Ariba Supplier Network Alternatives: Elemica (Part 1)

This post is part of a Spend Matters series looking at Ariba Supplier Network alternatives. We will cover each Ariba supplier network alternative in a series of posts, starting with each provider's basic background in the area. Following this initial installment, we will then examine their solution approach and Ariba/third party systems integration. Finally, we will provide our own summary and analysis of the provider's overall capabilities.

Elemica is one of the few remaining independent industry exchanges with material transaction volume. However, its solutions are not limited to just enabling P2P connectivity. Elemica provides a range of enabling supply chain, logistics and procurement and sourcing capabilities on an industry-specific basis. Spend Matters previously wrote that "In 2000, 22 chemical/process companies invested $140 million ... to get Elemica off the ground ... Later in 2009, Elemica merged with RubberNetwork. Today, they focus on two areas: strategic sourcing and technology enablement across both procurement and supply chain processes and connectivity between partners."

Elemica told Spend Matters that their solutions currently connect "more than 2600 companies across multiple industries" processing over $60 billion in annual transactions for clients including BASF, Continental, Dow, DuPont, Goodyear, LANXESS, Rhodia and Shell. Elemica does not break out revenue for its supplier network/connectivity offering, but shared with Spend Matters that it is a "profitable company" that is generating "positive cash flow." From a usage standpoint, Elemica works with "hundreds" of buy-side customers that connect with "thousands of suppliers" using their network enablement capability. All of these "clients and the majority of suppliers pass files in an integrated solution as opposed to portal access."

The majority of suppliers connect with Elemica directly through their own network capabilities, although a "small percentage of suppliers connect via other third-party networks." Elemica believes that "it is in the best interest of network clients to foster interconnects between networks, and Elemica supports many interconnects today and actively works on fostering new connections." Spend Matters has observed a bifurcation in the market in this regard between proprietary network models, such as Ariba, and other more open network interoperability models such as the type Elemica is pursuing.

Elemica supports connectivity into other networks that suppliers may be integrated into in a variety of ways. However, they prefer to focus on "single connections based on a superset standard file format as opposed to a one-to-one data agnostic communication pass-through like simple VAN connectivity" in the network connectivity/interoperability models they support. For document exchange/transactional standards, Elemica supports twelve separate international standards in EDI and XML as well as proprietary file formats, including IDOCs.

For overall specific network volume, Elemica does not break out the number of transactions or associated dollar volume, though it does note that the "volume of transactions is significant." Spend Matters estimates that the dollar volume of transactions Elemica enables via its network and connectivity capabilities is most likely in the billions of dollars per year.

Elemica's pricing model seems more flexible than others on the market. They told us, "when it comes to connecting trading partners, we have a price component that is based on volume of business, but not directly based on the number of transactions." Moreover, Elemica has "focused on fixing the most painful and expensive components of the supply chain for multinationals which leads to custom project pricing based on ROI." Spend Matters' translation of this observation is that Elemica typically works out customized deals with its users/investors based on their own financial and operational priorities and models.

Stay tuned for further Spend Matters analysis of Elemica's network capabilities, commercial/network models as well as our findings from talking with current Elemica customers.

Jason Busch

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