Sramana Mitra: What is the problem? What can you not do today in that scenario that you would like to do? What is the fantasy there?
Shan Haq: We’ve got some baby steps in this direction, but I think there’s a better way to go. We have a solution around dynamic discounting. This is the idea that an invoice is sent to a customer. On an invoice by invoice basis, a customer can make an offer to the supplier that says, “I’ll pay you more quickly if you give me a discount.”
We take this historical 2% NET10 scenario and make it much more dynamic, and instead of having it be ubiquitous across every supplier, supplier can make the decision on whether or not to accept the offer on an invoice-by-invoice basis. That’s in place today. We do that with customers today. One of the things that customers want to know is which suppliers should I make offers to, which invoices should I make them on. We can help with that today.
We can do things like look at some industry trends and look at credit reports. There’s a whole bunch of data out there. If you can leverage it and capture it, you can get real specific. We can give customers some guidance today on which suppliers are most likely to accept an offer and when they’re most likely to accept them.
Ideally, you’d like to get to the point where you could tell a customer, “You have a supplier in the retail industry. Because of their seasonality and based on their credit report, we can tell you, with 97% certainty, that they will accept an offer if the discount is no more than 2% and you pay them at least 15 days early.” That’s the type of granularity that we’d like to get to. If a company can find a way to access data from a number of different sources, analyze it, and learn from the analysis, and present that in a dynamic way, that’s something that can be powerful.
Sramana Mitra: You said there was a second area that you wanted to talk about in terms of open problems and new entrepreneurship opportunity.
Shan Haq: The other thing is, we’ve got a network. We’ve got hundreds of thousands of suppliers connected with a number of very large enterprise customers. There are other companies that do similar things and have similar networks. This is a difficult thing to do. There needs to be a rationalization of the network so that there’s more standardization and openness to break down these siloed networks and really get businesses working together. Maybe not a single network, but how can we get them to interact together?
There’s obviously a profit constraint there. Companies are in business to make money, but if there was a way to make it so that we can all participate together, customers would benefit from that. Someone could solve that problem. There’s a real opportunity to make life easier for a lot of companies.
Sramana Mitra: Is there anything else you want to add?
Shan Haq: There are some very good things going on in the procure-to-pay space and general supply chain collaboration. We’re playing a significant role there. I think that as technology improves, we’re going to see more and more effective and efficient connectivity and collaboration.
Sramana Mitra: Tell me a little bit about your company. What scale are you at? How big a company are you?
Shan Haq: We’re privately held so we don’t disclose revenues. We are somewhere in the hundred-ish enterprise level customers. We’re processing tens of millions of transactions a year through our network. As I said, hundreds of thousands of suppliers are sending transactions and are connected to our network.
Sramana Mitra: If you were to provide us an estimate of market penetration of these sophisticated procure to pay solutions in the supply chain, what percentage of the market is using solutions like yours or from other competitors?
Shan Haq: If you look at Fortune 500, my guess is probably 3/4 of them are using some form of application within the procure-to-pay space. There’s probably a significant headroom in terms of the range of functionality that they could be using. My guess is a very high percentage of them are doing some type of electronic invoicing but maybe not with all of their suppliers.
Those who are doing electronic invoicing, some portion of them may be doing spend management but not doing something with dynamic discounting. It’s fragmented in the sense that they’re all participating but in different ways. There’s probably a significant headroom in terms of getting them to utilize the full capabilities across the procure-to-pay spectrum.
Sramana Mitra: Very good. Thank you for your time.