The business-to-consumer market for electronic bill presentment and payment didn't take off as many companies had expected. Without significant consumer adoption, early adopters of E-billing saw insignificant savings.
But things are markedly different in the business-to-business market, where the chief motivators aren't print and mail savings but increased efficiency and savings in areas such as accounting, settlement, and customer service. With new products and services for online billing, businesses can realize benefits such as automated credit assessments, online dispute resolution, and more-efficient transaction settlement, including workflow automation for approval and payment processes.
This results in improved cash management, giving companies the ability to better predict when payments will be made. Online billing for business customers also can reduce outstanding accounts and require less manual effort for billing, collection, and customer service. B-to-B E-billing doesn't require high customer adoption to deliver a return on investment--getting just a few large customers to participate in online billing may be enough to justify the investment in software or services.
Companies that already use electronic data interchange to facilitate transactions with their largest trading partners can now use electronic billing technology for online settlement with smaller, lower-tech trading partners.
Doculabs recently conducted a review of the online billing systems from a number of software vendors and service providers. This article provides a look at just how well these vendors are addressing the needs of business customers and how the market is evolving.
There's a growing trend for companies to require both software and an application service provider option from E-billing providers. CheckFree and Pitney Bowes' docSense offer both. This dual approach gives businesses the ability to start on a small scale via a hosted service with less initial investment and later migrate to software when business conditions warrant bringing the system in-house.
The scope of E-billing in the B-to-B arena is broader than bill presentment on the Web. Companies require the ability to process invoices--often tied to a purchase order--and the ability to handle more sophisticated processes for settling business transactions. A more accurate description of this market would be bill and invoice presentment and settlement.
Adopting an E-billing application makes sense for companies that want to retain control over their billing data and have the resources to deploy and maintain the system in-house. An application gives businesses the flexibility to add functionality and integrate the billing system with other companywide applications such as accounting, enterprise resource planning, and supply-chain systems. Some businesses also want to integrate billing with front-end systems such as portal servers, Web content-management systems, and customer-relationship management applications.
The ASP approach makes sense for companies that don't have the support resources required to implement a new application within their IT departments. They can start quickly, with minimal capital outlays, and the ASP gives them the ability to spread costs out over time. However, outsourced approaches generally lack the flexibility of an in-house deployment, which may be problematic for companies that are reluctant to give up control of their data or that have specialized application development or integration needs.
B-to-B billing applications can be far more complex than B-to-C applications. Both billers and payers have unique requirements that good systems must address in order to provide them with value.
For example, billers are demanding ways to encourage their customers to pay faster. With this in mind, many billing systems provide a wealth of notification and marketing capabilities that remind customers about payment due dates. These capabilities can be used to offer customers discounts or other incentives for early payments. This leads to more predictable receivables and improved cash-flow forecasting.
The bills themselves can also provide a channel for cross-selling and up-selling promotions that may increase revenue per customer. Most systems let billers create business logic that inserts conditional messages into the bills, providing a means for personalization and one-to-one marketing.
Another key requirement is the ability to resolve disputes online. If customers are willing to access and pay their bills on the Web, they should also have the ability to initiate a dispute process. Many vendors offer tools that automate the dispute-resolution process online, minimizing the need for customer-service representatives or accounting personnel to get involved in the cumbersome, paper-based process of manually handling and adjudicating disputes. Avolent, Bottomline, and BillingZone have strong support for dispute-resolution functions.
In theory, more disputes are resolved and paid within the same billing cycle, rather than being pushed into the following month's cycle, when these issues are dealt with online. Billing systems can let payers set up bills to require payment for items that aren't in dispute by a particular due date, while extending the due date for disputed items.
Simplifying online credit and funds-availability validation is also a key demand from billers. Many billing systems provide integration with online banking systems and networks to ensure the availability of funds before enrolling a consumer or company in the billing system or before formally accepting their payment submissions. Such capabilities minimize bad debt risks.
A key consideration for approval workflows is security. An invoice may include line items that were commissioned by different individuals or departments.
Payer companies need to be able to apply security to particular line items and ensure that only those people with the appropriate rights can see the data that applies to them. This is critical for companies that are pursuing cost accounting or chargeback procedures in their procurement areas--especially if the approvers are in different locations. BillingZone, Edocs, and YourAccounts.com are three companies you may want to investigate if this type of security is an important consideration for your company.
In addition, a payer company may have multiple invoices coming from one biller; it may even have multiple accounts with a single biller. It makes sense for the recipient in the accounts payable department to be able to view consolidated statements that include data from multiple invoices and to submit a single remittance from which funds can be allocated against different invoices or accounts.
Payers need the ability to pay by their preferred mechanism, which may include credit cards, electronic checks, balance transfers, EDI, or automated clearinghouse transactions. Payers also want the ability to schedule their payments, take advantage of rebates or other favorable payment terms, and generally improve the management of their cash outlays.
