Model N Revs Its Stealthy Engine

B2B software startup takes on Ariba and Commerce One.

Model N, the B2B software company led by industry veteran Zack Rinat, came out of stealth mode last week after a nine-month delay.

Model Ns software allows companies to establish a private network with customers and partners so that business processes like order management and contract management can be automated.

Competitors include Ariba, which acquired TradingDynamics, where Rinat was a director, in 1999. Rinat also co-founded NetDynamics, which he sold to Sun Microsystems in 1998, and whose application server became part of Suns iPlanet offering.

Rinat intended to unveil Model last summer but instead spent more time working on the technology and acquiring customers.

Although Model Ns core technology has not changed, its business model shifted since its inception in late 1999. Model was set up as a technology company and a holding company for exchanges that were to be spun off from the medical and construction industries.

But Rinat contends customers wanted to work directly with Model the technology company, not an intermediary exchange. "We pulled those people and customers into Model and have business units focusing on verticals," he says.

Model also has shifted its focus from midsize to large companies and to industries like food and retail that have low gross margins and, hence, a stronger need for Model Ns products. Customers include Midwest Medical Company and another startup, Provision X, an exchange for the meat and poultry industry.

Rinat funded Model himself and last June received a $26 million investment from Accel Partners and Accel-KKR. The software platform is based on Solaris, Oracle 8i, iPlanet, BEA Weblogic and enterprise Java. It includes a server with business-process components, an engine for managing interactions, a community manager, and infrastructure for integrating with Ariba, Commerce One and other applications.

Model also offers an application suite with negotiation-to-contract, order-to-cash and channel-management modules, and it plans to partner with both ISVs and systems integrators to get other applications developed.

Ariba, meanwhile, is scrambling to develop a Java-based platform to unite the many applications that it has acquired over the years.

Wit SoundView analyst David Mahoney says that while Ariba has focused on transactions, Model has spotted the market opportunity, which is the exchange of information across supply chains to reduce inventory levels. Ariba also is stepping up delayed plans to integrate third-party applications into its Commerce Services Network.

Anne Knowles contributed to this story.