As we discussed some time ago in another blog post, implementing an operational transfer pricing solution can help bring your efficiency and level of control to the next level. However, while digitalization and automation are clearly the future of transfer pricing (and, broadly, cross-border business management), there is always a question – where do you start and how to prioritize various digitalization options?
That’s why we decided to discuss the options every company has and what are the pros and cons of choosing operational transfer pricing as a priority.
Traditionally, most transfer pricing automation players (such as Big-4 and more niche IT companies) were building solutions for transfer pricing documentation generation. In most of the cases, these solutions were solving only a limited set of problems, addressing the following areas:
Moreover, many TP tools available on the market are point solutions that deal only with one element of the transfer pricing lifecycle (i.e., documentation) while ignoring the rest.
The reality is that the value obtained by automating just TP documentation is often limited and the value lies in other stages of the transfer pricing lifecycle.
In the second half of the 2010s, many multinationals realized that the real issues (and, therefore, potential value if you solve them) lay within the operational transfer pricing field. And the focus shifted toward streamlining OTP processes and their automation. Moreover, it seems that the digitalization of operational transfer pricing first makes more sense:
Nevertheless, certain blockers make digitalizing and automating OTP somewhat challenging:
As a result of these problems, the market is currently in a situation where there are no good standard OTP applications, and most companies end up with tailor-made solutions leading to costly and extensive IT projects.
Aibidia has recognized the above issues already years ago. From different projects, we took the learnings and best practice to arrive at our approach to transfer pricing digitalization.
First of all, we strongly believe that building isolated tailor-made solutions is not bringing the value customers deserve. Therefore, our fundamental principle is that all applications (both dealing with TP documentation and operational transfer pricing) should be integrated and use the same data model.
Secondly, we always think about how we to offer the best option for the client. Sometimes, an extensive and customized fully-automated solution is needed. However, often a more standardized module with best practice methods and semi-automated data loads does the job without needing a big IT project. While building customized solutions, we either integrate features into our flagship products or standardize OTP applications and turn them into SaaS (software-as-a-service).
And thirdly, our ultimate goal is to build an ecosystem and a marketplace so that our users can develop and exchange their own transfer pricing apps. We believe this is the future of digital transfer pricing, and we must build tools and instruments that allow anyone to create such solutions themselves.
And this approach clearly works – check out this case study where one of our clients, Kemira, share their experience in building an end-to-end transfer pricing system.
If you are interested in joining our journey as a solver of transfer pricing issues, have ideas on OTP apps, or need help building a custom solution that can scale, reach out to us!
About the author:
Borys Ulanenko is a Digital Transfer Pricing Category Lead at Aibidia. Borys has more than 9 years of experience in transfer pricing with a background in industry and consulting. In addition, Borys is the founder of the educational platform StarTax Education. At Aibidia, he focuses on developing new transfer pricing applications and contributes to marketing and business development.