Looking under the hood of the Tradeshift enigma

Looking under the hood of the Tradeshift enigma

Posted by Pete Loughlin in e-invoicing, Electronic Invoicing, Financial Supply Chain Management, Supply Chain Finance 14 Oct 2011

Tradeshift are an enigma. Their revenue model may have you perplexed. Their tagline “Shift Happens” might raise an eyebrow and their animation for the launch of their Instant Payment offering – well is isn’t exactly Pixar.

But don’t let it fool you. Behind the enigmatic facade of Tradeshift is a brave business model – a business model that is going to fundamentally change the rules of supply chain finance. And this week, I spoke to Tradeshift’s charismatic CEO,¬†Christian Lanng, who, in his own words, began to “reveal the riddle that is Tradeshift”

Purchasing Insight logoTradeshift’s latest launch is a interesting and compelling addition to their cloud based electronic invoice service. Instant payments does exactly what it says. The aim is to bring to the whole of the market, SMBs as well as bigger players, the commercial benefits of supply chain finance. It will allow suppliers to receive instant payment – in the same way they could with a purchasing card or credit card – without the merchant fee.

Let’s just say that again. It will allow suppliers to receive instant payment – in the same way they could with a purchasing card or credit card – without the merchant fee.

For years, purchasing card have been a powerful supply chain finance tool. It’s not just that they facilitate immediate payment, they come with comprehensive data that can be used instead of an invoice. The biggest problem with the PCard has always been the merchant fee a charge directly proportional to the value of the transaction. It’s a great tool when the banks are reluctant to lend but at a time when interest rates are virtually zero, the cost is absurd.

So how can Tradeshift do it?

At the heart of the Tradeshift proposition is data. But data is more than mere information when it’s used intelligently – it becomes knowledge and knowledge is power. By leveraging the data that Tradeshift can collate about the suppliers and buyers in the Tradeshift network, they’re able to make detailed and near real-time risk assessments of the financial transactions within their community and, when it’s appropriate, factor approved invoices and pay suppliers immediately.

There are two thoughts that come to my mind immediately. The first is that this puts the spotlight, again, on the banks. The banks have been in a position to offer this kind of supply chain finance for years yet they have failed to step up to the plate. Whether that’s because they’ve had bigger, more lucrative priorities to pursue or they’ve been protecting their existing market, I wouldn’t like to speculate but we’re seeing again, like we did a decade ago, that businesses need to look at how they can destroy their own business modes in order to see how to survive. If they don’t – someone else will destroy their business for them. Hello Tradeshift – goodbye PCards.

The second thought that come to mind is “How cool is this?” We hear lots about web 2.0 and cloud and social networking.¬† Every consumer brand has a facebook fan page. But Tradeshift takes this whole thing about internet based collaboration, data mining, SOA and cloud, and turns it into a real industrial strength commercial application that will make a real difference to many businesses.

It’s noteworthy that Tradeshift has a high ratio of designers to coders. It takes a lot of effort to make something as complex as this look so simple – but that’s the way it should be. It’s what web 2.0 and the cloud is all about – substance with style¬† and I love it.

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