Ariba Eyes On Demand Procurement Model

Ariba has emerged from the bad old days of the dot-com crash to become the market leader at the "spend management" end of the supply chain. Now, after merging with FreeMarkets, the vendor is in internal integration mode.

Nearly nine months after merging with FreeMarkets, Ariba Inc. is now developing a more integrated procurement lineup, with the ultimate goal of giving users an on demand model for "spend management" software and services.

In a presentation at Lehman Brothers 2005 Global Software, IT Services and Internet Conference, Ariba Chief Financial Officer Jim Frankola likened the companys expansion into spend management from its early e-procurement roots to PeopleSoft Inc.s movement into ERP (enterprise resource planning) from its human resources software beginnings. SAP AG, another ERP leader, "started out with general ledger," he told the audience.

But unlike many other enterprise IT vendors, which sell to CEOs, Aribas pitch is to CFOs, according to the Ariba CFO.

Aribas decision to broaden its portfolio of products and services was driven by the "dot-com crash" earlier in this decade, he said. In talking with procurement users at that time, Ariba heard over and over again that "e-procurement is not enough."

Ariba today is the market leader in spend management, "roughly 10 times larger than our closest competitor," according to Frankola.

The companys customer list includes ChevronTexaco Corp., Hewlett-Packard Co., FedEx Corp., Merrill Lynch, Cisco Systems Inc., Pfizer Inc. and Hallmark Cards, to name a few.

Spend management is "a very high potential area," Frankola said. "A lot of money is being left on the table by corporations."

At the spend management end of the supply chain, Ariba focuses on helping large enterprises save money by managing expenditures in both direct and indirect procurement categories, the CFO said.

The vendor provides software and services that range across functions such as sourcing, negotiating, invoicing, online auctioning and "spend" monitoring, for instance.

But over the past few years, Ariba has started to place less emphasis on sheer technology and more weight on underlying business processes, Frankola said.

"Software is an enabling driver," he said. Ariba also operates IT and business services across a wide range of areas, including BPO, implementation, data services, application hosting and "expert" advisory services on specific supply markets.

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