A substantial chunk of the multi-billion dollar government procurement market is to go online via a new electronic trading hub launched this morning by Advantage Group, Quixel, and Government Supply Brokerage Corporation (GSB).
Called SupplyNet, the joint venture will be run as a separate company, with its own CEO and board. Ownership is split 50% to GSB, 30% to Quixel (investor Eric Watson's private investment company) and 20% to Advantage.
Through GSB (the former Government Stores Board, which became an SOE in 1989 and was privatised in 1992) the government spends $3 billion on procurement.
While not all of the government's purchasing will go through SupplyNet it's hoped that enough business be done on SupplyNet to create a substantial business-to-business electronic marketplace. Watson's Cullen Investments interests, FlyingPig.co.nz, Pacific Retail, BlueStar and Whitcoulls, will join the exchange.
Advantage will supply the technology - including the use of software from electronic markets specialist Commerce One. Quixel is putting up the money.
Advantage CEO Greg Cross won't comment on how much business SupplyNet hopes to achieve, nor on how much is being spent.
"This is the first time a government has seriously entered the vertical market space. But we're hoping that we can really leverage the opportunity to replicate an e-government model to other countries," he says.
"In most countries government procurement is very large so this is a significant deal for Advantage," he says. "By including the government the electronic exchange immediately achieves critical mass. We're hoping to attract a large number of other buyers and sellers."
He says the advantage to buyers and sellers is signficant reduction in the cost of transactions - conservatively estimated at 10%.
"Business achieves lower purchasing costs because tendering is being done in real time. A lot of buying now is done by tendering but this is slow and expensive compared to the dynamic pricing models that the Internet offers. It speeds up the ability of buyers and sellers to determine prices."