In this episode, AVP of e-Invoicing at Sidetrade, Bryan Pederson and CEO and Chairman of the Board of OFS Portal LLC and Chair of PIDX International, Chris Welsh discuss a global initiative to improve the way buyers and suppliers transact on the open market, what global e-Invoicing standardization looks like, and the trends towards continuous transaction controls and upcoming e-Invoicing mandates.
In this episode, AVP of e-Invoicing at Sidetrade, Bryan Pederson and CEO and Chairman of the Board of OFS Portal LLC and Chair of PIDX International, Chris Welsh discuss a global initiative to improve the way buyers and suppliers transact on the open market, what global e-Invoicing standardization looks like, and the trends towards continuous transaction controls and upcoming e-Invoicing mandates.
Welcome to Finance to Futurist, a Sidetrade podcast series on how innovation data and AI are disrupting order-to- cash.
Natalie Silverman:Hi, this is Natalie Silverman for Sidetrade. Welcome to Finance to Futurist. On today's episode, we're discussing a global initiative to improve the way buyers and suppliers transact on the open market. What e -Invoicing standardization looks like in both EMEA and North America and the trends towards continuous transaction controls and upcoming e-Invoicing mandates. Please welcome AVP of e-Invoicing at Sidetrade Bryan Pederson, and CEO and Chairman of the Board of OFS portal LLC and Chair of PIDX International, Chris Welsh. Good morning, Brian and Chris. And thanks for sitting down for Finance to Futurist.
Bryan Pederson:Good morning, Natalie. Thanks for having me again on on the podcast. today. I'm quite excited for our guests, Chris Welsh, and Chris Welsh and I have worked together for the last gosh, almost a decade, and some really exciting things coming through, especially on the invoicing side right now on a global scale. And so I wanted to introduce Chris Welsh. And Chris, you could just kind of give a quick I know you wear many hats, but a quick overview of what you're working on today. And kind of where you came from.
Chris Welsh:Sure.Thanks, Bryan, thanks for allowing me to attend your podcast as well. I've been working within the oil and gas industry for at least 25 years now, if not longer. And most of that has been spent in the digitalization of the supply chain. I used to work for a service company. And then also went and did some independent consulting on deployment of e-Commerce on a global basis with some of the largest operators in oil and gas. And then I moved into this role as CEO of OFS Portal seven years ago. So I've been in this role now for seven years. And our job is very much to try and implement a standardized e-Commerce deployment model in oil and gas. And that's on a global basis. And you know, and that's why you and I have been working together on this for, as you say, almost a decade.
Bryan Pederson:Well, yeah. And when I first came into that group, the PIDX group, the challenge, or I guess I didn't quite understand what the challenge was, with regards to standardization until I started to see more and more of these customer portals popping up and really interesting ways of doing business oil and gas, I think we can both share that. The agreement that it sometimes felt like we were way behind most industries with regards to how we transact and I guess, in knowing that and and seeing how this has progressed, because like I said, in the last decade, I've worked with you, we've seen a lot of progression in digitization, but what would you say is the three biggest challenges that we faced out of the gate and looking to standardize.
