Connecting SMBs: Intuit’s Procurement, E-Invoicing and Network Opportunity Jason Busch - March 11, 2013 7:07 AM | Categories: Technology | Tags: innovation, Intuit, L1, Tradeshift Last week, two members of the Spend Matters team spent the day at Tradeshift’s analyst day in NYC (links to our coverage are at the end of this post). Eric Dunn, responsible for Intuit’s commerce network solutions, took the stage at a morning session to explain his company’s interest in working with and becoming a strategic investor in Tradeshift (while the terms of Intuit’s investment were not disclosed, the top-line multiple, estimated by some at in excess of 20X, sets a high bar for valuations in the sector). Clearly, as a “strategic investor,” Intuit wouldn’t be throwing around risk capital – even true risk capital – at such valuations if it didn’t expect returns outside of a potential high IRR for its investment funds. After listening to Dunn and considering Intuit’s current market position, we believe that the small business accounting giant will learn considerable lessons from Tradeshift about the role of intermediary networks and platforms that sit between SMBs and their customers regardless of whether or not this specific investment returns at the higher end of expectations – collaboratively and financially. Reading between the lines of what Dunn shared (and translating for a larger procurement and AP audience), it’s clear that Intuit sees a wide open cloud, between its SMB QuickBooks users and larger enterprises using a broad range of eProcurement, e-invoicing, ERP/MRP and VMS packages for indirect, direct and services spend enablement and supplier connectivity respectively. Creating tighter linkages between both QuickBooks CD and QuickBooks online users and these larger buying customers – not to mention leveraging the cloud between to offer new services – seems like a reasonable strategy. In other words, this intermediary QuickBooks network tied into all Intuit SMB accounting users could link directly into enterprise P2P tools and systems of record or other supplier networks. And it’s clear that Intuit has done its homework – or at least some of it – on the broader e-invoicing opportunity. Intuit surveyed a sample of small and medium sized business Quickbooks users, asking “what percentage have received an e-invoicing request” from customers? For companies using QuickBooks with over $1MM in revenue, approximately 40% have received a request to submit invoices electronically to customers. For QuickBooks users between $500K and $1MM in revenue, the percentage drops to 35%. The mean number of e-invoicing requests from different buying organizations of those surveyed in these two company revenue ranges is roughly 4.5. And these numbers will only grow over time. But simply connecting the user base into transactional AP and payment systems of larger buying organizations must only be one goal of Intuit’s commerce network business unit. If Intuit can enable this level of connectivity and through the transactional interchange exhaust (e.g., PO matching, approvals) and add assurances of invoice acceptance and confirmed payment dates, it could potentially turn on a financing network for early payment that provides more attractive APRs to small businesses than cards or other early payment options. The Receivables Exchange pioneered the model of confirming systems-based transactional data from buyers/suppliers to lower the cost of financing (by reducing risk for lenders), a model like this could be adopted for an intermediary network sitting between QuickBooks users and their customers. Beyond this type of e-invoicing and discounting/early payment opportunity, there are a range of additional services that Intuit could provide to its SMB accounting users through a network business model which could make the provider far more valuable (and sticky) for small businesses than simply providing accounting tools that track debits and credits. We’ll explore some of these potential cloud-based services that Intuit (and others in the market) will be able to deliver with Tradeshift -- or others, or even internally -- once it builds upon its initial steps into a networked business model. Recent related coverage: Tradeshift’s Analyst Day: Platform and Competitive Context Tradeshift’s Analyst Day: Framing the Opportunity Tradeshift’s Analyst Day: Supplier Network Metrics and Growth Tradeshift’s Analyst Day: Summary and Key Takeaways Tradeshift’s Analyst Day: Intuit and QuickBooks (Part 1) Tradeshift’s Analyst Day: Intuit and QuickBooks (Part 2) Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.