School trustees to outsource online procurement

By ADAM GIFFORD

The School Trustees Association has written off its $1 million STAbuy electronic marketplace, and will transfer its catalogues and customers to GSB Supplycorp.

STA President Chris France said 750 of New Zealand's 2400 schools signed up for STAbuy, but there wasn't enough volume going through the site to make it pay.

"We need to provide a broader range of items at more competitive prices, which GSB Supplycorp can do for us," France said.

"It is a mindset shift for users to buy things online. It is taking longer than anyone predicted. This arrangement will give schools the opportunity to make that shift."

The failure of STAbuy casts further doubt over the planned GoProcure government-wide procurement service, which has the same technology and consulting partners, Oracle and Cap Gemini Ernst & Young.

Government agencies have been slow to sign up for GoProcure, and Cabinet is yet to make a decision whether it will proceed with the $7.5 million project.

France said under the memorandum of understanding signed last week, GSB Supplycorp will service schools at no charge to the School Trustees Association.

After that period there may be some profit sharing.

France said when STAbuy was initiated in 1999, there was considerable enthusiasm for the idea of electronic marketplaces.

More than 90 per cent of association members indicated support for the idea of aggregating demand electronically, which could lead to price reductions and help schools' operating budgets go further.

The project was funded out of reserves built up from contracts with clients such as the Ministry of Education, schools and Industry Training Organisations.

"We went into it cautiously, taking nine months to do the research and develop the business case.

"The mindset in the market at the time was e-tailing had a sort of golden glow," France said.

"You learn and move on."

He said the association is still financially secure.

STAbuy drew its revenue from a 1 per cent levy on suppliers.

It was supposed to be a joint venture with Cap Gemini Ernst & Young, but in March the consulting firm pulled out and invoked a guarantee under which the association was required to pay it the development costs of $775,000 plus GST.

According to the association's amended accounts for 2001, it spent $81,425 on further website development and $12,000 in directors fees.

The STAbuy venture drove the School Trustees Association into an $801,077 loss for the year.

GSB Supplycorp, part of the PSB Group, uses marketplace software from Commerce One.

PSB Group marketing manager Matt Caughey said GSB Supplycorp was a natural partner with the School Trustees Association because of its existing dealings with government organisations, its investment in the SupplyNet electronic marketplace and its experience in supplier management.

"There is not room for two different marketplaces for schools. We are already dealing with 300 schools, and this will provide us with more focus in that area," Caughey said.

He estimated the size of the potential marketplace, not including vehicles, at about $250 million, well short of the $1.2 billion being touted by STAbuy's promoters.

Caughey said GSB Supplycorp would offer schools more than an electronic marketplace.

"Not all of what we do will be online. Some services, like buying motor vehicles, will be done off line.

"There is huge potential to save the Government money. A lot of schools pay too much for various items, especially IT," he said.

Oracle spokesman Nigel Murphy said while Oracle was disappointed to lose a reference site, "the technology worked.

"The same software is being used in Waitemata Health and saving them lots of money," he said.