Chris Welsh:Currently, I think the three biggest ones, obviously, the variety and customer requirements, even though we've got standards available, and we've been pushing the petroleum industry data exchange standards as a kind of global implementation model, every operator and every customer seems to want a slightly different model. And then they tend to implement their procurement through a third party platform, you know, a cloud service provider, and each of those cloud service providers has a slightly different implementation model, some support order and order response doesn't just your invoices, you know, so it's very difficult to have a standard implementation model, when there's so much variety in what the customer wants. That's one area that we find is a challenge. The other one is around adoption. So we have great adoption in North America, you know, 80% of some of our members business is already transacted electronically or digitally, we're enabling about 50 new oil companies a year into the seed procurement model. And that's been steady for the last five years, we've got over 530 operators now that are in this model. So adoption is good. But on a more global basis, adoption tends to focus on when a large operate multinational oil company has a procurement program that it rolls out worldwide, you know, and our members would connect to that procurement platform or that procurement model in Egypt or in Angola, etc. So the adoption outside of North America, I think, is another challenge for us, as global organizations have, you know, one operating model is a challenge. And then I think that probably the biggest challenge is the portal. So most buyers stand up a portal to allow suppliers to connect to them, but not these third party networks. When they develop them, they are actually working for the operator and then working for the buyer. And so the web portal approach to digitalize the transaction is an issue, you know, because it's if you like the least cost way of doing business, but it's kind of like the lazy way because most of the companies that we deal with in oil and gas, I've got large implementations of ERPs and they don't want to be you know, keep punching the same transaction into the ERP and then having to go and do this again in the customers portal. So providing that electronic integration is always a challenge for us. And it's something that we push as a model. And we've been doing that for like 20 years now.
Bryan Pederson:So sticking to oil and gas, I mean, I think there's something that and I do want to move on to more of a global topic, because what I have seen and witnessed in oil and gas, and I think largely due to the efforts that your team has put together, both with the OFS portal, but also PIDX, we've created a standard a format standard. But it seemed to me that the more we had meetings and gatherings and brought in the suppliers and the buyers and the networks, the AP networks, but also supplier networks, that there was started to be a collaborative effort. And everyone was kind of on the same page that this doesn't have to be difficult, we should be able to work together. And I think the birth of that was coming from PIDX. So when we created that standard, do you believe that started to drive more adoption from the transacting that works, the supplier networks and the buyer networks? And is that continuing to grow today?
Chris Welsh:It is yeah, like I said, we do 50 plus operators a year, we roll out the PIDX model, you know, so that's the integration connection type that we use, are we back that up with things like the syndication of contracted data in the catalog management side of things in support of those procurement platforms. The issue that we've got now with with the oil and gas model is that most organizations, oil and gas is such a cyclical business, boom to bust kind of thing that a lot of suppliers are looking at ways of taking their products, or their services and actually using the same products and services in industries outside of oil and gas. So the PIDX model is great for oil and gas, because we've all agreed to use it, but that's not going to kind of cut it when we go into pharmaceuticals, or we go into construction, you know. So it is it is good for us. We want to maintain that oil and gas, because that's where we've come from, and where we still see a big growth. We've got 500 plus operators in our network today. But there's 2500 operators alone in North America, you know, so well, 50%, you know, we've worked with all of the larger organizations, and we're now kind of sweeping up and enabling the mid tier, but there's still another 2000 oil companies to to engage with. But also we've got the challenges to move to other technologies as well, as our members move to different industries and diversify away from the cyclical oil and gas boom bust. The other thing that we've got is obviously the large global organizations working in many countries, there's about 60 countries that are going to implement some form of electronic invoice mandate over the next three years, so that the governments are actually on a global basis are outpacing the kind of customers enablement, if you like. So we have to take that into account. And our models now covering that what we call continuous transaction controls, or CTC, that government invoice tax reporting. But you know, that's another challenge that we're faced within the office ball supplier network. And we've, we've enabled those we have, we have a standardized way of doing it. And we actually have been able to implement our pie decks model as the seed if you like of the invoice and then the last mile gets to the country government format.
Bryan Pederson:And that's a great kind of segue to where you're at today. Because I know with your roles with OFS portal and PIDX, it seems like people have been watching and seeing how, you know, if we created some level of standardization, in oil and gas that we know is still evolving, looking at more on a global scale. And this is something that you're also a part of, I believe you're working with the peple group and the global interoperability framework, but also the business payments coalition. And really these are it's their centralized organizations that are nonprofit and looking to do what we've done, or what we've tried to do so far in oil and gas, and create more of a standard framework. Where do you see that going? Now that we know we've seen and address some of the challenges in oil and gas, but on a global scale? Are the challenges still there as well?
