A Buyer s Guide to Handling Sellers Frequently Asked Questions

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1 A Buyer s Guide to Handling Sellers Frequently Asked Questions Benefits Sellers transacting over the Ariba Network have benefited by: Increasing sales and wallet share by percent Decreasing order and invoicing process costs by percent Getting paid percent faster Improving order accuracy 5-20 percent Reducing invoice entry time by 75 percent and change order processing time by 80 percent Lowering catalog testing time by 50 percent or more Turning outstanding receivables into working capital in as little as three days This guide is intended to help you answer common seller questions and concerns regarding the Ariba Network, the Ariba Supplier Membership Program, the Ariba business model, onboarding/ change management issues, technical questions, and value propositions for special seller segments. While it is not unusual for sellers to resist or raise questions about new processes, technologies, and approaches, the following responses have worked best in Ariba s experience from onboarding more than 600,000 sellers. Supplier Membership Program Fees and Billing 1. Why do sellers need to pay fees to support their customer s initiative? What value do sellers get from this investment? The majority of sellers do not pay a fee to transact on the Ariba Network. More than 70 percent of the sellers using the Ariba Network access it for free. Ariba provides these sellers with: Order, catalog, and financial collaboration functionality Productivity tools, such as PO-Flip Reporting Account registration and administration tools Seller profiles searchable by prospective customers Global support Sellers are not required to pay a fee unless they: Reach a document count 1 of at least five documents annually and Reach a transaction volume 2 of at least $50,000 3 in goods and services annually For these sellers, fees are assessed as a small percentage (0.155 percent or.00155) of annual business volume per qualifying relationship over the Ariba Network. For example, a seller transacting five or more documents and $100,000 in annual business volume would pay just $155 or 151/2 cents for a $100 invoice. In addition, sellers benefiting from the greater ROI of process automation made possible by direct integration to the Ariba Network via cxml, EDI, CIF, and/or Ariba PunchOut technologies pay a $495 annual subscription fee. Sellers who transact fewer than five documents and less than $50,000 in goods and services annually do not pay fees to use the Ariba Network. More than 70 percent of sellers transact for free. 1 Documents are defined as purchase order and invoice documents. 2 Transaction volume is defined as the dollar value of spend transacted over the Ariba Network. Our standard practice is to calculate this by adding up the value of purchase orders received plus non-po-based invoices sent across the Ariba Network. PO-based invoices generated and sent through the Ariba Network are not included in transaction volume. We do this to avoid double-counting. However, in some cases, your seller s total invoice value (both PO-based and non-po-based invoices), rather than PO value plus non-po-based invoice value, may be used to determine fees. 3 All financial amounts are in US dollars.

2 These costs are more than covered by the benefits of transacting on the Ariba Network, which include: Greater sales and marketing exposure to more than 1,000 buyers using Ariba solutions More efficient processes, particularly in the areas of accounts receivable and customer services; these process efficiencies enable accounts receivable and customer service professionals to focus on more strategic activities not just collections follow-up and order taking Faster payment, which is made possible by automation and software functionality for validating invoices and sending immediate notifications regarding problems Ariba has investigated other pricing models, including only charging buyers or only charging sellers. In keeping with our commitment to maintain a pricing structure that encourages growth and participation while offering continued, demonstrable value for all Ariba Network participants, we have selected a two-sided pricing model that best reflects the benefits the Ariba Network offers to both buyers and sellers. This model allows us to invest in support and ongoing product enhancements for buyers as well as sellers while also reinforcing our collaborative network design. 2. What about sellers with very low or high transaction volumes? Important aspects of the Supplier Membership Program ensure that fees are waived for low transaction volume sellers and capped for high-volume sellers: Relationships with fewer than five documents or transaction volume of less than $50,000 are exempt from fees. Today more than 70 percent of Ariba Network sellers transact at no cost. Fees are capped annually at $20,000, which equals approximately $13M in qualifying transaction volume for any of your sellers customer relationships. Transaction volume in excess of $13M in a one-year period is exempt from fees. Order confirmations, advance ship notices, invoice and payment status reports, and other similar documents are not included in this calculation, yet these value-added capabilities contribute to the percent process cost reductions sellers realize. Less than 1 percent of sellers reach the annual cap of $20,000 in total fees, and at this volume of business, sellers reap benefits from automation and faster payment that far exceed these fees. Ariba can provide models and calculators to help sellers see the value of their investment. 