As sole developer and custodian of ePerolehan, Commerce Dot Com Sdn Bhd (CDC) has a decade of experience under its belt.  Senior vice-president and COO Muzafar Kamal Shahaluddin says that had plans gone the way the company wanted when it started in 1999, ePerolehan would have achieved its targets much sooner. Instead, CDC has experienced two distinct five-year periods since 2000 — the first of slow growth followed by the company steaming full speed ahead.

At the end of 1999, the federal government contracted CDC to build, operate and transfer an electronic procurement system that covers government goods and services transactions.  The first period from, 2000 to end-2004,  was CDC’s  introduction and development phase.  Muzafar says 2003 and 2004 were particularly challenging years.  “The magnitude of eperolehan and what it could do was huge back then. But there was hardly any take-up,” says Muzafar.

Because ePerolehan was one of the earliest rollouts under the e-government flagship, the online procurement system faced users with low technology literacy and a decentralised IT system in the government sector.
In fact,  if not for a RM120 million loan injection by Malaysian Debt Ventures in 2003, CDC could well have gone under.

Even with the loan, CDC had its work cut out for it, and by end-2004, the transaction value going through ePerolehan reached RM316 million.
Going into the second five-year phase, ePerolehan would reach RM1 billion in 2005. Muzafar recalls reaching the RM1 billion target as his first big assignment at CDC. From then on, ePerolehan has not looked back.  Last year, RM9.1 billion went through the system from 805,000 transactions.
Reaching the first billion was indeed a quantum leap for everyone at CDC, recalls Muzafar. “With the build-operate-transfer model, we are highly dependent on the adoption rate.  If the adoption is late, we get our commission in late. By 2005, we had easily invested about RM150 million in the business.  In the last 10 years, we have invested almost RM300 million,” says Muzafar.

CDC’s main revenue is the commission from ePerolehan at 0.8% per transaction value. However, the commission is capped at a maximum of RM9,600, regardless of transaction value.  Last year’s financial result was the best year for CDC when it raked in RM54 million in revenue.

The second phase of CDC was not only marked by stellar growth, it saw changes in the company’s stakeholders and technology architecture. CDC is 81% owned by Puncak Semangat, a company linked to Tan Sri Syed Mokhtar Al-Bukhary, while the remaining 19% is owned by Puncak Semangat Technologies, a subsidiary of Puncak Semangat. Ministry of Finance (MOF) owns one golden share in CDC.

Prior to end-2008, Puncak Semangat Technologies’ stake was owned by NTT Data.  Muzafar says NTT Data decided to opt out of CDC due to changes in its business direction. One of the reasons NTT Data came into the picture in the first place was so CDC could leverage on its technology to build ePerolehan.

However, Muzafar says that CDC took a conscious choice to be technologically independent from any brand by going open source early in 2005.  Starting from that year, each new module was built using open source. Some of its architecture has also gone open source. CDC has 80 technology experts in-house out of its 200 employees.

CDC’s next phase
Muzafar says the next phase for CDC is not about ringgit and sen, but will be about measuring ePerolehan against global benchmarks and offering value-added services to the public.

“From this year onward, we are geared up for a new journey.  Users are more demanding now. Previously, they just wanted to use the system. But now people want a lot of other services. In order for us to go from good to great, we have to look at the best practices out there,” says Muzafar, meaning that CDC has to serve its customers better, faster and cheaper.

The company has learned from its own studies that the best practices go beyond mere transactions. They are geared towards establishing an online community, such as offering social networking features and mobile capabilities. ePerolehan is currently the largest e-procurement community in Southeast Asia, with 70,000 suppliers registered out of the 100,000 actively registered with MOF. Muzafar also cites the example of the European e-procurement system that allows goods and services to be purchased between Euro countries as another benchmark.

But for starters, CDC is launching its own nationwide call centres by the middle of the year to deliver superior services. It also plans to increase the number of ePerolehan one-stop centres from 10 to 18 this year.
In terms of cost savings, Muzafar estimates that the federal government has saved at least 10% through using ePerolehan. With a total of RM22 billion worth of procurement going through the system over the last 10 years, the estimated amount saved is RM2.2 billion.

In South Korea’s case, up to 30% cost savings is achieved.  This could be due to the scope of its e-procurement system, extending to goods and services for construction. South Korea’s supply of construction materials such as steel is contracted centrally through its e-procurement system.
Muzafar says that improving transparency is one of CDC’s targets, in line with the National Key Result Areas (NKRA). While it is hard to quantify how transparency has improved, frequent mentions in the annual Auditor General’s Report are a plus to CDC. Furthermore, Muzafar says an independent survey undertaken for a module called e-bidding came out with positive feedback for transparency.

Moving forward, the company has no plans to list. Muzafar says it wants to make sure it can claim to be on par with other e-procurement service providers globally. It has indeed been a long and fruitful journey for CDC. But there is no doubt that there will be more fruitful years to come, especially as the government toils harder to improve its image in the public eye.

This article appeared in [email protected], the technology section of The Edge Malaysia, issue 796 Mar 8 - 14 2010