Spend Matters PRO Week: Tradeshift – Should Ariba and OB10 be Worried?

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PRO subscribers can access the original installment of this four-part Spend Matters PRO research brief starting here (published July and August, 2012): Tradeshift's Supplier Enablement Strategy for E-Invoicing -- Should Ariba and OB10 be Worried? PRO subscribers can also access Part 2, Part 3 and Part 4 of this series by clicking these links (they will not be published on Spend Matters).

Earlier this summer, Tradeshift unveiled a new program called Fast Track to get companies transacting invoices electronically for a relatively low price per document, including all supplier enablement costs and fees for an unlimited number of suppliers. TradeShift shared that the base level bundle for $15,000 per year or $1,500 per month includes 25,000 documents annualized (including invoices and credit notes) and support for invoicing across "standard TradeShift countries." This includes those in the European Union as well as the United States. TradeShift also notes that, "detailed country specific e-invoicing and e-archiving compliance verification have been made for Austria, Singapore, Netherlands, and the UK, EU, and US." Pricing per document decreases independent of any other factor as users add more documents beyond the standard 25,000, reaching as low as 40 cents per document under the Fast Track program.

In Tradeshift's words, this pricing is "all inclusive and there are no other fees for the services outlined or for implementation. There are also no supplier fees." Spend Matters readers should note that TradeShift's pricing can be significantly less on a per-document basis in the case of larger, enterprise deals for their global product (in these cases, the largest early
adopters are pushing 6-7MM documents per year over the TradeShift network). To date, TradeShift's largest customers have enabled over 100,000 suppliers, a huge number relative to typical e-invoicing on-boarding rates. For a past write-up on TradeShift's CloudScan enablement approach, one method the vendor provides for enablement, please see our recent analyses below:

TradeShift Introduces CloudScan -- A Shift in E-Invoicing Philosophy as Much as Technology (Part 1)

TradeShift Introduces CloudScan -- A Shift in E-Invoicing Philosophy as Much as Technology (Part 2)

After this latest announcement, we caught up with Tradeshift's founder Christian Lanng to discuss the new bundle and get a demonstration of TradeShift's supplier onboarding technology approach. One area we asked Christian about early in our conversation focused on the move to offering a cancellable monthly subscription-pricing model. In Christian's words, "Tradeshift has taken a lead from SalesForce.com" in the area subscription pricing, which is really the "first of its type" for e-invoicing. This changes the game for vendors and network operators within the P2P sector by forcing them to deliver value "month by month" lest they lose an account.

TradeShift's secret sauce to delivering value in a short period of time is its approach to rapidly onboarding suppliers through its network engagement tool. Think of this toolset as a specialized contact management tool specifically designed to run, track and monitor campaigns aimed at supplier onboarding. It allows TradeShift users to run individual campaigns targeted at different groups of suppliers and to modify what information (e.g., email subjects, content) that suppliers receive based on how they interact with the application.

For example, it allows users to quickly learn about which suppliers have received (confirmed) emails as part of an on-boarding campaign, which have opened the emails, who has clicked (and where), who has installed specific TradeShift apps, and where vendors are in the overall on-boarding process, including any steps left to finish. When working with the TradeShift supplier on-boarding team (which is very small relative to Ariba and OB10's staff, but more productive based on supplier conversion rates), users can take advantage of all of the A/B testing that TradeShift has done to understand various tricks and tips to get suppliers to open emails, click links, complete processes, etc.

In short, Christian told Spend Matters that the Fast Track program is "only profitable because we don't have to run a manual process." Specifically, their campaign tools enable onboarding and conversion" at rates "significantly higher" than other manual or automated approaches in the market. Having walked through the process of setting up, managing and monitoring campaigns in a live demonstration, we've never seen anything quite like what TradeShift has created in a self-service supplier onboarding context for e-invoicing.

Essentially, what TradeShift has created is a tool to manage large-scale communication across the supply chain, from which it has built its onboarding process around. Users can define specific supplier groups (by tier, geography, size, industry, volume, etc.) and outline and manage communication strategies based on these different defined sets of onboarding targets. It's also possible to move suppliers between groups. For example, after a supplier is on-boarded into the system and passes certain thresholds, they can automatically be pushed into a different group where additional information is required (and automatically gathered) either to populate a profile or for specific transactions (e.g., PO reference numbers).

While Ariba and OB10 have defined similar processes for their onboarding efforts (driven by internal teams, not user self service as a primary means), they are built around standard CRM environments rather than a dynamic integrated toolset whose campaign management elements are exposed as part of the core e-invoicing and connectivity application itself. In Part 2 of this series, we will walk through how users interact with this toolset in practice as they set up and manage campaigns.

And in the meantime, to answer our own question in the title of this series: yes. Ariba and OB10 should be wary of TradeShift's self-service enablement and management approach. The similarities to the commoditization of the FreeMarkets business model when self-service e-auction tools became available and ultimately usurped the market for full services auctions is significant (down to how incumbents will deny that a process such as this can be managed as effectively as a tool without a leading human element).

Spend Matters PRO subscribers can access Part 2, Part 3 and Part 4 of this series by clicking these links (they will not be published on Spend Matters).

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