3. Is Ariba offering any new capabilities to sellers? Yes. As the only business commerce network dedicated to treating sellers as valued customers, Ariba has invested more than $90M since 2007 to enhance account management, support, the platform, and functionality for sellers, as well as to create new marketing and exposure opportunities with prospects and customers in Ariba s global buyer community of over 1,000 companies. The new platform investments and functionality deliver rapid ROI for sellers. Moreover, Ariba provides dedicated account management for high-volume sellers and global customer support in ten languages for all sellers. Ariba also has a team of more than 200 account managers, product managers, engineers, and service professionals all dedicated to helping sellers succeed. At the same time, Ariba has made significant investments in the Ariba Network itself, offering even more ROI-generating functionality, including: A completely redesigned invoice user interface that decreases invoice entry time by 75 percent Streamlined CIF testing workflows that cut seller testing time from two hours to 30 minutes Streamlined PunchOut testing tools that reduce catalog testing time by 50 percent Greater visibility into change orders that reduces seller change order processing time by 80 percent Access to a global network of investors through Ariba Receivables Financing, which can turn outstanding seller receivables into working capital in as little as three days Expanded access to seller technical support, valued at $1000 annually

3 4. Does Ariba charge sellers in advance? No, unlike other services that charge fees up front, the fees Ariba charges sellers are invoiced only after they meet the two thresholds and begin to see value from the Ariba Network. This enables sellers to experience the incremental benefits of electronic transactions before paying any fees and those fees only apply to sellers transacting at least five documents per year and $50,000 in annual business volume. It is important for sellers to use the Ariba Network first and clearly understand the measurable benefits it offers, including: Faster payment: Sellers typically realize a 15 to 20 percent reduction in days sales outstanding through automation and early detection of problems during the invoice process. Reduced process costs: Sellers typically experience a 5 to 20 percent improvement in order accuracy, a 60 to 75 percent reduction in order processing costs (enabled through automation), and up to a 75 percent increase in accounts receivables efficiency. Increased sales: Sellers on the Ariba Network have access to marketing and sales programs that increase their exposure with more than 1,000 buyers using Ariba. Improved buyer compliance channels more spend to Ariba sellers, helping them increase wallet share by 26 to 32 percent. Greater visibility into customer processes: Sellers gain real-time visibility into catalog usage, customer orders/change orders, and invoice and payment status. Higher customer satisfaction: Sellers can boost customer retention by 10 to 15 percent through automated capabilities that support customers e-commerce initiatives and save time and money. 5. Why does Ariba charge a percentage of spend instead of transaction fees? Ariba performed considerable analysis with third-party pricing experts and determined that this model best reflects the value of the Ariba Network which for sellers includes increased sales and faster payment. 6. How frequently do sellers receive bills from Ariba? This depends on the timing of when sellers relationships with specific buyers cross the two chargeable thresholds and reach a paid membership level. Seller-buyer relationships that reached a paid membership level before September 1, 2011, are typically billed on an annual basis, whereas seller-buyer relationships that reach a paid membership level on or after September 1, 2011, are typically billed on a quarterly basis. 7. How does Ariba determine how much to bill sellers? Sellers pay for future usage of the Ariba Network based on historic usage. For annually billable relationships, Ariba issues an invoice in the amount of.155 percent of the value of the prior twelve months transaction volume. This bill covers the next twelve months usage of the Ariba Network. For quarterly billable relationships, the Ariba Network issues an invoice in the amount of.155 percent of the value of the prior three months transaction volume. This bill covers the next three months usage of the Ariba Network. For both types of relationship, chargeability (i.e., eligibility to receive an invoice) is based on the prior twelve months transaction volume and document count. The only difference is that the bills for annual relationships cover twelve months of usage, whereas the bills for quarterly relationships cover only three months of usage Ariba s Business Model 8. Why do sellers need to pay fees? At Ariba, both buyers and sellers are treated as customers. We strategically invest in new functionality and services that deliver value to all parties. By charging sellers to use the Ariba Network, Ariba collects revenue that is then reinvested back into the Ariba Network to deliver greater ROI to sellers and enable them to service their customers faster and more efficiently. 