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Ariba Network, Dynamic Discounting Give Startup Mediafly Cash Flow Benefits, Help Manage Capital


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Transcript of a BriefingsDirect podcast on how the cloud networking helps a small company work well with Fortune 500 enterprises.

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Ariba Network, Dynamic Discounting Give Startup Mediafly Cash Flow Benefits, Help Manage Capital

  1. 1. Ariba Network, Dynamic Discounting Give Startup MediaflyCash Flow Benefits, Help Manage CapitalTranscript of a BriefingsDirect podcast on how the cloud networking helps a smallcompany work well with Fortune 500 enterprises.Listen to the podcast. Find it on iTunes/iPod. Sponsor: AribaDana Gardner: Hello and welcome to a special BriefingsDirect podcast series comingto you from the 2012 Ariba LIVE Conference in Las Vegas.We’re here in the week of April 10 to explore the latest in cloud-based collaborativecommerce and learn how innovative companies are tapping into the networked economy. We’ll see how theyre improving their business productivity along with building far-reaching relationships with new partners and customers. Im Dana Gardner, Principal Analyst at Interarbor Solutions and Ill be your host throughout this series of Ariba-sponsored BriefingsDirect case study discussions. [Disclosure: Ariba is a sponsor of BriefingsDirectpodcasts.]Our next innovator interview focuses on Mediafly, a startup company that deliverscloud-based applications for content management and distribution on mobile devicesfor Fortune 500 companies.We’ll learn how Mediafly, through the Ariba Network, gained insight and control over itscash flow and found new means of managing capital all along aiding its ability tosupport ongoing operations and to drive future growth.To hear how they did it, please join me now in welcoming two executives from Mediafly. We’re here with Carson Conant, CEO, and we’re also here with John Evarts, Chief Financial Officer and Chief Operating Officer. Welcome to you both.Carson Conant: Thank you.John Evarts: Thank you very much. Good to be here.Gardner: Let me start with you, Carson. Before we learn about your interestingservices in the mobile space, tell me about the type of business you are. I think theres aninteresting opportunity here to explore why buying and selling things works in anadvantageous way for you. Tell me about the size of your company and why managingcash flow is so important.
  2. 2. Conant: Mediafly is the leader in the presentation platform market. What that means isthat we’re the company that helps bridge the gap between large Fortune 1000companies, their internal systems, and primarily mobile applications, but also thingslike Internet-connected televisions, and so forth.Lots of videoLarge companies create lots of video. It could be live broadcast, sales presentations,training videos, and TV and movie industry content. When theyre trying to distributethat content to make it available on all of these emerging devices, particularly at thatlarge scale, they need a provider like Mediafly. We’re a leader in the space right now.Gardner: As a small company, what are you facing, when it comes to the financialpressures? Let’s go to you, John.Evarts: As a small company, we often dont have a balance sheet that’s attractive tobanks, among other things. As we seek things like angel investment or equityinvestment, we need to do things that are extremely capital efficient with those funds. When we have an opportunity for revenue, especially revenue at large corporations, Fortune 100 companies, these are large contracts. As a small organization, contracting with larger organizations, it’s absolutely critical for us to manage that cash flow well and have visibility into the cash flow. As we said, we’ve been growing very quickly. So our recurring revenue has grown by 3x over the last two years. As we grow quickly, we need tohave that visibility into cash management, because it’s absolutely critical that we staff atthe right time relative to taking advantage of opportunities that are out there in themarket.Gardner: So looking at this from an elasticity point of view, larger companies have abit more wiggle room. As a smaller company you dont, but you need to grow fast. Helpme understand what led you to do things differently in order to make this elasticity workin your favor.Conant: We’re very fortunate. One of our largest customers is in the mediaentertainment space and we did a large seven-figure deal with them over a series ofyears. But the way that they do invoicing and transactions is through the Ariba Network. They said, "For you to get paid, join the Ariba Network." So that was the first thing that got us onto the network. What was amazing is that once we got on there, as John said, it was unlike a lot of our other transactions with similarly large companies. In those companies it’s just like a black box. Youve got a several hundred thousand-dollar invoice that goes out, and you may not know if that’s
