2006
How government plans to spice up its e-business
By
Andrew Baxter
Financial Times,
15 February 2006
Zanzibar, a new web system launched in the UK, should make public sector transactions more efficient.
Since the early days of e-commerce, hundreds of millions of dollars have been invested in online marketplaces designed to bring multiple buyers and sellers together, trading electronically to reduce costs and bring down barriers between potential suppliers and customers.
Many of these marketplaces failed to survive the dotcom bust, however, and those that are still operating have often failed to live up to their original vision. This may be because they are not fully electronic - and are thus less efficient - or because there is little or no added value for suppliers or buyers to participate.
In the private sector, there is also a competitive issue - collaboration with rivals to reduce costs on common components, for example, is not easy to achieve. That should not be an issue in the public sector but, even here, different methods and systems have often stymied collaboration on e-procurement between different government departments in the same country.
Addressing these challenges is the reason behind the launch in London today of Zanzibar, a managed service that backers hope will give a fresh boost to e-procurement across much of the UK public sector.
The Zanzibar project, named after the spice markets of Stone Town on the Indian Ocean island, is generating much interest among governments and public sector organisations from Canada to Hong Kong, keen to stimulate e-procurement to cut transaction costs. It could also be applied in parts of the private sector.
For all the activity on e-procurement by public sector organisations, as little as 5 per cent of their procurement is taking place online. Sarah Cotgreave, director of e-commerce at OGCbuying.solutions, says it is hoped that Zanzibar and related initiatives will lift this to 40 per cent of transactions over the next few years, measured by the number of transactions rather than their value. "The value of Zanzibar or any e-procurement system is its ability to do low-value transactions efficiently," she says.
OGCbuying.solutions, part of the UK's Office of Government Commerce, has been working for the past two years with a consortium led by PA Consulting Group, the UK-based consultancy, on designing Zanzibar.
It has had to recognise that many large government departments have already invested heavily in e-procurement systems. Rather than replace these, Zanzibar integrates with them, providing a range of incentives for buyers and suppliers. This is vital, says Ms Cotgreave, for e-commerce to thrive: "You need two partners to work effectively - we are not just taking a buyer-focused view now."
One clear improvement for both sides is that the new system really is fully electronic. In a typical existing system, says Veera Johnson, a member of PA's management group, at least one-third of the 20 steps involved in a transaction might have to be performed manually, adding days to the length of the transaction.
"A lot of e-procurement systems are doing e-orders, but that is where it stops," says Amabel Grant, Zanzibar programme manager at OGCbuying.solutions. "Invoices are still coming back in paper form." With Zanzibar, suppliers receive purchase orders online - with notification by text message to their mobile phones or e-mail - and "flip" them, as Ms Johnson puts it, into invoices that can be sent back electronically.
Potentially this could lead to faster and more efficient payment for suppliers, and is just one of several features designed to attract them to Zanzibar. "It can be difficult to get suppliers to provide their content [catalogue information] to e-procurement systems. They have had to provide it separately for all their customers, who all want it in a different way," says Ms Cotgreave.
With Zanzibar, suppliers can upload their catalogue information just once, retaining control over it but making it freely available to customers across the public sector. And once a supplier's information is on the system, other customers in the public sector can gain access to it. They can also view and use contracts that other departments may have made with suppliers.
For example, says Ms Cotgreave, a contract to supply teachers that has been negotiated in the education sector could be used by the Ministry of Defence, which also has education needs.
As more customers and suppliers join the system, the hope is that Zanzibar will become the biggest marketplace in the UK public sector, providing a single, standardised way for buyers and sellers to connect - like the Zanzibar spice markets - and a template for more efficient procurement in other countries.
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