9. Why doesn t Ariba charge a flat, per-document fee, rather than a percentage of spend? Flat-fee solutions available today, such as fax and the postal service, don t provide as much value to sellers. They deliver the invoice, but they don t help buyers process it. Nor do they give sellers visibility into invoice approval or payment status. Buyers choose Ariba because Ariba offers greater value faster transactions, lower costs, and greater ROI that benefit both buyers and sellers. Ariba technology doesn t just eliminate paper it moves money faster and solves a working capital problem, similar to the way

4 Visa, MasterCard, and PayPal do. The business model of nearly any organization that manages money and moves money faster is to capture a percentage of spend. When Ariba moved to a value-based pricing model, it engaged the world s best pricing consultancy, and their recommendation based on price sensitivity and behavioral analysis of 55,000 sellers showed that this is the best model for all parties. Ariba has a 99 percent seller retention rate, and 100 percent of sellers with three or more customers renew their annual membership. 10. What value does Ariba offer to sellers? Ariba offers significant value in the following areas: Visibility Sellers can see the status of invoice approvals and payments so they can manage their cash flows. Unlike other third-party networks, Ariba provides self-service access to real-time status information. Faster payment Through automation and instant notification of any exceptions, Ariba streamlines the entire invoice approval and payment process. Sellers using the Ariba Network typically lower their DSO by six to twelve days a percent reduction. For sellers seeking even faster payment, Ariba offers an array of working capital management solutions that provide accelerated payments for discounted terms. Increased productivity Ariba helps sellers reduce costs by supporting collaborative, automated order, catalog, invoice, and working capital processes. The result is a percent gain in productivity in invoice and order processing (increasing to percent for sellers that fully automate their interactions with the Ariba Network). New business growth Ariba provides sellers with access to a community of thousands of buyers who want to discover new sellers. Sellers also realize higher revenue with existing customers by increasing wallet share percent through increased buyer compliance. Seller need for value in these areas has been validated by research that Ariba has conducted through polls and interviews with more than 700 sellers as well as behavioral analysis of 55,000 sellers on the Ariba Network. Ariba has a 99 percent seller retention rate, and 100 percent of sellers with three or more customers renew their annual membership. 11. Does the value of accelerated payment and cycle time/dso reduction really cover SMP fees? Yes. At a 10 percent cost of capital, sellers only need to shave six days off the payment cycle in order to fully recover their fees. Ariba sellers typically shave off six to twelve days by using the Ariba Network. This alone covers the fees due to the time value of money. You can calculate the value of cycle time reduction, which leads to DSO reductions, as follows: Assumed cost of capital (e.g., 10 percent) divided by 365 days Multiplied by the number of days reduction (e.g., six days) Multiplied by the annual value of receivables 12. What capabilities does the Ariba Network provide for sellers? The Ariba Network helps sellers conduct business with their customers in a more cost-effective way that benefits everyone especially in the areas of collaborative order, catalog, invoice, payment, and working capital management. Ariba does this by providing sellers with a complete, closed-loop, collaborative order-to-cash system, complete with features supporting new business opportunities, greater visibility and control across the order-to-cash cycle, and innovative working capital management solutions. Key features and services include: New opportunities for sellers to grow their business via features and service offerings that increase seller visibility to current and prospective buyers Opportunities for new business relationships Collaborative order and catalog management functionality that offers greater accuracy in customer orders

