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    Home Development
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    B2B Firms Victims of Own Failures

    By
    John S. McCright
    -
    April 9, 2001
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      B2B software providers are the latest to take their turn at the Wall Street whipping post. And like the many other victims of the slowing economy, the problems of business-to-business software developers are mostly of their own making.

      Ariba Inc. and i2 Technologies Inc. each announced job cuts and earnings warnings last week, and Commerce One Inc. also lowered earnings estimates. These were the result, according to users, of a failure to address nagging issues of integration, time-to-market and return on investment.

      “The Aribas and the others are taking that notion of ERP [enterprise resource planning] at an intraenterprise level,” said Eric Spencer, CIO at PackExpo.com, a packaging industry exchange in Fairfax, Va. “Imagine how complex it was to tie in systems within a single organization. Now they are trying to do that between companies. Its premature to think we could possibly define a single solution.”

      The fallout from the recent blow to the so-called leaders of B2B will result in more-realistic goals for their marketplace software and more-intimate partnering on their part with software suppliers that can add value and integration to a B2B infrastructure?both a boon for customers.

      Commerce One has a multifaceted partnership with SAP AG, of Waldorf, Germany, for development, sales and marketing. The closeness of that relationship is what sealed a B2B deal for Bob Renner, chief technology officer at the ForestExpress online exchange. While Renner said he respected Commerce Ones marketplace engine, SAPs catalog of products geared for the forest products industry made the combined offering more compelling.

      “We wouldnt have done the deal with them if it hadnt been for the SAP-Commerce One partnership,” said Renner, in Atlanta.

      In addition, because SAP already has software for his industry, Renner said he can develop additional industry-specific functionality in-house and then negotiate with SAP to have those functions inserted into the broader marketplace software. As part of the e-marketplace, those features will be covered under maintenance and support contracts. Renner is not sure that an independent e-marketplace software vendor like Ariba would be open to adding such industry-specific features.

      For an alliance between an e-marketplace software provider and an enterprise applications developer to be attractive, Renner added, the two companies must show that they have executive sponsorship, a real financial commitment and demonstrated technical integration.

      But such partnerships havent always translated into easy installations at the marketplace level.

      “Theyre saying they can do the system integration. My question is, how” said Jim DeMin, program manager of customer relationship management at Infonet Services Corp., in El Segundo, Calif. “Tell me what you know about Oracle [Corp.] and SAP; they know nothing about the systems they need to integrate to.”

      DeMin and others say that the e-marketplace providers are limited in their ability to integrate between companies and software platforms. Those building online exchanges and those connected to them should look to third-party integration specialists such as WebMethods Inc., they said.

      “The vendors hype themselves as being the end-all solutions,” DeMin said. “But youre probably better off to understand the sweet spot of the vendors-what they do well?despite what the salesperson tells you? and look to other vendors for their sweet spots.

      Ariba, which was trying to solve some of these problems with a proposed merger with Agile Software Inc., last week called off the alliance-a deal that would have given Ariba a suite of B2B collaboration applications.

      Prior to that, Ariba had an alliance with i2 to provide part of an e-marketplace, but that relationship soured after Ariba announced it was buying Agile in January. To make up for the loss of Agile, Ariba officials said they will continue to partner with that company and others.

      Many operators of exchanges built with Ariba, i2 or Commerce One technology say they are not worried about short-term financial woes at their technology supplier, particularly since sales are about double what they were a year ago.

      “I dont equate company viability with the stock price of companies like Ariba, i2 and Commerce One,” said Ariba customer Steve Mori, director of IT for AutoDesk Inc., in San Rafael, Calif. “You don?t lay in an enterprise infrastructure without considering the long haul. And you can?t base an infrastructure on quarterly numbers.”

      But others are not as optimistic. Harvey Seegars, CEO for GE Global eXchange Services, in Gaithersburg, Md., said he believes that with the “darlings” of the B2B space missing their numbers so significantly, companies will start to reassess purchase plans.

      The movement of commerce to some exchanges is “much slower than expected. The [returns on investment] at the purchase points are looking more pessimistic as exchanges dont ramp according to assumption,” Seegars said.

      “Ultimately, there is a level of customization for every implementation,” PackExpos Spencer said. “As you get closer to each individual organization, you find yourself saying youre going to install e-procurement software, then you realize that-oops!-you need workflow and document management. So, all of a sudden the customer signed up for a solution to connect trading partners and he now has to decide to either scrap the project, go forward with all the extras or re-evaluate the whole thing.”

      John S. McCright

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