  3. 3. going to come in in two weeks or six weeks.What was amazing to us with Ariba was the ability to know exactly where we were inthat payment process. Ultimately we took advantage of this program they call "dynamicdiscounting," which allowed us to accelerate cash for a couple of basis points.Huge ramificationsSo for a fairly inconsequential amount of money to us, we were able to get paid in about14 days instead of 60 days. It had huge ramifications on our business. What that did forus is allowed us to interact with them in a way that they preferred, but still have thenimbleness that we need from it as being a small company.Gardner: So visibility and predictability are really important. In the past, people wouldgenerally go to a bank to get a line of credit and pay a high interest rate in order to havethat accordion to manage their cash flows. You’ve found a way to do this, not through abank, but through working directly with your customers and perhaps even incentivizingthem to help you with your cash flow and visibility and your saving on the interest. Itsounds like a win-win all around.Evarts: Its an excellent opportunity for us to work with a partner and deepen thatpartnership with our vendors. We’ve found that, as Carson said, for a few basis points ofa concession on the contract, we’re able to factor 100 percent of the contract value of theinvoice.When that occurs, the advantage to us is that were able to immediately take advantageof it, as soon as it hits the system, to take 100 percent of those otherwise unknowncollection periods. When we can reduce the collection periods from 60 days all the wayto 14 days. We’re in a much stronger financial position, because we can take advantageof those dollars.Gardner: Carson, what has this enabled you to do in terms of growing your company?Conant: The first time we took advantage of dynamic discounting, it was relativelyearly in a development cycle for a security package that we were in the process ofbuilding. What that did allowed us to get access to cash to bring in additional resourcesto accelerate those featured enhancements.Literally, two weeks after signing this deal with one of the largest entertainmentcompanies in the world, we were in the board room with one of the largest global banksin the world touting these new security features we had, which we otherwise wouldn’thave had for maybe 60 days.It sparked additional Fortune 100 contracts. It was fundamentally game changing for us.We joke that it would be interesting if all of our customers leveraged something likedynamic discounting. It would be transformative for our business. It would drastically
  4. 4. accelerate how we can deploy cash. Then you think about it in terms of what could it dofor the economy.If all these companies were taking advantage of this, it would boost the stability and thegrowth of their partners and their vendors. It would be something. That’s why we’re sovocal about it.Evarts: As a small organization that is very nimble and trying to innovate, it speeds upand accelerates the pace of innovation that we’re able to generate. The new features thatwe offered to this first client, we were immediately able to turn and sell to one of theleading investment banks as the same security capability.So when we’re able to quickly accelerate and bring new innovations to market, obviouslyeverybody benefits. Mediafly benefits, and ultimately, our customers are going to benefitas well.Level playing fieldGardner: And what strikes me is that this seems to be a level playing field between you,a small company, and as you point out, some of the largest media companies in theworld. You’re playing with the same rules with Ariba being the arbiter, if you will. Youcan partake in those services just as easily as the big company. Is this a leveling of theplaying field?Conant: Absolutely. There are probably two or three technologies that weve takenadvantage of that have just come into play in the last three to five years. One of them iscloud-based infrastructure. We dont have to buy servers anymore. That’s allowed acompany of our size to outpace and outcompete companies that have been around for along time and provide enterprise services to Fortune 100 global companies.Then, you look at Ariba, and its very similar. It allows us to interact with them the sameway that they would interact with another large company. Doing business with usdoesn’t feel different than doing business with another large company.They get what they want, we get some additional visibility and some things that arevaluable to us. But, these technologies have just come into play in the last three to fiveyears, and its really allowed a company like Mediafly to exist.Gardner: A lot of times, analysts like myself focus on the technology behind the cloud,but its really a game changer, when it comes to business processes and allows for thecompression of what used to be latency in terms of business functions, monetization,and cash flow. Now, when everybody has visibility, when the level field is there for allparticipants, its much more efficient and direct, and we’re just starting to pick some ofthe fruit of that.
  5. 5. Evarts: And you touched on it. Creating scalable solutions is absolutely critical and itallows a small organization with relatively limited initial capital, first to be able to scaleto a level, and participate in the Ariba Network, and basically have the same credentialsas some of the largest companies in the world.Folks who are transacting with Mediafly are doing it in the exact same way that they dowith other Fortune 100 peers. To some degree, to us, its a competitive advantage, andwe feel that way. We feel that if were on the system, we’ve been vetted, and other folksare using us on the system. Its an excellent credential for us to have and a nice referencefor us.Gardner: So its also a go-to market strategy.Evarts: Absolutely.Gardner: Tell me a little bit more about Mediafly. What do you do? Contentmanagement, the mobile thing, is huge. Youre using cloud to your advantage in anumber of different ways. Maybe you can give us the elevator pitch about what you do,and why people should be interested.Conant: One of the best ways is to think of an example. Think of all the TV and movieproductions that are going on the studios. Those companies have thousands of videofiles that theyre housing inside of their four walls. Theyre trying to expose that contentto all of their executives and staff, everybody from the makeup artist that needs to watchthe last three dailies to the CEO and the president.Perfect platformNow, they want to be able to do that on iPads, iPhone, Android, and on televisionsconnected to the web. Were the perfect platform, because there is so much that has togo on that so many gears are turning to make all that happen.That’s a perfect solution for the cloud, and those companies now integrate with us sothat that material is available to all the different stakeholders on all of these differentdevices. So we’ve dropped ourselves in and filled the gap between their in-house systemsand all of these mobile devices.Gardner: If I understand correctly, lots of content needs to be shared, and youre ableto deal with the multiple panes of glass, the formats, the streaming, codecs, all theseother technical issues.Conant: Security is a huge thing. Think about the value of this content. Its theirimportant assets. How do you move this thing around so that when its on an iPad, ifthat iPad gets stolen or persons are let go from the organization, that theyre not walkingaway with sensitive information.
  6. 6. We also provide that same service for documents for one of the larger global banks. Sowhen theyre training their sales force or their sales force is going on doing one-on-onepresentations to large money managers, they are doing that with iPads. If that thing islost or that thing gets hacked into, that content is protected. This comes back to thatsecurity suite. There is a whole lot of functionality we’ve added to really make thisenterprise great.Gardner: Now that we understand a bit more about how this is important as afunction, lets revisit this notion about the cloud as an enabler. Ariba calls it thenetworked economy. That really gets to what weve been talking about -- that there aremultiple levers that incentivize all the players to contribute. But then they all getsomething out of it, including that great visibility and control, when it comes to money,as well as business processes that can make all the difference.Lets go one more time into this notion of the networked economy. We’ve touchedbriefly on how this could be a go-to market for you. Lets expand on that. How inproviding a discount incentive to cash flow, and using the Ariba Network, does that endup getting you more customers?Evarts: One of the tools that we’re just trying to tap into is this concept called AribaDiscovery. Discovery allows you to self select a series of industries, what they callcommodities. That allows you to say, "These are the services that we offer." Then, largecompanies are able to go on that system and say, "These are the services that werelooking for." So its really kind of a matchmaking function.While we’ve only scratched the surface -- we feel were relatively new to this system -- wefeel that this Ariba Discovery concept is extremely valuable to us as a small organization,as we look to scale as a lead generation opportunity and ultimately, as we’re transactingbusiness.We feel that as a small vendor, if there are a number of individual companies that arelooking to leverage this system, were happy to make a light concession, obviously, forthe right amount of basis points and just for the right timing. Were able to then takeadvantage of that, accelerate cash in. When non-financial companies, at the end of thirdquarter last year, had three trillion dollars sitting on their balance sheets, you know thattheres a ton of liquidity out there that will be invested, and is going to be invested indifferent ways.One way that folks can take advantage of it is using a system like Ariba in order tosupport the supply chain, investing in their current partners.Of, for, by the cloudGardner: So youre sort of of, for, and by the cloud. When it came to moving towardsAriba and using some of their services, did that work as an off-the-cloud service, where
