Ariba Supplier Fee Increase: An Illustrative Example

The Ariba network fee increase, which is being phased in as of September 15th, will significantly impact some suppliers and have only marginal -- or no -- impact on many others. But what type of impact are we talking about? We included an illustrative model in our free downloadable paper analyzing the topic, Ariba Network Price Hike: Plan for Increased Supplier Fees in September 2010, which we thought we'd include in a summary post for those wanting only a cursory look into the fee change. This model is listed as Figure 3, Illustrative Impact of Ariba Fee Changes, in the above-linked paper, and is based on Spend Matters analysis that was vetted by Ariba customers:

As you quickly see, for the great majority of suppliers, the fee increases will be negligible (the same holds true if you run the model with fewer overall suppliers for a single buying organization, which we did). In fact, 70% of suppliers will continue to transact for free, according to Ariba. However, high dollar volume transaction suppliers will face a significant increase under the new pricing model.

Our analysis suggests that larger, financially healthy suppliers (with a low cost of capital) -- and with multiple trading relationships and revenue going through the Ariba network -- submitting fewer documents per annum are those that stand to disproportionately assume the costs of the network fee increases. It could be argued that the new Ariba network fees place a larger burden on large suppliers to subsidize smaller ones, those most likely to leverage Ariba as a primary sales channel to win new business.

What do you think?

Jason Busch

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