In a press
conference that had the general air of a reunion of the graduating class from
CEO school, IBM, Ariba and i2 announced a sweeping strategic partnership whose
goal is to accelerate the adoption of B2B technology. