Ariba Successes Highlight Standards Wars

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Event Summary

California based Ariba saw its stock rise 20% (by 17.88 points to 107.88) on August 11, with continued rises into the low 120's for the rest of the week. Ariba (ARBA) is a provider of Internet procurement products and services. The jump followed closely on partnership announcements with vendors in the electronics (NetBuy) and print (Impresse) sectors. It is not necessarily the case that these agreements sparked the price increase, but putting them together provides some insight into Ariba's position and future.

Market Impact

The Internet Procurement market is still in its infancy. Ariba's product offerings span two of the models for Internet Procurement that are struggling to shape the industry. The burning question is where software control and vendor information reside. Ariba provides its clients with software (Ariba ORMStm) that ties together the pieces of the ordering processes from product identification through approval. On the other hand, its Ariba Networktm brings vendors together in a centralized system that its clients can access. Other procurement models range from integrating vendor catalogs within the purchasing company to having all software and catalogs resident on the Internet. An important feature of the partnership announcements is that each procures another backer for Ariba's cXML language, one of the proposed standards for exchange of commerce information.

Vendor Winners/Losers

The most important issue at this point may be not which vendor is ahead but which standard is ahead. Once a vendor commits to a particular standard, with all of the work required to implement XML-based content throughout their catalog, the more they are tied to products that support the standard. Eventually there will be a single standard, probably with dialects to grandfather in the early adopters), but the number of users will be a significant factor in shaping that end result. With Ariba behind cXML, rival CommerceOne behind CBL, and content management heavyweight Vignette with its own proposal ICE, the ERP vendors, all of which are touting procurement applications that integrate with their other offerings, are notably (but not surprisingly) absent from the leadership in this skirmish. Microsoft, which recently announced its own BizTalk standard, is a supporter of both cXML and CBL, and almost everyone is part of the OBI standard definition effort. A second result is to point to the likely ascendancy of independent vendors of procurement systems over integrated ERP vendors. It's worth noting that Ariba has announced successful implementations for customers like electronic design powerhouse Cadence Design Systems, which have different portions of the ERP function supported by different vendors. Ariba's success in bridging these different vendor systems is a boost for all independent procurement software firms.

Vendor Recommendations

Ariba's partnerships give it significant momentum, which is clearly reflected in the stock price, as do such customers as Federal Express, Nestle, and General Motors. Some client reports of relatively easy installation don't hurt either. Ariba is on a good path. The company must now make sure that, as its customers begin working with the product and smoothing the inevitable rough edges, its Customer Service and Technical Support operations rack up the same level of achievement as do Sales and Marketing.

User Recommendations

Users moving into the Procurement space will certainly want to consider Ariba as a possible partner. Those most interested will be ones for whom the vendor partnerships present significant opportunities or leverage on existing relationships. However, for most users the field is wide open and vendor selection needs to be approached cautiously.


XML: Extendable Markup Language): A mark-up language that allows for separation or content and display functions.

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