5 Collaborative invoice and payment management for greater visibility into customer processes Dedicated account management for high-volume sellers Global support for all sellers Onboarding and Change Management Issues 13. How should I position the Supplier Membership Program to my sellers? Explain that you are moving to a business collaboration model and will no longer accept paper invoices and/or will only issue purchase orders through the Ariba Network. Tell your sellers that their participation is key to the success of your e-commerce initiative, and that value not cost should drive their participation. Sellers on the Ariba Network are realizing significant value today, including faster payment, decreased costs, and increased sales. Despite all this value, more than 70 percent of sellers do not pay to transact over the Ariba Network. For high-volume sellers, the Supplier Membership Program balances value and cost, as we assess a modest fee that amounts to less than 20 percent of the benefits sellers realize resulting in percent ROI for them. The fees sellers pay are reinvested back into the Ariba Network to enhance account management, services, the platform, and functionality for sellers, as well as to create new marketing and exposure opportunities for sellers among Ariba s Global 2000 buyer base. Sellers are and will continue to be the focus of significant strategic investments at Ariba. Because of the investments we make to deliver seller ROI, sellers are very satisfied with Ariba; ongoing seller participation is 99 percent. Given the options, most sellers have chosen the Ariba Network and have found that the benefits of increased ROI through faster payments, increased productivity, reduced error reconciliation costs, and increased sales through better customer compliance far outweigh the costs they may be required to pay. Possible Seller Objections 14. Why do I need to change my processes to support your initiative? B2B e-commerce is a major business trend that is here to stay, and sellers should view it as an opportunity to position themselves for positive, continued growth as B2B e-commerce adoption continues. 15. Can t we just continue doing business the old way? This is not an option, as paper invoices will no longer be accepted and/or purchase orders will be issued only through the Ariba Network. B2B e-commerce is a major business trend that offers sellers the opportunity to drive new growth as B2B e-commerce adoption continues. 16. I don t know how to get started. It seems like too much work to learn all of this. It s actually very easy to get started; all you need is an Internet browser and the ability to work with a user-friendly interface. Ariba can help you begin. 17. My customer tells me that we don t need to participate because it doesn t apply to us. This is incorrect information. If you do not comply, your Ariba Network account will be suspended, which will impact your ability to obtain purchase orders and invoice this customer. 18. I don t want to do double data entry from my invoicing and/or order management system to the systems running on the Ariba Network. Ariba gives sellers the option to upgrade to server-to-server integration using cxml or EDI and at no extra cost. When this is in place, manual data entry is reduced significantly at your business, and errors are nearly eliminated. For sellers unable to engage in B2B integration, Ariba offers productivity tools, such as PO-Flip, that reduce most of the data entry activities.

6 Technology 19. I don t have a computer, so I can t get started. The Ariba Network does not require a costly server just a basic, low-cost PC (which you can purchase at a nearby computer store or online) and an Internet connection. B2B e-commerce is a key business trend today, so embrace it as an opportunity to evolve and grow your business so you don t get left behind. 20. I have concerns about the privacy of my data. How do I know it s secure? Ariba takes security and privacy very seriously. Ariba has Webtrust certification and is PCI-compliant. We have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect within the Ariba Network. These measures include the following: Multi-level firewalls to segregate and secure network segments based on system roles Encryption of data transmissions using SSL technology Use of server-side and client-side digital certificates Role-based administrative access policies and procedures A primary co-location facility protected by cipher-encoded access badges, biometric scans, and 24-hour video surveillance and guards to control access Comprehensive, in-house performance and security monitoring and auditing Intrusion detection and analysis Detailed security policies, processes, and procedures Security auditing performed by outside consulting agencies Ariba has Webtrust certification and is PCI-compliant, so sellers can rest assured that their data is very secure. 21. I already have an EDI connection and want to use it. Ariba can accommodate EDI over a VAN and over AS I don t want to log into your system I just want to process functional acknowledgements. Functional acknowledgements do not offer the end-to-end visibility that Ariba provides. With the Ariba Network, you not only gain visibility into whether the transaction reached its designation, but also what your customers are doing with your order responses and invoices. 23. I don t want to upload and manage CIF catalogs. For sellers whose customers request CIF catalog enablement, CIF catalogs provide an opportunity to help customers enforce their employees compliance and direct more spend to preferred sellers. CIF catalogs also increase the accuracy of purchase orders; Ariba sellers report on average a 5 to 20 percent improvement in order accuracy when their customers use online catalogs and some sellers have reported 85 percent improvements. In addition, Ariba continues to invest in tools that greatly simplify the management of CIF catalogs, such as one-step catalog upload and validation.

