Earlier today, Ariba announced that it is getting into the supply risk "tools" game by offering a new solution that will help companies to "determine the financial health and stability of key suppliers". This new offering is offered as a paid-extension to the Ariba Spend Visibility suite and, in Ariba's words "provides access to comprehensive financial information and the option to add risk scores for suppliers around the world which companies can use to identify and address potential weaknesses in their global supply chains". Ariba did not provide information on where they are getting this information, but I suspect that it is either coming from D&B or Experian (there are few other choices out there). They did tell me the accuracy of this third-party information tends to be higher for suppliers exceeding $100 million in revenue (and especially public companies).
This $100 million breaking-point is generally common across all supply risk content providers. In terms of early interest by industry, Ariba is seeing manufacturers express the greatest need for this type of information, especially for direct materials suppliers. Utility companies have also expressed early interest. From a cost perspective, companies will continue to receive basic enrichment updates pushed out to them on a quarterly basis (or however frequent their refresh agreement is). For risk data specifically, companies will pay based on how often the content is refreshed, but the pricing will not be on a linear scale (for example, it will cost significantly less on a per record basis for a company that refreshes risk data six times per year versus once). This model is designed to not overly penalize companies for pulling frequent updates to more proactively manage supply risk. However, it does not provide the same subscription-based proactive alerting as DNBi that operates on a continuous basis.
In my conversations with Ariba about the news, I learned that the specific information made available will include supplier scores in the following areas: Supplier Evaluation Risk (SER), Commercial Credit and Financial Stress. Earlier in the week I had the chance to speak to Alex Saric, who is working on this effort for Ariba. I was curious about his research for this offering and what he observed as to how companies were finding budget to fund supply risk content such as this. He told me that typically "funding is coming directly from procurement but in some cases companies are passing it around to the business units who are absorbing the costs". In addition, Alex notes, "as supply risk becomes more important, finance departments are going to have more of a vested interest in splitting costs. But right now primarily purchasing departments are funding it and sometimes passing costs down to business units."
Like CVM Solutions and other providers with risk management services, Ariba is also offering service-based risk assessments, including programs that consider such areas as country and geographical risk (in addition to financial and operational risk factors). Alex explained a set methodology and approach Ariba has to these services such that they can be delivered cost efficiently and quickly. Most companies who pursue this approach are only interested in looking at a sub-set of their total supply base. And such is the case with the automated risk scores as well. Alex told me that for the most part, many of the companies he has spoken with are only interested in scores for their top 500 or so suppliers (a similar number of suppliers, incidentally, that most companies are interested in including in supplier performance management programs as well).
Stay tuned for an updated analysis of the supply risk management market next week on Spend Matters and my thoughts on what this move by Ariba -- and recent moves by Aravo and CVM Solutions -- represents for the broader supply risk management market.