Making Sense of Ariba’s Network Price Increase – The Argument in Favor of the Move (Part 2)

In the first post in this series, I began to provide the Ariba perspective examining both the value of the Supplier Network and the network fee increase that started to come into play on September 15th. In this post, we'll continue to explore the Ariba side of the story. Ariba claims to have made a $70 million investment in suppliers in the past three years. This includes staffing a team of 80 program managers, enablement and support professionals. It also includes technical and UI improvements that have streamlined the invoice submission and management process, reducing by 50% the time for suppliers to carry out specific activities. In addition, Ariba has added new dashboards and portlets for suppliers to gain visibility into new information quickly.

Ariba suggests suppliers benefit in five ways via the network: "higher customer satisfaction (and preferred supplier status), greater visibility into customer processes, increased sales with new and existing customers, lower costs of managing the order-to-cash cycle and faster payment by eliminating errors and rework." I personally buy into at least some aspects of these arguments, even though I'm no sure they'll ever justify the $100+ network cost to process a high-dollar invoice/transaction.

Still, Ariba suggested to Spend Matters that many other networks charge higher prices while offering no suppliers a free level of transactions. These include Visa, which through its standard commercial interchange charges a 2.7% transaction fee. It also includes the American Express P-Card, which charges a 2.5% fee. Other comparables that Ariba shared included the Commonwealth of Virginia electronic ordering system (1%), Florida (1%), Visa (large ticket at .95% + $35), Mastercard (large ticket at .7%), Visa (network only at .26%) and Mastercard (network only at .21%). Ariba also provided us with information about Hubwoo's pricing (which Ariba claimed was a flat fee plus a 0.4% to 1.25% fee), which proved incorrect (according to Hubwoo, a "typical buyer account has supplier fees of less than 0.1% overall. Caps on supplier spend are $2 million.")

Curious to learn more about how the network fee increase will impact your organization (and you suppliers)? Read the free, full analysis: Ariba Network Price Hike: Plan for Increased Supplier Fees in September 2010.

Jason Busch

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