  7. 7. there wasnt anything on premise or you didn’t have to have your IT people involved in?How friendly a cloud player did Ariba turn out to be?Conant: Extremely friendly, relative to some other more manual processes that some ofour other customers leverage. The best example that is our ultimate discovery of thedynamic discounting program. Our controller noticed a checkbox in our interface. Its aweb-based interface and he asked John, "This looks interesting. Should we takeadvantage of it?" We said, "Yeah, lets try it on our first invoice."This was not some training that had to happen before we understood how to use thissystem. It was a couple of checkboxes, and now we are getting paid earlier.To me, thats really what the cloud is. A company like Ariba, in my opinion, has done areally good job of abstracting, so youre left with just an elegant functionality and its inthe cloud. Its all web-based. Theres nothing we had to deploy on premises.Were a cloud company. So it feels natural. I cant even imagine how simple it must seemto somebody whos used to using things on premises.Evarts: One of the key elements for us was the ease to get on the system. When acustomer whose that large asks you to join, and youre as small as you are, you sayabsolutely, how quickly and when. Ariba was absolutely fantastic in helping us to getonto this system and then ultimately helping us navigate, within the course of a coupleof hours max, to have been fully integrated into the system. Not only can we now takefull advantage of their entire cloud-based infrastructure, but it was very easy for us as asmall vendor to get onto this system.Gardner: On the other side, the flip side of the coin, these global Fortune 500companies were familiar with Ariba. You didn’t have to drag them along and convincethem. There was already the established trust and credibility.Conant: We’re still scratching the surface, as more and more companies are movingthis way. It seems like a lot of the people that we’re talking to are moving into cloud-based procurement solutions, things like Ariba. As more time goes on, more and more ofour customers will be on Ariba and leveraging dynamic discounting and so forth.Whats great is that each one that is using Ariba is already set up. Its just a matter ofthem attaching our profile or however it happens behind the scene. But there are not awhole lot of additional process. That’s whats neat about the network effect. Oncemultiple parties are on a network, its just a matter of connecting the two lines together.Gardner: I am afraid we’ll have to leave it there. We’ve been talking about howMediafly, through the Ariba Network and a dynamic-discounting program, gainedinsight and control over its cash flow and found new ways of managing capital tosupport ongoing operations and drive future growth.
  8. 8. Join me in thanking our guests. We’ve been here with Carson Conant, CEO of Mediaflybased in Chicago. Thank you, Carson.Conant: Thank you very much.Gardner: We’ve also been here with John Evarts, the Chief Financial Officer and ChiefOperating Officer at Mediafly. Thank you.Evarts: Thanks for having me.Gardner: And thank you to our audience for joining us for this special podcast comingto you from the 2012 Ariba Live Conference at Las Vegas. Im Dana Gardner, PrincipalAnalyst at Interarbor Solutions, your host throughout this series of Ariba-sponsoredBriefingsDirect discussions. Thanks for listening, and come back next time.Listen to the podcast. Find it on iTunes/iPod. Sponsor: AribaTranscript of a BriefingsDirect podcast on how the cloud networking helps a smallcompany work well with Fortune 500 enterprises. Copyright Interarbor Solutions,LLC, 2005-2012. All rights reserved.You may also be interested in: • Ariba Network Helps Cox Enterprises Manage Procurement Across Six Different ERP Systems • Ariba CMO Tim Minahan on how networked economy benefits spring from improved business commerce and cloud processes • Ariba Dynamic Discounting Gives Companies New Visibility into Cash Flow to Improve the Buying Process • Ariba, IBM Deal Shows Emerging Prominence of Cloud Ecosystem-Based Collaboration and Commerce • Ariba Steps Up Cloud Efforts with StartContracts, On-Demand Contract Management for SMBs • Ariba Live Discussion: How Cloud Alters Landscape for eCommerce, Procurement, and Supply Chain Management • Cloud-Based Commerce Network Helps Florida Manufacturer MarkMaster Reach New Markets, Streamline Transactions