Ecommerce seems to be a hit with everyone even the Indian government. Back in July, last year, the country’s ecommerce ministry launched an e-marketplace to bring more transparency and streamline the procurement of goods and services by the government.
This year, the government amended the General Financial Rules (GFR) making it compulsory for central and state agencies to purchase all office requirements through the Government e-marketplace (GeM). In April this year, the Union Cabinet ordered the wind up of the procurement department under the government and replaced it with GeM.
Now, since the scope of the portal has increased the government is looking for a private company to build and manage the platform. The broadened scope of the platform makes this opportunity more exciting for companies. So much so that even Flipkart and Amazon are eyeing it.
Why is GeM a big deal to etailers?
Handling GeM will require managing the biggest buyer in the country, i.e. the government. The portal caters to ministry and department procurement needs. It offers items like laptops, air conditioners, furniture and daily use items like stationary. These items can be purchased by states and the central government bodies. On the service level, GeM covers taxi services, transportation, pest control, laundry and florist services to make the procurement process more efficient.
More than 21,000 products and 17 services will be available on GeM which is currently run in-house. From August 2016 to April end this year, the portal received purchases worth Rs. 454 crore in total.
In a year, the procurement needs of state governments and the central government amount to Rs.5-7 lakh crore, approximately.
“The value of the contract will depend on the transactions. There would be a revenue-sharing model with the MSP (managed service provider) in which the private company’s share has been capped at 0.5% of the total transaction value payable quarterly,” said an official.
A source said, “It will be a mega opportunity if all the government departments start to procure through it. The size of the project could anywhere be between Rs 900-1,000 crore.”
How will companies join the government?
According to reports, many sources confirmed that Flipkart and Amazon have shown interest in a managed service provider (MSP) contact with the GeM. The government recently sent out a request for proposal (RFP) regarding the same. The final submission deadline is June 1st. Executives from these ecommerce companies were present at the pre-bid meetings organised by the government. A top tech firm executive stated that this project is a hit with ecommerce firms like Amazon and Flipkart showing visible interest.
The executive added, “Flipkart is a logistics provider, they know the game. Amazon is also hovering.”
The person also mentioned that these companies will need to join forces with tech vendors since they cannot provide their own platforms to the government.
Flipkart is likely to team up with Microsoft for technology since the RFP promotes IT and ecommerce company collaborations for collective bidding. According to sources, Amazon received permission from US-headquarters to go ahead and the franchise is looking to present its cloud services if it is selected. But, Flipkart and Amazon are not the only ones aiming for the MSP designation at GeM. Tata Consultancy Services, Accenture and Wipro are also in for the coveted five-year contract that is extendable up to two more years.
The official mentioned above said, “Formation of consortium is up to the private companies. The government will only talk to the lead partner.”
How will payment work on GeM?
Within 10 days payments are required to be made by all government agencies for goods and services acquired from vendors. GeM is expected to prioritise payments which are a major concern among vendors. The portal is planning to make them happen much faster.
The special purpose vehicle for GeM will cover MSP payments within a month from the date of transaction. Vendors will be asked to pay for registration on the platform to ensure revenue is sourced for the portal.
Partner and retail sector leader at KPMG India, Mohit Bahl said, “Whichever company gets the contract will add the country’s largest buyer to its customer base.”
The successful bidder could also receive advantages other than revenue. If ecommerce front runners manage to strike a deal to manage GeM, they will be a mammoth sized lead over their competitors.
No comments:
Post a Comment