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Ariba Goes Vertical: No Pain, Much Gain

Written By: D. Geller
Published On: January 14 2000

Event Summary

Ariba, Inc. (NASDAQ: ARBA) has purchased privately held TRADEX Technologies, Inc. for $1.86 billion in stock, based on the closing price on the date of the announcement. Ariba sells software that lets companies engage in E-procurement, and manages marketplaces that bring together its buy-side customers with vendors. Ariba's marketplaces are primarily for MRO (maintenance, repair and operations) products. TRADEX sells software that allows its customers to build and manage Internet marketplaces.

Market Impact

It has been obvious for a while that Ariba needed to make a move into the incredibly fertile arena of vertical markets. The acquisition of TRADEX lets it do that without the pain of developing sophisticated user-level software. At the same time, Ariba acquires some strong assets from TRADEX's toolkit, especially its workflow engine.

We see this move opening new markets for Ariba's marketplace activities. For every industry in which a vertical market offers specialized products, there is still a need for the same old cleaning supplies, copy paper and carpet protectors. There will be strong incentive for any company wanting to build a vertical market to use Ariba's forthcoming solutions to get what should be painless access to both the special products and the mundane ones. With TRADEX under its belt, Ariba can help its customers roll out vertical markets by the thousands, creating a huge magnet for companies of all stripes that want to latch onto the promised savings from E-procurement.

There is a lot that can happen in the E-procurement market, especially where the huge North American and worldwide markets for consumables are concerned. However, the continued strong moves by Ariba and Commerce One (See TEC News Analysis article: "Commerce One Goes High, Wide and PeopleSoft" December 27th, 1999) seem likely to assure both of them strong and stable leadership positions. Competitors that want to survive will need to choose their niches carefully.

User Recommendations

The only users directly impacted by this announcement are those who are planning to build vertical marketplaces in the next few years - and estimates suggest that there are about 10,000 of you. Those that are will want to see what Ariba can promise, particularly in terms of delivery dates and back-end support for your own customers. If you decide not to go with an Ariba/TRADEX solution, be well advised to work at faster than net time to get your product up, running and populated. A company that chooses to move into your market using Ariba's forthcoming solution will have a powerful offering with which to compete against you.

 
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