Finally, billers can offer additional value to their customers by providing payers with data-analysis capabilities, such as those found in Avolent, Edocs, and Pitney Bowes solutions. For example, if payer companies can conduct historical analysis of their bills to identify spending or consumption patterns, they can use this information for purchase-forecasting purposes or in negotiating a modified contract with a supplier. Likewise, analysis capabilities can help companies identify redundant or unauthorized spending.
Most of the vendors in the E-billing market offer systems for B-to-B users. Leading software packages in this market include those from Avolent, Bottomline Technologies, Edocs, and Pitney Bowes' docSense. These systems provide good workflow and online dispute-resolution capabilities that are crucial for both billers and payers.
Leading service providers include BCE Emergis, BillingZone, Fidesic, and Pitney Bowes' docSense. These vendors are highly focused on the business-to-business market and have designed their solutions around the accounting complexities and cash-management demands of both billers and payers. BCE Emergis, BillingZone, and Pitney Bowes' docSense offer strong solutions for large billers, while Fidesic caters to small-market billers that want to push their basic invoicing processes to the Web.
Vendors such as CheckFree and YourAccounts.com are just beginning to offer capabilities for B-to-B customers, but their offerings come from a consumer heritage--and using them for B-to-B applications generally requires considerable customization.
The basic E-billing capabilities--converting data from print streams for presentment on the Web--have become commodities. The real differentiators for B-to-B systems lie in the value-added capabilities they provide for billers and payers. Online billing vendors and service providers are quickly evolving their offerings to handle sophisticated application needs of companies doing business with other companies.
The underlying architecture of a billing system should be closely assessed before making a purchase. Ideally, a good system should provide an architecture that fits well in diverse IT environments, with the ability to run on Java2 Enterprise Edition-compliant application servers and to leverage the development skills that exist within the companies. While systems from Avolent, Bell & Howell, and Pitney Bowes' docSense are designed around object models that are in line with many IT organizations' strategies, many solutions don't yet offer this level of openness.
|Software Vs. Service For Online Billing|
|In-house software||Hire an ASP or business service provider|
Another major stumbling block is integration and standards support. For B-to-B applications, it's critical for billing systems to integrate with both billers' and payers' back-end accounting systems, ERP applications, or legacy systems. Some vendors are beginning to offer the ability to handle the input and output of data in standard formats such as XML and financial formats, including the Interactive Financial Exchange and Open Financial Exchange, but few are offering packaged connectors for major ERP systems such as those from PeopleSoft Inc. and SAP.
However, most of the systems we evaluated still require extensive custom integration to tie into back-end systems. Others rely solely on batch-file transfers to update systems other than the actual billing system. In addition, billing vendors generally have been slow to form partnerships with leading EAI vendors such as Tibco Software Inc. and webMethods Inc. to make the integration process easier.
Companies with sophisticated requirements should be prepared to pay $2 or $3 in custom development and integration costs for every dollar they spend on the technology.
There's been significant merger and acquisition activity in the online billing market during the past year as vendors scramble to build their market share and extend their offerings. But even as the billing software market sorts itself out, the vendors face new competition from E-commerce platform vendors and banks and financial-services firms.
The large platform vendors such as iPlanet and Oracle are rounding out their systems in an attempt to provide everything a company needs for E-business, including application servers, E-commerce platforms, and portal servers. Online billing is a logical extension to the total-platform approach.
At the same time, computerized billing-system vendors such as Amdocs and Daleen Technologies Inc. have incentive to maintain their role in their customer accounts. They provide platforms for billing and invoicing data and want to provide their existing customers with complementary capabilities for handling closed-loop transactions online.
The real players to watch will be the financial-services firms. Banks have major incentives to retain their commercial customers, protecting themselves from disintermediation and providing their customers with complementary offerings to their existing commercial banking and cash-management services. Many banks are starting to partner with online billing technology providers in an effort to speed their time to market.
What does all this market movement mean for buyers? If your company hasn't yet implemented an online billing system, your implementation options are getting more complicated. It's no longer a question of going with a software vendor or an ASP. Now you're faced with viable options from online billing vendors, E-business platform vendors, conventional billing system vendors, and commercial banks. It's certainly a benefit to have so many options to choose from, but customer choices often require a great deal of analysis. It's crucial that an IT department and line-of-business managers identify their business requirements first and then assess the IT infrastructure these products will be implemented in. Only then should a company set out to find the right technology to meet both its business and IT requirements.
Avi Greenfield is an analyst, Jeetu Patel is executive VP of research, and Joe Fenner is a senior technical editor with Doculabs Inc. (http://www.doculabs.com), an industry analyst and advisory firm. You can reach them at [email protected].