Microsoft and partners help resource-strapped customs agencies leapfrog IT.
By Geoff Whiting
When it comes to monitoring inbound trade, many developing countries’ customs administrations still rely on inefficient paper-based processes, often resulting in significant cargo clearance delays at the border and worse — a potential for corruption.
Microsoft, whose software engineers’ goal is to develop easy-to-deploy systems applications, has created a platform to help customs administrations with minimal information technology to leapfrog into the 21st century and start bringing their cross-border controls in line with those of industrialized countries.
To accomplish this, Microsoft and about a half-dozen partners have developed customs systems that use cloud technology, or the ability to more cheaply access information from the Internet via servers no matter the user’s location. More specifically, cloud technology lets Microsoft offer scalability but with a very flexible nature because of its size and the fact that many partners already use Microsoft software.
Large IT companies like Microsoft, IBM, Oracle, and SAP generate considerable revenue from government contracts. Once these modernization practices and programs are in place, these firms are often able to establish long-term, lucrative relationships.
According to the World Trade Organization, international trade grew 13.5 percent in 2010 which makes the customs market a great business opportunity with solid revenue potential for Microsoft. Even before this growth, government business in this area often proves extremely lucrative.
Microsoft already has trade representatives with existing relationships among customs authorities across the globe to work on compliance issues, while its public sector business division currently helps to facilitate trade with many of these governments.
Microsoft leverages its size and scale as a provider of technology to a large number of existing customers and trade partners worldwide. Developing a platform that supports and easily integrates with existing software gives Microsoft inroads with not only trade partners, but customs agencies, freight intermediaries, financial institutions, and many others entities involved in the supply chain.
Through these efforts, Microsoft markets its system by promoting a short timeframe for a return on investment, while promising low ongoing maintenance costs. Microsoft said this total cost of ownership will reduce costs throughout the life cycle of the platform.
Ludo De Bock,
corporate senior director for global strategic accounts,
|“Developing country customs
administrations often have limited legacy
solutions and infrastructure in place,
meaning new innovative technology
solutions can be implemented faster
and in a more flexible environment.”
Ludo De Bock, Microsoft’s corporate senior director for global strategic accounts in Brussels, said “national competitiveness, an important priority for many of our public sector partners, is also supported through our efforts to make trade faster and helping them achieve greater economic growth.”
When Microsoft began expanding its business overseas — it’s first international office was established in 1978 in Japan, though 1983 was one of its first strong years internationally with the success of its Multiplan spreadsheet application — it found a need to develop customs software for its own use, as its operational challenges seemed to highlight gaps in existing customs IT platforms. Microsoft, which generated revenue of $69.9 billion in fiscal year 2011, ships products to 147 countries and more than 60 percent of its total trade is conducted outside the United States.
Based on IDC’s predictions for the IT sector in 2012, worldwide IT spending is expected to grow by 6.9 percent. IDC said spending in emerging markets alone is set to increase 13.8 percent. Spending for both public and private cloud services is projected to reach $60 billion this year.
For all companies looking at these markets, Microsoft said delivering products and related services in a consistent and timely manner is essential. The company noted that adding security and efficiency to the system is the best strategy for a long-term approach to the market.
“As with all multi-national businesses, reducing the need to resubmit trade data multiple times has been one of the driving forces behind the need for developing standard trade data elements and interoperable customs systems,” said Frank Callewaert, global technology strategist for Microsoft. “Each customs authority has developed its own set of processes, procedures and levels of automation.”
Callewaert said these were strong reasons for Microsoft to pursue this market. Not only does it have a strong interest in developing systems to manage its own customs data and reporting, but government contracts are a lucrative business and Microsoft’s software is ubiquitous to the point that it can pursue customs platform modernization projects all around the world.
Microsoft is now looking beyond national and regional customs projects to develop a global system. The company is currently working with the World Customs Organization to create a Globally Networked Customs initiative.
Callewaert said the initiative “will rationalize, harmonize, and standardize the secure and efficient exchange of information between customs-to-customs and trade-to-customs transactions.” It will also put Microsoft in a position to be part of every customs organization and exporter around the globe, potentially a mountain of revenue to pursue.
Today, nearly every country has a customs declaration system in place, but they struggle to connect with each other. This lack of connectivity causes cargo flows to slow at the border.
Microsoft saw cloud technology as the means to connect these systems without the need to change the existing IT infrastructure of any individual country and thus allowing them to efficiently share non-classified trade information.
In Microsoft’s view, developing countries stand to benefit the most from globalization and customs enhancements in the next five to 10 years, because many are experiencing boosts in both imports and exports. However, many of these countries’ customs systems aren’t keeping pace.
“Developing country customs administrations often have limited legacy solutions and infrastructure in place, meaning new innovative technology solutions can be implemented faster and in a more flexible environment, and with the support of those eager to be part of the move towards globalization,” De Bock said.
Cloud-based services do not require a large infrastructure investment and remove many of the burdens that previous systems required. These lower costs enable customs agencies to catch up with the technology curve.
