E-gateway to public sector buying

By RICHARD BRADDELL

WELLINGTON - An electronic portal targeting $3 billion a year in public sector buying expects to transact business-to-business e-commerce as well, soon after its launch in August.

SupplyNet, which is half-owned by GSB Supplycorp with the balance held by Quixel and Advantage Group, aims to cut purchasing costs through an electronic marketplace that matches public sector buyers with their private sector suppliers.

While government and local bodies buyers will be the initial targets, private sector suppliers are expected to begin using it for their own purchasing almost immediately.

SupplyNet will leverage GSB's expertise developed in handling $750 million in annual public sector procurement and will rely on the XML web document language to enable suppliers to offer catalogues of goods on the internet.

GSB derives its name from the Government Supplies Board, which was taken private in 1992 and is now owned by a group of private investors.

The Eric Watson-related internet investment company Quixel Capital will own 30 per cent and Advantage Group, with 20 per cent, will provide web solutions and technical support.

The chief executive of both Advantage and Quixel, Greg Cross, said SupplyNet would be one of the first portals in the world to offer business-to-government e-commerce.

"The public sector in New Zealand, as in every other country, is responding to the urgent need to adopt electronic procurement models in order to cut costs and save taxpayer funds," he said.

GSB claims to bring together more than 2000 buying organisations and 1000 suppliers, most of which are small and medium-sized enterprises.

It has 900 ongoing supply contracts.

However, the new venture's success will owe much to its ability to generate other revenue streams.

In keeping with Metcalfe's law, a maxim which states that the value of a network rises according to the square of its users, it will seek to bring other users and services on board.

Profit margins, which will be based on transaction charges, may not be huge.

GSB currently charges between 0.5 and 1 per cent on its $750 million in transactions.

Rates have not been disclosed for the internet portal, but it is targeting recurring revenue streams from transactions, commissions generated from auctions and income from subscriptions from organisations not wanting to invest in their own hardware.

The platform is supplied by Silicon Valley-based Commerce One, which has developed the system in conjunction with Microsoft.