Chris Welsh:Yeah, it's a good question. It's very tricky to answer really. So what we did for oil and gas, we kind of took this global approach that we want to have a standard for the whole implementation of e-Invoicing, or e-Procurement. But there's obviously regional variations and the newer kind of e-Delivery networks that BPC, peple the global interoperability PEPPOL framework, we do see that they're all trying to implement a similar technology stack. And so it's a bit like, everybody's suddenly decided that we've got a railway and it's all at the same gauge now. So we can all actually interoperate, because we're using the same stack or technology stack that's going to underline the message exchange and the delivery of the standards. So we're doing a lot of work in that the global interoperability framework team itself is ensuring that these networks where possible, run that same technology stack and actually cooperate on the development of it, but it seems a bit daunting to actually get this and to actually have all of the ecommerce platforms, and all of the e-Commerce deployment standardized across the globe, it seems very daunting. But we have models in this world today that actually have already cracked this. If you look at the mobile phone network at one time, you had to get on the right network to speak to your contacts. And then the regional phone carriers, similar to what we've done in GIF, and movies, volunteer groups got together and said, you know, if we can allow roaming, you know, we can have my network of customers could talk to you on network of customers, and we get this network effect. And one time, you know, you couldn't use a US phone in Europe. But that's now been cracked, right? So because everybody's collaborated, everybody's seen the value of being on the right network at the right time, and also connecting, so it would be absurd now to think that you couldn't phone, anyone in the world from a mobile phone today, you know, but it's an evolution, right? It's come from being on the right network to talk to your immediate customers then been able to roam across networks, and then actually been able to interoperate across any network on any platform in any region. So that global approach and regional implementation is gonna take time. But we've got a lot of the right organizations working together to make it happen. There seems to be this real drive now that people have realized that the market is so enormous that they don't have to hold the customer connection to run some, if you like, and not allow integration with other platforms, the market is so massive that it will support many, many networks, and many, many service providers, and it's still growing. So 60% of the US business is still transacted by paper, you know, that's the largest industry area, it's more in China, it's even worse in China. So the market for invoicing and e-Procurement, and the delivery of digital documents is massive. So I think that's the approach to the future, if you like. So we're going we're putting a lot of time and effort into making sure that the global approach works because as our members core business is still oil and gas, and we have our oil and gas model, they are diversifying, they do want to connect to logistics companies, pharmaceutical companies, construction, engineering, electronics, etc. So an our oil and gas model is not going to work for that. So we need to make sure that we can have a cross industry platform that's available on these ie delivery networks that are sprouting up in Europe, Scandinavia, Australia, New Zealand, Singapore, us with the BPC, for example. We've all now decided to kind of do it the same way. So it means we can have a global approach, and then a regional implementation. So it's slightly different in Scandinavia, it's slightly different in Europe, but it uses the same rails. So we can, we can make sure that our global approach even though it's going to be implemented regionally, it's gonna work for us and for our members.
Bryan Pederson:And I love that analogy that you use with the cell phone networks, I've often brought that up as well. And I remember those days of can't call them because they're on a different, different network. And I guess, you know, in understanding that, and that, I think is one of the biggest challenges that we overcame is that we don't have to be exclusive by region by country. And it's like, we have the Sprints, the Verizon has all of the companies in the room talking about how we can make this better for the end user, the customer, and we're talking about both buyers and suppliers. I had recently attended one of the invoice exchange summits. And it was quite an interesting flavor of the room because they were competitors from the business that we're in, and even some of the other technology providers, it was a competitive landscape of people, participants, but they all wanted to work together to address exactly what we're talking about here. And so there is another one coming up. And I would say because you've been a part of this you presented at these types of exchanges, or this summit rather, there's one coming up in in Lisbon. Correct?
