Thought Leaders in Big Data: Interview with Tim Minahan, Network Strategy VP for Ariba (Part 3)

Sramana Mitra: That is interesting. That brings me to the question about startups. Of the one million companies transacting on your system, what is the distribution? How many are large companies, how many are mid-sized companies, and how many are small companies?

Tim Minahan: Demographics would certainly tell you that the large majority of them are small, by nature. Certainly the Ariba network has been a massive channel for many small startups. I will give you an example around working capital and financial management, but also being exposed to new sales with global 2000 buyers. One company called MarkMaster makes a host of office products, but predominantly the rubber stamps that are used to accept or reject your mortgage loan. Cuban immigrants came to the U.S., started a company in Florida and became a good growth company but a very low-margin business. So, they joined the Ariba network about seven years ago because one of their customers asked them to, and they found that an interesting thing happened. When they began transacting business with that customer, it actually lowered their cost of sales. But then something even more magical happened: soon they were able to be exposed to new business opportunities with other global 2000 buyers in other parts of the U.S., to whom they would have never been exposed. Over the past six years, they have seen their revenue grow 20% year over year through the Ariba network. Their share of wallet with customers on that network grew 30% year over year – including through the worst recession we have all seen. Finally, today their president claims that 80% of their new business comes through the Ariba network. This is a significant channel for a mid-market company.

Going outside of the U.S. – even more interestingly – I was speaking with the CEO of Grupo Posadas, which owns a fast-growing hotel chain in Latin America. He was talking about their growth plans and how they rely heavily on localized suppliers. They certainly use Ariba to discover and qualify new suppliers. What is interesting with those suppliers is once they joined that network, there are two or three suppliers he mentioned that have now been exposed to new business outside of Mexico. For the very first time – because they are a part of this network – they are exporting outside of Mexico. This power of global digitally connected communities oriented around doing business is really helping emerging companies find new business and better manage their businesses.

SM: How is the distribution in terms of verticals? How does the business play out? Is it mostly in manufacturing, entertainment?

TM: Traditionally Ariba had gone to market in a very horizontal manner. We addressed the problem that any company in any industry had. The first problem was around spending management – how do I manage my costs better – but the bigger problem today is inter-enterprise collaboration. As you might imagine, certain industries have gravitated towards us. As a result when a large buyer comes on board, enabling their supply chain, we get to the point today that on average more than 40% of a typical specific industry with more density, which is where we are getting at – industries like financial services, discrete and high-tech manufacturing, retail, consumer packaged goods, oil and gas, pharmaceuticals, etc. The density there is well above 60%, making it much easier for them to merely plug their systems in and begin transacting immediately.

SM: Does a small company have to get invited to join the network by one of their procurers, or can they just join?

TM: Traditionally the answer would be yes. Today the answer is no more. The Ariba network was originally built for what you just said. Large buyers said, “Look, you have automated our purchasing process within the four walls of our company, but we need a better way to connect and collaborate with our suppliers and view their catalogs and transact with them.” So we created the Ariba network back in 1999. But over the course of the past 10 to 11 years, a couple of things have changed. Not only have we increased in volume and participation, but also the types of collaborations that go on in there. Today a supplier looking for new business can come to the Ariba network – https://discovery.ariba.com – log on and go through a registration process and indicate what they sell and what regions they sell in and be exposed to new business right off the bat.

I will give you an example. There is a unit of David’s Cookies called Eleni’s. Their bakery out of New York joined not too long ago, and in their first months what turned into a million-dollar annual contract to provide their baked goods to one of the more famous casino and entertainment companies. The answer is yes. Companies can join today. That is the power of the community and that is why we have seen the network grow so fast, because it is very easy to get on board and begin engaging in the community in many different ways, not just transacting with an existing customer.

This segment is part 3 in the series : Thought Leaders in Big Data: Interview with Tim Minahan, Network Strategy VP for Ariba
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