This move is similar to other instances where Ariba leverages a strategic partner to provide a piece of the puzzle that is not Ariba’s core competency; for example, using Discover and First Data to provide the payment network for AribaPay. Since it was founded in 2003, PrimeRevenue has created the legal framework and agreements, and the onboarding tools and methods needed to build out a network of over 20,000 customers/suppliers and 60 supply chain financing funders, including banks, institutional investors (fixed-income managers and sovereign funds), and hedge funds. Last year PrimeRevenue raised $80M in a financing round led by BBH Capital Partners.
This partnership allows Ariba to expand their existing portfolio of working capital management solutions, which currently includes buyer-funded dynamic discounting capabilities. With the PrimeRevenue partnership, buyers can offer additional programs to their suppliers that leverage third party funders and provides benefits to their suppliers such as better cash flow (shortened cash conversion cycle) and lower cost of capital (based on the buyer’s credit rating). This is all accomplished without negatively impacting the buyer’s balance sheet or cash conversion cycle.
Reducing Risk and Rates
The multi-funder model reduces the risk for the buyer, compared to relying on a single funder that might decide to pull out of a particular market and/or lower their limits for specific customers. Furthermore, it provides a level of competition between funders that can drive down rates (the cost of capital) and/or ensure that rates remain competitive.
A More Complete Payables and Working Capital Offering
Ariba has added the supply chain finance capability into a strategic payables bundle that includes AribaPay, Discount Management, Supply Chain Finance, and Working Capital Management Services. Ariba told us they are seeing a lot of interest in this solution. The Working Capital Management Services provides buyers with an engagement team that helps define a working capital strategy and terms extensions, and then actively reaches out to and onboards suppliers.
Serving Global SMBs
The PrimeRevenue solution also helps extend supply chain finance to mid-sized and smaller suppliers around the globe. All of the onboarding is done by Ariba and PrimeRevenue, removing one of the burdens (i.e. the cost of onboarding) that causes banks to hesitate to serve smaller accounts. It also provides a platform with a variety of funders that have fewer constraints and are often more amenable to working with smaller suppliers than major banks are.
This partnership represents another significant step in Ariba’s building out a broader portfolio of working capital management capabilities. It demonstrates Ariba’s willingness to partner to bring in those capabilities that are outside of its current competencies, to the benefit of all the parties involved.
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