Chris Welsh:Correct. The Exchange Summit in Lisbon. They run in different places. So from Singapore recently had one in Miami for the US market and Latin America, and one in Lisbon. It's coming up in September, and they started in Europe, or at least 10 years ago, I think at first one I went to was in 2006. So they've been going for a long time. And the European one tends to get over 250 service providers, we all have a common aim, if you like is to try and digitalize the market, right? That was a paper move forward. And now that there's realisation that there is almost a shining light at the end of the tunnel of interoperability, it's not a train, but it is actually going to move us forward when people are really excited and getting involved in it. And it's a great place to go and just network with people get some up to date information on what's available. There's lots of case studies on things like implementation of Apple in different countries, implementation of customer requirements and cross border, things like that. So there's a lot of great opportunities there. If you can get to one of these exchange summits will be networking with people that are already either doing this or are helping to develop the global products.
Bryan Pederson:Yeah, I think it's what I found on the last one I did attend to one in Miami was just seeing some of the buyers and suppliers, the willing partners that know that they need to evolve their business to transact on this, this framework. I think one of the challenges or one of the daunting questions for them is I don't have the technology, I don't have the team in order to implement something like this or to be a part of this, because they don't have the technical expertise. But I guess in your opinion, and what you've seen so far, doesn't really require a lot of technical advancement or changes for the organizations that we're looking to engage
Chris Welsh:It's an interesting question. If you look at it from with. a kind of a supplier and a buyer perspective, the buyers, they already kind of contract with a technology provider or an e-Procurement platform. So they already kind of naturally have a service provider to do their supplier integration, right. So they, they have aggregated all of their digital connections through a single point, or an access point. And you know, our members, for example, will connect with their technology to these different service providers in like a three corner model. So suppliers call the one sending the invoice to the buyer's agent con to get eventually gets to the buyer corner three, within oil and gas, we have 10s of 1000s of these three corner connections in a very expensive to manage, if we could have a supplier aggregation point where the supplier can connect to an access point. And that access point talks to all the other access points, they wouldn't have to have the three corner model, they could have what we call the four corner model, the supplier is gonna one sends his invoice via his service provider to any of the other service providers as corner three, and then onto all of the biases corner for all of the buyers that are connected to those access points. So it's from a supplier or a buyer perspective, it actually simplifies your integration, you're not managing hundreds, if not 1000s of three corner connections, and standing up a big integration team to make sure your invoices delivered. You've contracted with a service provider to do this. So actually simplifies it in terms of the access points themselves become currently from an industry where we have lots of siloed procurement platforms, and my procurement platform is better than your procurement platform, come and join me because I'm giving more services etc. This focus on a model for service providers have realized, you know, I can get a network effective, my customers can talk to your customers on your network. And I've actually maybe doubled or tripled the size of my potential trading partner network, I'm going to satisfy the needs of my customer who I'm already engaged with by connecting to customers on other access points, or trading partners and other access points. So I don't think the technology is difficult is the delivery network. And it's a standard set. As I said, it's the technology stack standard rails with a standard gauge that anybody can implement. The big shift we've seen within oil and gas is back in 2000, when we started doing all of their implementations, the early implementations of e-Commerce, there was no networks, there was no supply networks to be able to engage with, you know, another site trade and its predecessors that have built up the supply and network side of it are doing a good job now have been able to provide services for the small suppliers. But the large suppliers, it was strategic for them, they built on their own technology stack, and they built their own integration management teams, things like that wasn't anything to contract with. If you were starting out today, you would just go on contract with a service provider, that maybe it's global, if you're an oil and gas, you know, maybe it's already got some kind of integration or capability to the government invoicing initiatives and the different countries that you would operate, because it's available today, you can keep it very simple. So the service provider is a very key component. And all the work that we're doing in terms of the global interoperability framework, making sure that the various delivery networks on the regions can interoperate, and the all the service providers that are supporting are willing to adopt it and move forward with it. That's going to make it a lot simpler for people to be able to get access to the network and hence transact with hopefully, you know, everybody on the planet, if it's gonna go that like a phone network.