7 About Ariba, Inc. Ariba, Inc. is the leading provider of collaborative business commerce solutions. Ariba combines industry leading technology with the world s largest web-based trading community to help companies discover, connect and collaborate with a global network of partners all in a cloud-based environment. Using the Ariba Commerce Cloud, businesses of all sizes can buy, sell and manage cash more efficiently and effectively. Over 600,000 companies around the globe use the Ariba Commerce Cloud to simplify inter-enterprise commerce and enhance results. Why not join them? To get on the path to Better Commerce visit: Special Seller Circumstances 24. What s the value for high-dollar-volume sellers? A key value Ariba provides to high-dollar-volume sellers is the speed at which Ariba helps move money. Therefore, your sellers high-dollar documents are the most mission-critical and benefit the most from Ariba s reliability, security, and visibility. The reason for this is similar to the reason wire transfer (which typically costs $20-$30 per document, while ACH is free) is often selected over ACH: because it s simple, safe, irreversible, and fast. Companies look at the cost of the wire versus interest gained over the one to two days saved, and what they gain generally exceeds the amount they pay. This is another example where high-value transactions deliver the greatest benefit. 25. What s the value for small sellers? Small sellers benefit from the opportunity Ariba provides to drive new revenues and increase exposure through optional programs and resources such as Ariba FastTrack Invoice and Ariba Discovery, which give them exposure to thousands of buyers currently using the Ariba Network. They also have the opportunity to increase wallet share within their accounts; sellers on the Ariba Network have reported 26 to 32 percent increases in sales and wallet share. In addition, Ariba continues to offer sellers the opportunity to develop their B2B e-commerce capabilities, enabling them to differentiate their offerings. 26. What s the value for services sellers? Over the past three years, Ariba has made many investments in support for services sellers, such as the development of services taxonomies and new service procurement collaboration capabilities that further streamline and optimize services procurement and order processing. As a result, services sellers gain the same benefits as other sellers: increased revenues, decreased process costs, and faster payment. 27. What s the value for European sellers? Over the past three years, Ariba has invested heavily in functionality and services to benefit European sellers. For example, Ariba has invested in VAT, GST, and sales tax capabilities that are superior to other solutions in the market. More than 30 percent of sellers on the Ariba Network are European. Ariba has also invested in multilingual seller support and offers global support in ten languages, including Dutch, French, German, Italian, Polish, Portuguese, and Spanish. 28. What s the value for Asian sellers? Asian sellers gain the same benefits as other sellers: increased revenues, decreased process costs, and faster payment. Over the past three years, Ariba has made significant investments in Ariba Network performance reliability; as a result, in its most recent seller satisfaction survey, Asian seller satisfaction increased more than 5 percent over the prior survey. Ariba has also invested in multilingual seller support and offers support in ten languages, including Japanese, Korean, and Chinese. Ariba now offers sellers sales and marketing opportunities in Ariba Discovery and optional sales and marketing programs that provide networking, access, and exposure opportunities. Copyright 2011 Ariba, Inc. All rights reserved. Ariba and the Ariba logo are registered trademarks of Ariba, Inc. Ariba Discovery, Ariba PunchOut, and PO-Flip are trademarks or service marks of Ariba, Inc. All other brand or product names may be trademarks or registered trademarks or service marks of their respective companies or organizations in the United States and/or other countries. 11/11 Ariba, Inc. 910 Hermosa Court, Sunnyvale, CA Toll-free (USA): I Outside USA: