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Ariba Network Price Hike: Plan for Increased Supplier Fees in September 2010

Jason Busch, Executive Editor, Spend Matters

Ariba is increasing supplier network fees in September 2010 by a significant amount. Certain supplier groups (higher spend/dollar volume, lower transaction volume) will be most impacted, with the cost to process invoices for this group to potentially exceed $100 per invoice in certain cases. Specifically, Ariba is raising network fees to 15.5 basis points (.155%) for suppliers meeting new, lower transacting volume thresholds, meaning more suppliers will be impacted. This represents a 55% price increase from the previous 10 basis point cost (e.g., a $100 invoice would incur a 15.5 cent versus 10 cent fee). There is more to the fee increase than meets the eye, however. Spend Matters has interviewed both Ariba team members and Ariba customers to get multiple perspectives on the planned fee increase and what it will mean. In this free research brief (registration required), we offer customer, supplier and investor perspectives on this business model evolution. Included in the analysis is an illustrative example of what the new supplier fees will look like for a buying organization transacting on the Ariba network.

The report suggests that Ariba's network fee increases will be negligible for small and medium-sized suppliers on the network (and large suppliers with minimal dollar transaction volume). Moreover, for suppliers engaged in low-dollar volume and/or high frequency transactions, Ariba's network fee structure can be materially less expensive than competitive fixed fee networks, despite bringing significant value. Yet for suppliers transacting materially large dollar volumes, the economics of the Ariba network may no longer make sense if other options exist (e.g., taking spend offline, using a competitive network, etc.).

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