SM: Did you have a supplier network as part of your product offering?
KC: We did, and that was a great piece. In 2002 our supplier network had about 25,000 suppliers on it. That supplier network continues to be a core piece of our business. Even in 2002 it was in the cloud. I like to say that we were in the cloud before it was cool. Today our supplier network has 300,000 suppliers on it, and transacts $140 billion of business a year.
SM: Do suppliers pay to be part of the network?
KC: A small fraction of them pay to be part of the network. It is free for the rest of them.
SM: No part of this business is transaction based? It was pure software?
KC: It was mainly software in 2002. Things have definitely evolved. The only thing which Ariba today shares with Ariba of 2002 is the name. Let me take you through that evolution. First, we added to our solution of behind the firewall software. We added services to that software, so not only could companies get the software implemented but they could also use it correctly. The next thing we noticed was that business owners and chief procurement officers were looking for a way to be able to control their own destiny in their technology solutions.
They wanted more control over how quickly they could access the technology and how quickly it could be rolled out. About four years ago we decided to take a two-pronged strategy. First, it was important for us to be able to serve our customer set with a on-demand or SaaS version of our technology. We recognized that very early in my tenure.
SM: What year was that?
KC: That was 2006. We also decided to make the procurement network I just described a core piece of our business. We had the only available network of its size in the world which allowed buyers and suppliers connect to conduct transactions. We set out four years ago to build that SaaS technology. It took us two years to build it.
Our initial thinking was that the SaaS offering would open up the mid-market customer base for us. We found out that it clearly did that. We quickly found that that not only did the mid-market companies want to use the solution, but companies of all sizes wanted to use the SaaS offering, including the Fortune 500 clientele. It was a much faster implementation for them.
We could get some of our technology operations for customers in as few as seven days. It could take a large ERP provider two years to get operational. We could get up and running to start saving our clients money in a period of three months. We changed the focus of our business to on-demand. We did maintain CD software for our existing customer set.