compare the cost of different solutions, including initial setup, licensing, and ongoing maintenance fees.
Return on Investment: Consider the potential ROI from improved efficiency, compliance, and reduced operational costs.
What’s next?
Selecting an e-invoicing solution provider requires thorough preparation, clear communication, and systematic evaluation. Following best practices in requirement gathering, RfP preparation, and vendor assessment ensures you choose a provider that meets your business needs, regulatory requirements, and long-term goals.
As the market for electronic invoicing expands rapidly due to the upcoming ViDA regulations, competition will intensify, making differentiation challenging. According to Billentis, the overall number of 5.000 providers will likely decrease due to consolidation in the coming years. A strategic, well-structured approach will position your organization for compliance and future growth in this evolving market.
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