Could Ariba Discovery Finally Scale a Challenging Business Model? (Part 2)

In the first post in this series looking at Ariba Discovery, I provided a high-level overview of what the Discovery marketplace solution provides. In this post, I'll share some details about the traction Ariba is receiving with the solution. And in the final post coming up, I'll provide a walkthrough of the application and how it functions relative to other approaches in the market.

At the time of my analysis last month, Ariba currently had what it self-described as 4,261 active suppliers in the Discovery database (among the over 300,000 it counts has having registered in the network). This number may seem small, but relative to most marketplaces, it's actually somewhat substantial given the early days of the Discovery offering.

In a recent quarter, Ariba saw 239 postings in Discovery, from 88 different buyers (representing an approximate 31% increase from the previous quarters). Of each posting, buyers received on average 9.5 responses from different suppliers. In total, Ariba saw a 66% successful posting match rate (i.e., 2/3rds of those posting RFIs or RFPs through Discovery were successfully matched to new suppliers). The total value of transactions for this quarter on Discovery was $185.5 million, a number representing a 213% increase over the previous quarter. However, I'd urge readers to discount the percentage increase and look at the number of buyers and RFPs, which are a more accurate reflection of growth (since single, large events can skew volume numbers).

So far to date, the overall volume growth numbers and posting on the network are impressive. The cumulative postings have reached nearly 2,000, and the cumulative volume nearly $6 billion. There have been over 25,000 individual supplier responses in total. The typical size of the postings has varied from very small to very large, but on average, the typical value has been in the $3 million range per RFP. Industrial / general equipment, business services, consumer products, manufacturing and machinery, IT and telecommunications, material and minerals, construction and engineering and vehicles and transportation have accounted for the overall majority of the volume going through Discovery. They also represent the largest categories of business on the network.

Total registered suppliers on Discovery have now reached over 316,000. In a recent quarter, the number of suppliers registered for Discovery climbed by over 11,000 and of these, nearly 20% were not currently Ariba supplier network users. And a substantial percentage more were "Non-limited access" suppliers in Ariba speak, meaning these were non-transacting suppliers on the Ariba network.

In short, from these numbers, here are our takeaways and analysis:

  • Volume on the network continues to grow despite limited marketing
  • Typical RFP size is substantial (there are clearly large, Global 2000 companies experimenting with Discovery)
  • It is likely that as Ariba further embeds Discovery within its own applications, RFP volume will increase at an accelerated rate

Stay tuned for our analysis of what Discovery feels like to use from a buy-side perspective.

Jason Busch

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