Digital documents the easy way

Digital documents the easy way
Business Direction caught up with Jacek Mikus of Comarch, one of Poland’s biggest EDI providers, to find out what’s happening in the Eastern European digital document management market.

BDEE: Tell me a bit about what Comarch does in terms of document management.
JM: Our core market is in retail. A major client is AHOLD – one of the largest retailers in the Netherlands, that also operates in Eastern Europe. They have a very strong position in three countries in particular – Poland, Croatia and Slovakia.
We handle their billing. We take all the documents for the three countries into one central place. We scan the paper documents and convert them into electronic format, we archive it and we also handle lifecycle workflow. This is a huge operation – we are handling around 250,000 invoices per month. Retail chains in Poland would typically only have between 30,000 and 100,000 invoices a month.

BDEE: So is invoicing the main area where companies in Eastern Europe, particularly Poland, need help managing their documents?
JM: Invoicing is the main area at the moment. But I think that may change. All invoicing used to be by paper or hardcopy and that was largely because there was no legality surrounding electronic signatures. This caused huge difficulty as all that paper had to be archived and easily retrievable.
However in 2005, Poland legitimised electronic signatures and so electronic invoicing has really taken off. It’s a big boom area right now in Poland and Hungary.
There are two main ways to go about paperless invoicing. The first is to use the electronic signature and send the invoice by email. The tax office and all the authorities now have the facilities to recognise and accept this method of invoicing.
The other way is to use EDI (electronic document interchange) providers. This allows you to send certified invoices electronically. Currently 99.9 percent of paperless invoicing in the retail sector in Eastern Europe takes this approach. For example one of the largest cash and carry operators, Makro, uses this method.
Of course with paperless invoicing there is no need to worry about physical archiving as it is all done electronically.

BDEE: So what is the market for EDI providers like at the moment?
JM: Well we are one of the biggest EDI providers in Poland, Russia and the Ukraine. Right now there is a lot of growth in the EDI market in Eastern Europe. I don’t think this is just because certain countries recently joined the European Union, although perhaps that did help. But I think the main reason is that the markets are developing and the technology is developing.
There is a big gap between what we have now in Eastern Europe and what existed 10-15 years ago in Western Europe. Western Europe’s e-invoicing technology developed using VAD? Networks whereas now in Eastern Europe we are using the internet as the primary network and it is cheaper, more flexible, more secure and, of course, everyone has access to it. So I think the boom is the result of a correlation between market growth and technology.

BDEE: So is it fair to say that Eastern Europe has benefited from the West’s mistakes?
JM: Well, yes, I would say that Eastern Europe has learned from the market. It is the same at the moment between Russia and Poland in the retail sector. In Poland the EDI boom started in 2001/2, but it did not take off and expand as quickly has it is now doing in Russia. The retail markets in Poland and Russia are very similar, so Russia has taken advantage of Poland’s learning curve and technology development.
In 2002 in Poland four retail networks were connected in three years, in Russia there are currently 18 retail networks with 1500 suppliers! Now you might say that is because Russia is bigger, but the vast majority of the EDI uptake is in the big cities like Moscow and St Petersburg. So the EDI market in Russia is expanding and enlarging more quickly than in other parts of Eastern Europe.

BDEE: So do you see a point where the EDI market in the retail sector will reach saturation?
JM: The reality is that it has slowed down already in Poland. And the reason is simple we have connected everyone! But that’s not really the whole picture. Just because everyone is connected to an EDI provider doesn’t mean that work stops – the service still has to be provided to those customers year on year.
And the sorts of services the customers demand is changing and developing. They might start with electronic billing, but graduate to scanning services and archiving. Banking systems are also getting involved now. But you cannot offer all these complex services in the beginning – they require a mature market. So really the only limit is the imagination of the providers, especially in a competitive marketplace.
In Russia I think the market for retail will slow down in around three years.

BDEE: So is the EDI provider market in Eastern Europe competitive?
JM: Yes. It’s the same as in the EU. And of course we have to compete with Western European providers who operate in our market. There is always one company that is on top and that company will be on top because it is widespread. It is exactly like the telecommunications market – you cannot focus on just one customer, the service has to be implemented everywhere.

BDEE: Are the retailers that have signed up to EDI providers making savings?
JM: Yes – because if they didn’t they wouldn’t use them. The big companies like Proctor & Gamble, Unilever and Pepsi Cola are electronically exchanging thousands of documents every month. They have a lot of different resources to tie in, so it is a very complex operation. For them EDI providers make sense, they can be sure that their documents are online, on time.
Smaller companies, like a local bakery for example, might not see as much advantage in using an EDI provider. If they only send out three or four documents a month, they can easily manage it in-house. But, if they want to do business with the bigger companies, like the Unilevers or the Pepsi Colas, they have to use an EDI provider, so it is an advantage to them in that respect.
Also smaller retailers can grow faster because there are fewer mistakes in their logistics – but for them it is a long-term benefit, for big companies it is more immediate.

BDEE: So is accuracy another big benefit to companies?
JM: Definitely. Around 40 percent of paper invoices are inaccurate in some way – the order number doesn’t tally or the amount is wrong. In one retail network I saw two entire floors of people manually processing invoices, of course there will be mistakes! With EDI however, the number of inaccurate invoices is reduced to 3 or 5 percent and you can manage it with 10 – 20 people. This is also good for customers, as they are happier receiving accurate information.
At AHOLD they now use a scanning system, so people are now working in a completely paperless environment – everything they need is on the computer on their desk and it is much more efficient.

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