There is no doubt that the popular adage, "follow the money," is a resounding theme across businesses. On the B2B commerce side, IDC Manufacturing Insights is seeing an increased focus on following the money that exchanges hands as part of the buyer-supplier transaction for direct (and indirect) procurement. Specifically, IT suppliers are building B2B commerce networks that not only facilitate the business processes involved in finding, ordering, and receiving materials and goods necessary for the manufacture of their products, but also ensuring that the financial transaction is similarly facilitated and captured within these commerce networks.
Take two examples of this trend in recent B2B commerce network history. The first harkens back to an announcement at Ariba LIVE 2013 this past May, whereby Ariba shared its intent to connect all suppliers and support all collaborative business processes from order to cash (find IDC Manufacturing Insights coverage about Ariba LIVE 2013 here). At the conference, Ariba announced the AribaPay service, a cloud-based service that meshes the Ariba Network with Discover's global payments infrastructure to streamline settlement and reconciliation of B2B commerce.
While not live, the service is expected to be generally available in the first half of 2014. Essentially, Ariba (and SAP) want to capture and digitize their share of an estimated $30 trillion in B2B payments that are largely paper-check-based today. AribaPay will offer data to support faster invoice-to-payment reconciliation, the ability to track and trace transactions, and automation of billing and settlements. And, for these services, Ariba and Discover will extract nominal fees that are intended to still be markedly less than what most manufacturers currently pay for manually processing paper checks.
More importantly, AribaPay will solve a problem that even ACH hasn't been able to, which is to electronically tie the rich payment information to remittance and settlement, making it easier for suppliers to reconcile their payments. This has long been a challenge for electronic payments, and AribaPay solves it by leveraging the comprehensive data it captures - from contract to purchase order to invoice - on the Ariba Network. Now, buyers choosing to pay with AribaPay will have that data automatically mapped to and delivered with the payment.
A second example of monetizing B2B commerce networks can be found in the recent acquisition of OB10 by Tungsten Corporation. In October, Tungsten, a UK-based company founded in 2012 to "create a leading cloud based global trading network," acquired OB10 for 100 million pounds from a private equity firm to form the platform for its global trading network vision. OB10 is a global B2B e-invoicing and purchase order network, founded in 2000 and headquartered in London. The OB10 network hosts 122 large corporate and government buyer groups, including Kraft, Unilever, Motorola, GSK and BP, and more than 140,000 suppliers. The network processed over 100 billion pounds in invoice transaction value between April 2012 and April 2013.
Tungsten's strategic vision is to monetize the existing OB10 e-invoicing platform with value-added services that include electronic invoice discounting and spend analytics technology. To complete this strategy, Tungsten has announced an agreement to acquire a UK bank to facilitate the provision of supply chain financing and invoice discounting to the OB10 network.
What these two very diverse examples illustrate is that B2B commerce is fast becoming a landscape that captures the procure-to-pay process and monetizes the transactions involved. B2B commerce network operators are promising manufacturers visibility and tighter control of cash flow, providing them with the critical financial services link in exchange for tying the manufacturer to their network. Naturally, there are benefits to these networks, including seamless processing of purchases, streamlined supplier onboarding and communication, and reduced costs associated with manual processes. Among the challenges for manufacturers are deciding which B2B commerce networks to join and how to ensure the highest proportion of suppliers are part of the networks. Stay tuned as we delve deeper into these topics in the coming months at IDC Manufacturing Insights.