From strength to strength

By ERROL OH

Commerce Dot Com expects ePerolehan deals to reach RM2bil this year  

DATUK Azizan Ayob knows a thing or two about the difficulties in implementing large, IT-driven Government projects. He was once a key player in the Government Multipurpose Card (better known as MyKad) project, and he now helms a company that handles the Federal Government's electronic procurement (e-procurement) system. 

His last position in the civil service prior to his retirement in July 2003 had been that of director-general of the National Registration Department. Attached to that role was the chairmanship of the project management committee for the MyKad initiative. 

The use of ePerolehan educates the local business community on the importance of IT literacy and e-commerce. This is crucial for the future says Azizan

The MyKad rollout was far from smooth, particularly in the early stages, but the hardest part seems over and the experience has proven valuable to Azizan, who is executive director and CEO of Commerce Dot Com Sdn Bhd. 

Incorporated seven years ago as an e-commerce service provider, the company has the exclusive right (granted on a build, operate and transfer basis) to develop and run the Government's e-procurement system, called ePerolehan. 

In e-procurement, the entire process of purchasing goods and services, from ordering to payment, is done with the aid of electronic tools and systems so as to improve efficiency and lower costs. 

Azizan says the usage of ePerolehan has grown from strength to strength since its launch in 2000. In that first year, only 13 transactions worth RM48,000 were done through the system. Last year, ePerolehan recorded about 107,000 transactions with a total procurement value of almost RM1.09bil. 

Commerce Dot Com expects ePerolehan deals to reach RM2bil this year. The system only reached the halfway mark last week, but the company is confident that the activity in the final quarter of the year, traditionally a far busier period for the public sector, will bring the target within sight. 

“About 60% of the total value last year was generated in the last three months. Based on this, we believe we can hit RM2bil,” says Azizan. “These numbers prove that the system works.”  

Leveraging on the Net 

The most visible component of ePerolehan is a website (www.eperolehan.com.my) that functions as a virtual trading environment for Federal Government agencies and their suppliers. Through ePerolehan, the agencies can browse through the suppliers' online catalogues, make enquiries and place orders. 

The system enables those that supply to these agencies to receive, manage and process purchase orders and to receive payment via the Internet. The suppliers can also submit quotations, obtain tender documents and submit tender bids through ePerolehan. 

In addition, ePerolehan serves as the single point of registration of government suppliers. However, the system does not cover all Government procurements; construction contracts for development projects, for example, are excluded. 

It does not take a lot to be ePerolehan-enabled. A personal computer (with the basic system requirements), broadband Internet access and a smart card reader will do. 

The system leverages on the benefits of the Internet and automation such as greater speed, efficiency and interactivity. For the suppliers, the introduction of ePerolehan ought to be a good thing because it increases their reach, saves costs and helps them achieve customer satisfaction. 

Perhaps most importantly, it shortens the Government's payment cycle from an average of 30 days to 14 days. “Faster payment improves the economic cycle for suppliers as well as for the country,” says Azizan, who points out that the Government is among Malaysia's largest buying entities.  

He adds that ePerolehan is also significant because it encourages Malaysian businesses to embrace e-commerce. “The use of ePerolehan educates the local business community on the importance of IT literacy and e-commerce. This is crucial for the future,” he explains. 

There are equally compelling arguments for the Government agencies to make full use of ePerolehan. The system streamlines procurement processes and procedures and improves efficiency and productivity. 

At the same time, Azizan says, it facilitates accountability and transparency in the Government's procurement activities. “When everything is open and moves faster, there are less opportunities for corruption to take place,” he adds. 

Aiming for RM7bil 

What the users of ePerolehan do not see is the hardware and software that make the website work. In fact, putting together the right IT solution may have well been toughest task in the development of ePerolehan. 

Azizan says the objective from the start is to come up with an online marketplace that is user-friendly, reliable, secure, scalable and compatible with the various IT systems of the Government agencies. For example, at one point, Commerce Dot Com switched from proprietary to open source software to address portability issues. 

The company's revenue from ePerolehan is derived mainly from the service fee it collects from each transaction. The rate is 0.8% of the purchase order value, subject to a maximum of RM9,600. 

The company has invested RM180mil to develop ePerolehan, but the work does not end there. For one thing, the usage of the system has plenty of room to grow. Commerce Dot Com hopes to see RM7bil of business transacted through ePerolehan once the Government agencies fully embrace the system. 

And that is a modest figure when you consider that in Budget 2007, the Federal Government has allocated RM113bil for its operating expenditure. Of this, about RM23bil will go towards services and supplies.  

To achieve the RM7bil target, ePerolehan's current volume has to expand dramatically, and that depends a lot on the Government agencies optimising their use of the system. 

In August 2003, the Treasury issued a circular letter setting out directives to Government procurement centres (more commonly referred to as PTJs, or Pusat Tanggungjawab) so as to encourage the use of ePerolehan. However, it appears that this has yet to achieve the desired results. 

According to Commerce Dot Com, the Federal Government has 2,679 PTJs nationwide. Of these, 971 are ePerolehan-enabled, although not all are active users.  

Handholding required 

The slow adoption by Government agencies has led to complaints from suppliers. One of them is Shah Alam-based IT solutions provider Apex Hi-Tech Sdn Bhd. Says director Mohamed Yusnizam Yahaya, “We were informed that the Government will only deal with ePerolehan-enabled suppliers. 

“However, as one of those suppliers, I also urge the ministries, departments and agencies to be equally committed to using ePerolehan, which promises and delivers shorter payment cycles for Government suppliers.” 

Commerce Dot Com's Azizan sees this hesitation to go through ePerolehan as similar to the initial resistance to the adoption of MyKad. “The government departments must migrate from manual to electronic. 

That's the direction the rest of world is heading. It's a major shift, but it has to be done,” he says. 

“Ultimately, we are dealing with human beings. We can buy the technology and the infrastructure can be upgraded. The biggest challenge, though, is to persuade people to use the system.” 

One measure to counter this is the company's mandatory handholding programme, which entails sending employees to the PTJs to guide the government officers on the use of ePerolehan and to help them solve related problems. 

The Federal Government concession would have expired next year but it has been extended to 2012. Commerce Dot Com is working on a version of ePerolehan that can be used in other organisations such as statutory bodies, government-linked companies and state agencies. 

The company is controlled by Puncak Semangat Sdn Bhd, which is linked to Tan Sri Syed Mokhtar Albukhary. 

NTT Data Corp of Japan is another shareholder, while the Ministry of Finance (Inc) holds a special share.