Bryan Pederson:So the last part, I guess, is, you know, in looking at driving this adoption, because this is something as multiple organizations that you're you're part of, but I had heard this before, especially with the ofs portal group, what was the key driver? What was the incentive to embark on something like this? And yes, it's great to have technology and things working together. But what was the key driver the incentive, and what should be for organizations that are interested in doing this or just even looking into it?
Chris Welsh:Yeah, I don't want to kind of keep coming back to history. But what we saw when we implemented e commerce as global suppliers back in 2000 timeframes is we were very cautious. We wanted to see where this thing was going. We've got to the point where we realize every time that we integrate with a customer and send electronic invoices, we get a reduction in DSO, days sales outstanding. So there was a real business benefit it and there was a tipping point around about 2005, where we suddenly said, you know, this is great, you know, this is actually helping our bottom line, our cash management, we're reducing DSO on all of the invoice integrations of our customers, and it started to be driven by the supplier. Now supplier was starting to ask the customer, Hey, when are you going to start an electronic invoicing? You know, it's a benefit for you more accurate, not handling paper more efficient, you can enable your spend management, you know, a line item level, but also there's benefits to the supplier. So the presentation, the invoices, etc, you know, the higher first pass rate for invoices being accurate and paid the most for paper, for example. So there's great benefits and suppliers on the buyer side, you know, they want if they're going on any procurement route, they want as many of their suppliers to be digital as possible, because they get improved accuracy, they capitalize on the process improvements, their digital enablement of their e-Procurement, or their procurements processes work. So they want as many suppliers as possible. And then as we said, from the service providers, this network effect that you know, I don't have to have the biggest cluster of suppliers now to attract customers, if I can connect to somebody else's network as a partner, customers and my customers are now capable of transacting, there's a network effect there. And then also just simplification or an oil and gas service provider and you want to suddenly get into logistics or your customers are pushing you to be in different industries. There is one approach now, you know, this kind of global interoperability framework approach says for multi industry or cross industry networks, they can now interoperate in a standard manner. There's not a oil and gas model is not a logistics model, does not pharmaceuticals model have actually said no, now we've got some common rails across all industries that can open up in Arkansas as a service provider struggling to get into an industry going down the common route, if you implement any delivery network wouldn't be there a smart approach, really it would open up for the service provider.
Bryan Pederson:Yeah, that's some great points. And I think the incentives on DSO, that's certainly something we've seen with our own client base, but in the industry as a whole. And it's what we all talk about when we meet and gather with organizations we're a part of, I love that we're moving towards a plug and play mentality. And everything should just work together. It's a challenging initiative. But I think, you know, kudos to you and all the things that you've done with the ofs portal group and, and introducing pipe x and a lot of the initiatives and successes we've seen in oil and gas. And I'm looking forward to seeing how the global scale rolls out. And I think already we're seeing some successes there. So there's also a webinar, I think, coming up for the PIDX group here in the in the short term.
Chris Welsh:Yeah, the PIDX group, you know, it works on a lot of things. So not only did it do all of the procurement stuff, but it is working on some of the emissions reports. And you know, and that's trying to make sure that that's embedded in the transactions as well into the supply chain. So that kind of scope through reporting that's happening, which is going to be required from supplier to buyer, you know, we can capitalize on that strong integration that we've got today between supplier and buyer by augmenting the procurement and the digital transactions and adding in the emissions reporting data on what we call a bottoms up approach. So that's where it's the emissions at the line item level, if you like and PIDX has an upcoming webinar that is all about the journey to net zero on emissions reporting, and how they're enabling that in the supply chain. So well worth looking out for if you go to PIDX.org and look under Events. I think you can find it there. Yeah. And Bryan, we we like your support all the time. It's been great working on. Yeah, I look forward to continue and I'll see you in Lisbon.
Natalie Silverman:Thanks, Chris and Bryan, for your insights into the future of finance. For Sidetrade, this is Natalie Silverman.
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