B2B is Back: The Marketplace Evolution, Oxygen Finance and an Interview with Mark Hoffman (Part 4)

Please click here for Part 1, Part 2, and Part 3 of this series.

Jason Busch (Spend Matters): How much should suppliers expect to pay on an APR basis through the Oxygen system?

Mark Hoffman (Oxygen Finance): It's very modest. Think of it as a short-term loan (this also helps conceptualizing how a buyer can book the "payment" back as revenue). It could be 30 days, 60 days, 90 days, etc. Most important, because the buyer secures it, once the buyer has accepted the goods or services from a supplier, the early payment in effect becomes this loan. There is very little risk to anyone in the transaction. Even though the architectural funding model might look like a p-card/credit card, from a risk and APR perspective, it is more like a highly secured loan, more like commercial paper.

Jason Busch (Spend Matters): Where is this going in the future?

Mark Hoffman (Oxygen Finance): Think about what you can begin to see from this model. You begin to layer analytics on top of what we provide and you can see the flow of trade around the globe...to understand what that is, the data has huge value itself. It's a neural network across businesses. Some day this will be a very big thing. You could truly see the flow of goods and services -- and Oxygen could collect level 3 p-card-like invoice detail which is missing in so many transactions today. Think about the possibilities -- seeing aggregate COGs, SG&A, volume numbers, in real time. It's a huge amount of information and the true pulse of the market.

Jason Busch (Spend Matters): Are you sure the "rebate" model that allows buying organizations to book the discount as revenue will pass accounting muster?

Mark Hoffman (Oxygen Finance): We deliver a truly integrated model with our partners (systems integrators, accountants, banks, etc.) and the model is accepted in the US and the UK. But besides just passing muster, it is a clever idea. It is also clever in accountability in what it brings to purchasing. It forces the tracking of the original price of a good or service on a granular level because that becomes the basis of a new source of revenue -- not just an unrealized discount.

Granted, this does not change economics internal to the company (aside from a modest P&L impact) but it is an exceptionally good way to track dollars in and out. And as you start to bring in suppliers, you don't need to bring them in multiple times. Then they can work with many different buyers so there are also significant network-based efficiencies for on-boarding owing to the SaaS or cloud model supporting our deployments.

Jason Busch (Spend Matters): Why has this model (either Oxygen or a competitor) not caught fire yet?

Mark Hoffman (Oxygen Finance): It's new. Very new. Yet when we speak to people, they say it is the first true win-win they've seen for buyers and suppliers. Under older P2P and supply chain finance models, you can plug companies together and you can facilitate the cash flow, but the incentive (for suppliers) and integration often comes up short. And with many supplier network models, you have to pay upfront -- as do suppliers.

Jason Busch (Spend Matters): Where do you see different categories of new partners (and competitors) fitting into the Oxygen model?

Mark Hoffman (Oxygen Finance): Banks have tried to go after large business purchases and have not been really successful. I don't know a single bank that is a huge player. On the software side, Oracle could be a partner. As could Ariba. Software providers like this could implement and share in the revenue and the overall benefit of the model. We could easily turn these guys into implementation partners and plug them into our operating model and integrate with their systems.

Our vision is to grow this business through partnerships, and candidly, the implementers and partners get the lion's share of the return. I honestly don't see us now as a software company but something broader, uniting these different parties. Yes, software is a piece of it -- the ability to put everything together, to run super-high volumes of transactions, etc. Still, think of Oxygen like a credit card company -- they have many partners as well as huge back ends but you don't think of them as software companies. It's like a credit card company for the bulk of the business spend.

Jason Busch (Spend Matters): Where to next in the US?

Mark Hoffman (Oxygen Finance): My first goal is to hire a US CEO and we will keep talking to current and potential global and regional partners. Clearly there is a giant opportunity to expand there. We also have to get new US partners on board. Long-term, the middle market also presents a great opportunity here. But first things first.

We would like to thank Mark Hoffman for taking the time to share his thoughts. And here at Spend Matters, we look forward to chronicling the activity of Oxygen Finance going forward given the true uniqueness of the model.

- Jason Busch

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