The Ariba Distinction

In our last post we addressed recent changes to the TRE invoice verification procedures. Two thoughtful and important comments have been posted in response and I’d call your attention to both.

The second of those comments, by Drew Hofler of The Ariba Supplier Network, highlights an issue that will (I hope) become increasingly important to all TRE Buyers.

Because a Seller that belongs to The Ariba Network brings added value to the table.

First of all--what is Ariba?

Quoting here from a press release:

“The Ariba Supplier Network is the world’s leading business collaboration platform, which combines technology and services to better match buyers and suppliers, automate transactions and optimize payments. Buyers and suppliers in 115 countries leverage the network to engage in transactions worth more than $110 billion a year and process one purchase order every two seconds. Leveraging the reputation and power of the Ariba Network, suppliers can lower the cost, risk and time associated with accessing capital.”

So, for our purposes, Ariba represents a VERY substantial volume of B2B receivables-creation, with a payment process that incorporates an automated, controlled, protected, invoice approval process.

Ariba and TRE have had a strategic alliance for some time now but the volume of Ariba invoices offered for sale on TRE has been minimal. That might be because of a lack of Ariba member education. It might be because the actual mechanics of uploading member invoices has not been as user-friendly as it might be.

In any event, Drew posted welcome news yesterday that I’d like to make sure to highlight. I quote from his comment to yesterday’s post…..

“This issue brings to light even more the value of invoices that are uploaded to the TRE platform directly from a supplier network such as Ariba. In the case of an Ariba supplier selling an invoice processed via the Ariba Network, both the issue brought up in the blog (verification) and the issue in the comment (quality of invoices/errors) are rendered moot.

1) Verification: When the next release of the Ariba Network (AN) comes out (4Q09), Ariba suppliers will be able to click a button and directly upload their approved invoices for sale to the TRE platform. Approved invoices are delivered directly to the AN from the Obligor's ERP, and are then transmitted directly to the TRE platform with no opportunity for the supplier to change any of the data contained within. Given the unbroken electronic chain of data, the need for verification is obviated.

2) Quality of Invoices & subsequent error correction: The nature of the Ariba Network is such that buyers/obligors set parameters up front that suppliers must meet in order for a submitted invoice to be considered in good order. This systematic quality control ensures that the vast majority of quality issues are filtered out before an invoice is even received by the Buyer/Obligor. So the issues brought up by Mr. Schmidt are largely removed for Ariba invoices.

Combine the above with the fact that eInvoicing via Ariba reduces invoice approval times down to an average of less than 5 days, and invoices sold by Ariba suppliers directly from the Ariba Network will offer TRE Buyers a qualitatively better option to reduce risk and extend returns.”

The critical issue to highlight in Drew’s comment, I believe, is that the Ariba system will actually provide a MORE robust verification process than had been offered by TRE even BEFORE its recent changes.

If I understand the mechanics of the network correctly—and I invite Drew to correct me or to amplify here—the invoices posted by an Ariba Seller will not only have been verified with respect to authenticity i.e. that there IS an invoice matching the Seller’s posting in the Account Debtor’s AP system, but the Account Debtor will have ACKNOWLEDGED that the goods provided have met the conditions of the agreement AND that the amount of the invoice is payable as and when indicated.

This provides a significant level of additional security to a TRE Buyer, which should result in preferential pricing of invoices originated by Ariba members.

A substantial increase in Ariba Seller activity would be a very good thing for TRE and, I suspect, for Ariba also. Let’s hope all interested parties work hard to make that happen!