But even though EIPP remains a slow-moving proposition for companies not fortunate enough to have a ready-made network, observers believe it is gaining momentum. About 16% of the Fortune 1000 are now using some form of EIPP, according to Paystream Advisors of Charlotte, N.C., up from a negligible 10% only a year ago. Even more encouraging, most of those who have adopted EIPP report a relatively high degree of satisfaction with the new system. "We expect it to move to 20% or even 25% in the next 12 to 18 months," predicts Henry Ijams, managing partner at Paystream Advisors. "It's starting to move from early adoption into the mainstream," he observes.

One key to the new success of EIPP: Vendors finally acknowledged the fact that it was a mistake to start with the biller community. The companies that want electronic invoicing are the payers.

That's why Thomas Glassanos, president and CEO of Xign Corp. in Pleasanton, Calif., is smiling. Xign was quickest to market, almost a year ago, with a commercial payer-centric EIPP service that now has 15 customers, 10 in full production, settling $350 million a week with 8,000 suppliers (and adding 150 every week), he says. The biggest selling point: "We'll halve the cost of your A/P operation. " No data entry is required, and the 10% to 20% of invoices that are disputed can be resolved with much less effort, he notes. And the communication speed of EIPP means that payers can take advantage of valuable prompt-pay discounts they missed before, he adds. " Ninety percent of the work is done on the A/P side," Glassanos points out. "The billing side is not where the big gains come."

Admittedly, 15 payers isn't what anyone would call massive penetration of the potential market. But as Glassanos would tell you, finance executives are "skeptical and conservative by nature. They want to see proof that it works first."

Xign greases the skids for billers by taking invoice exports from their billing systems in whatever format they use and then converting them to a single stream of incoming invoices in the payer's preferred format. It's easier for billers to sign on because they don't have to do much work on their end, Glassanos claims. It's also free for billers; for payers, Xign offers a pay-as-you-go outsourced solution with no big up-front costs. Still, 100% supplier participation is out of reach for most companies. But if the 20% that supply 80% of the purchases play, then the ROI case is compelling, he insists. Billers have three options with Xign: manually fill out a Web form, download an invoice file or flip the buyer's purchase order.

Commercial EIPP products mimic internal systems built by leading-edge companies. "We didn't invent this concept. We learned it from IBM and Intel, who have been doing it for years," Glassanos says. And now, other EIPP vendors are following Xign's lead. Pittsburgh-based BillingZone, now a brand name under First Data Corp.'s Velosant division, recently introduced its payer-centric offering and now finds that 80% of its sales are to payer organizations and just 20% to billers.

Holding the Hand of Payers

For example, Latrobe, Pa.-based Kennametal Corp., a $1.8 billion metals producer, is receiving virtually all of its invoices today in an electronic feed from BillingZone in the EDI 810 format. The feed goes straight into its SAP A/P system for application, reports Dean Hoffman, manager of customer-vendor support services. Kennametal's suppliers can choose how they want to invoice, but they have to go through the BillingZone doorway. About 20% have chosen to continue mailing paper invoices, but BillingZone, not Kennametal, receives them and then converts them to the electronic 810 format, Hoffman says.

An initial screening catches incomplete or non-conforming invoices and returns them immediately to be fixed, so the invoices reaching Kennametal have had an initial scrubbing. That's progress but not victory, Hoffman says. "We want them to flip our purchase orders, to see that document and select what they have shipped and are billing for. Then, the three-way match will be unnecessary, and our hit rate will be 100%."

Like Xign, with which it now competes, BillingZone takes invoices from suppliers in any format. In fact, 10% of Kennametal's invoices come to BillingZone as faxes and then have to be keyed in. But regardless of how invoices are delivered, the service is free to billers unless they want customized reporting back, explains Todd Barnhart, BillingZone's senior vice president for sales and marketing. Kennametal picks up the tab.

Other biller-side EIPP vendors moving into the payer-centric turf include Bottomline Technologies, BCE Emergis and Citigroup, an aggressive reseller of Bottomline's software. And although many ERP vendors have stepped away from actively offering EIPP, it remains "mission critical" for SAP. The company is writing payer-centric software that should be ready in early 2004, reports Philip Say, product marketing manager. "We addressed the A/R side first, but our next foray will be into the A/P side. The same technology can be made to work both ways," he reports.

Currently, SAP customers can buy the latest upgrades and send out electronic invoices, but it's not cost-effective as a stand-alone product. So far, only 50 to 60 of the ERP giant's 18,000 global customers are actually using it. However, Say claims that new prospects are asking for EIPP, so being able to offer it is a significant selling point for SAP's big financial systems.

Deutsche Bank, which got a slow start in EIPP, is another player pushing for market share with vastly improved offerings. Later this quarter, the bank expects to roll out a payer-centric option that will be bank neutral, so an existing customer relationship won't be critical, and will feature heavy integration with ERP systems. "Another Deutsche Bank approach is to integrate this service with the bank's supply chain financing products," says Hooi-Him Saw, global head for EIPP for Deutsche Bank Global Cash Management. "This has the advantage of delivering value to our clients, but more importantly for them to generate value for their business partners through a choice of financing terms, opportunities for cash-flow improvements and process efficiency."

Biller-centric Payoff

All this is not to say that vendors are giving up entirely on biller-centric sales, and the biller-centric side still has its success stories. For instance, BCE Emergis, which works mostly through banks such as JP Morgan, Bank of America and Bank One, has signed up 26 billers who send 4.5 million invoices a month to 14,000 registered suppliers. One star account: Equifax Inc. The Atlanta-based credit reporting business presents roughly 12,000 invoices a month to over 3,000 corporate customers electronically. Equifax started using EIPP in June 2002. Small businesses, some of which still lack Internet access, resist going electronic, but mid-sized and large buyers like electronic billing, reports Thomas R. Rhodes, assistant vice president of finance. "They like being able to download the data to their A/P system in their preferred format, where they can massage the data. They like getting invoices 27 hours after the cutoff in our billing cycle. They like finding historical invoices online and not having to keep boxes of paper in storage," he explains.

EIPP billers get two big payoffs–if their customers will participate: operational efficiencies and reduced DSOs, says Kevin Tissot, Citi's vice president for receivables business management. They can shed the hardware, software, postage and people tied up in printing and mailing paper invoices, deliver invoices faster, eliminate one or two days' check float and expedite dispute resolution so that they get paid sooner. Today, a dispute over a small part of a large invoice often delays payment of the whole invoice. EIPP encourages payers to go ahead and settle the good part. And finally, customer acceptance does not have to be high for billers to profit, Tissot notes; most show a positive ROI at just 10% to 15% acceptance.

But despite the good news, EIPP is still plagued by a lack of standards and resistance by trading partners to a solution dictated by a large supplier or customer. "Companies with efficient A/P and A/R processes usually are unwilling to change them to accommodate a trading partner unless that partner has a lot of clout," notes Beth Robertson, senior analyst at TowerGroup in Needham, Mass.

Aggregators have emerged to help solve this problem in the B2C world, but that's unlikely to happen soon among corporations. It will have to wait until EIPP providers get enough volume to make it worth aggregating, says Avivah Litan, research director for financial services at Gartner Inc. in Stamford, Conn.

Consolidation rather than aggregation may eventually strengthen the market, Glassanos says. "In the end, there won't be 15 competing systems. There may be three or four. It will be like the credit card providers," he says. But there's no assurance that vendors will ever have the critical mass to drive the market: Gartner's survey shows that 78% of corporate billers are building their own e-billing solutions, not buying them from vendors.