Dietmar Jost Consulting
|“This current modernization by cloud
technology comes from the demand for
modernization…The demand is in the need
to keep up with the increase in workload
without increasing the workforce.
Automation is the means to enable that.”
Dietmar Jost, a former WCO technical officer and managing director of Germany-based Dietmar Jost Consulting, said the heads of customs agencies in emerging markets often have more clout in their governments than their counterparts in developed nations, allowing them to make changes to national policy and practices through systems adoptions without a burdensome political process.
“People don’t change as quickly as technology, and already modernized customs are often slowed by unions, laws, and other human resources,” he said. Jost believes legacy technology is still the biggest inhibitor to modernization and new technology adoption.
Customs systems built on location are typically long-term projects that do not lend themselves to a staged rollout, making it difficult to analyze the results of the project during implementation.
“Often, a normal time frame for a project is two years, with only the first results and milestones being reached after roughly 9 to 12 months of work,” De Bock said. The lack of infrastructure requirements allows cloud systems to be evaluated more often.
Emerging market customs administrations with cloud-based systems also stand to benefit from the ability to efficiently respond to transportation modes and route changes during shipment. Customs applications based in the cloud give officers the ability to run reports and track shipments in real-time, and share it with other agencies in the government. According to De Bock, this type of data reporting and sharing is much more difficult using an on-site system.
Using the cloud also means that countries do not necessarily have to buy all the software and hardware resources for a system or pay the related maintenance costs, De Bock explained. Microsoft also sees the cloud as a means to modernize customs while maintaining existing data privacy and security requirements.
“This current modernization by cloud technology comes from the demand for modernization, but the technology didn’t create demand,” Jost said. “The demand is in the need to keep up with the increase in workload without increasing the workforce. Automation is the means to enable that.”
These same forces can play a positive role in developed countries as well. Customs agencies can benefit from the streamlined approach of cloud systems and the ease of use they provide for importers and exporters. As these processes get easier, more small and midsized companies can move their goods to more markets. The technology exists and can be used by small enterprises to find international buyers and to navigate the field of imports all from mobile phones. As customs systems add in cloud support, more reach can be given to those companies with less resources and internal infrastructure.
Developed nations can also benefit from this type of cloud interface through a “community systems” approach, which can link government and private sector reporting, further reducing the amount of data and documentation carriers send out per shipment.
While Microsoft has a multinational presence, it has preferred to develop a customs modernization program that involves partnerships with specialized customs and shipping industry IT application providers.
“Microsoft never makes itself appear to be the leading partner, it likes to stay in the background,” said Jost, whose firm is not affiliated with Microsoft.
Microsoft looks at the system as a series of stakeholders and their steps in the overall process, from producers and exporters to government agencies and insurance companies. Microsoft doesn’t try to present itself as the main face of interaction for customs agencies or companies, but instead as the force that can help unify all the disparate parts. In short, Microsoft is the plumbing and its partners are the fixtures.
“Our goal at Microsoft is to work with our partners to support the development of solutions and offer a one-stop access point,” De Bock said. “Our partner network develops solutions in their specialized areas, often designed to meet the needs of specific markets and countries, showing how technology can be an enabler of more efficient trade transactions.”
The goal is often to provide a single interaction point where companies can view and sort data based on the most relevant and critical pieces of information. A portal like this would be capable of saving shippers time and money and would consist of an underlying Microsoft architecture with its partners building layers within and on top of that unified base.
One of these partners is Arlington, Va.-based GreenLine Systems, which offers services to help government agencies assess and manage risks to safety, security, and trade. The company’s IT applications are based on Microsoft’s BizTalk, SQL Server and .NET.
“The solutions that we deliver are all mission critical systems,” said Noah Rosenkrantz, GreenLine’s chief executive officer. “It is very helpful to have Microsoft as a partner to make sure that we’re doing so with the latest technologies and architectures.”
Rosenkrantz said this coupled with the resources that Microsoft makes available, such as access to its Technology Centers, gives GreenLine an avenue to larger government agencies while Microsoft’s partnership confirms its ability to build to the scope and scale that larger bodies require. GreenLine also provides consulting services to industrialized country government agencies, such as U.S. Customs and Border Protection, which build their own systems.
Other Microsoft partnerships have been forged with Antwerp, Belgium-based Bureau International Maritime (BIM), French port community system developer SOGET, Ireland-based Tradefacilitate, GAINDE 2000 in Senegal, and Crown Agents of the United Kingdom. All these firms have established IT applications to improve various aspects of cross-border trade.
At the same time, the success of these firms’ programs is grounded in Microsoft software. For example, BIM uses Microsoft technology to create tailor-made applications for both the public and private sectors. The company has been active in Africa for 16 years working in 10 countries including Cameron, Congo, Gabon and Togo.
In 2005, BIM started work on the Guichet Unique Maritime (GUMAR) single window application and began its Congo implementation in 2009. GUMAR is based on Microsoft’s SharePoint Server, BizTalk Server and other technology. The solution provides a single entry point for standardized information and documents to help fulfill all import, export, and transit regulatory requirements.
The biggest achievement of the GUMAR system so far is that it has reduced the average time required for clearing a cargo container in the Congo from 15 to 17 days on average to five to seven days. BIM is now working to expand the solution to other countries.
SOGET’s key advancements are around trade automation for European Union ports and governments. Microsoft and SOGET view the EU as a diverse and fragmented network of trade stakeholders that must deal with complex national and EU-level trade policies and regulations. The companies say the key challenge is ensuring interoperability and standardization of information for use across multiple locations and players.
SOGET launched its eMaritime in June 2010 to provide a single system for sea and airport authorities and partners alongside customs authorities. The system uses several Microsoft technologies including BizTalk, SQL Server, and Windows Server Hyper-V.
With this system in place, the companies say it now takes only six minutes and 19 seconds on average to gain customs clearance of goods. SOGET’s Port Community System processes about 150,000 transactions per day.
Tradefacilitate provides online services to help importers and exporters worldwide to reduce costs by replacing older systems with new cloud-based and paperless ones, as well as helping them become compliant with EU customs regulations. The company moved its core application to a Windows Azure platform, which allowed it to add scalability through Web development instead of additional infrastructure.
GAINDE 2000 was initially created in 2002 to assist Senegalese Customs authorities with IT advances. The company’s operations have now moved past Senegal’s borders and are targeted at various customs agencies nearby.
Microsoft said that GAINDE’s technology and expertise are directly responsible for Senegal and other African countries having significantly improved their trade environments. For Senegal, GAINDE’s technology has resulted in 95 percent of foreign trade procedures being covered by a single interface and also a 70 percent reduction in time spent on overall procedures, according to Microsoft.
Crown Agents focuses on providing technical expertise, advice, and training to support public sector modernization. The company works with customs administrations to redesign and automate processes to make information more transparent, allow for better integration for related parties, and develop both national and regional single window systems.
Crown’s system, named the trips Single Window, is based on Microsoft’s Dynamics CRM technology and provides an integrated workspace for trade and transportation organizations. Microsoft is now working with Crown to create a foreign trade single window to help a Central Asian country increase its presence in international trade. This new window simplifies the development and delivery of documents through a single point of submission. This system also adds in integration with its Customs Unified Information System, jointly developed by Crown, to automate customs border clearances.
Microsoft recently partnered with the U.S. Agency for International Development and customs agencies of Botswana and Namibia to provide technology for the Trans-Kalahari Corridor project.
The goal of the project is to develop what’s called a Regional Single Window (RSW), which is basically a single platform and entry point for data and customs reporting software for multiple countries. The RSW automates customs connectivity and increase compliance between the customs authorities of Botswana, Namibia, and South Africa.
Using RSW, data can be sent from a shipper or carrier to customs bodies for the entire region in one move. Agencies can then send and confirm this data between them. This means companies only submit information once even if covered goods move across multiple borders of countries taking part in the RSW.
The goal of the Trans-Kalahari Corridor project is to facilitate economic growth and development in the region as well as raise food and health security since these sectors are very important to the region.
Many customs authorities in southern Africa use software built on ASYCUDA, which is a computerized customs management system for handling most foreign trade activities. It gained a foothold in the market in the 1980s because it grew out of a request from the secretariat of the Economic Community of Western African States to the United Nations Conference on Trade and Development.
Before the Trans-Kalahari Corridor work, customs agents had to take documents and manually encode their data into the ASYCUDA system, have it process the data, and then print processed data and customs forms that were finally either mailed or physically delivered to companies.
“The idea of the Trans-Kalahari Corridor project is to link and automate the ASYCUDA system, which is pretty manual and labor intensive and error prone, to link it to a modern system where traders can digitally provide and receive their information without any human intervention needed,” Callewaert said.
Cloud-based Microsoft Azure is integrated to sit on top of these ASYCUDA systems and allow them to send information across borders as well as letting traders send their information to a single system and have it reach each needed customs agency.
“This can be used across countries without someone having to build and operate a physical infrastructure at a certain location in a certain country,” Callewaert said, noting this meant both less infrastructure and manpower. He also said these systems will easily scale as trade increases in the region.
Microsoft started the actual development of the project in October 2011 and the first phase of the Trans-Kalahari Corridor is set to be fully implemented by the end of March. The goal for the end of this phase is to exchange consolidated customs documents between the participating customs agencies. The service should also have enough visibility that a company can continually track the location of its goods and documentation within the platform and its chain of approval and messaging.
When American Shipper
spoke to Microsoft for this article, the company said everything was on track to reach these end of March deadlines. The company said it will avoid traditional deployment bottlenecks because of its reliance on Microsoft Azure and integration of cloud systems on top of existing customs software.
Callewaert said the parties involved in the Trans-Kalahari Corridor have the attention and capability to build additional functionality on top of the core infrastructure. This added functionality means more document support, increased government agency support, and more organizations that can contribute to the system.
The final details of phase two for the project are still being worked out between the participating companies and their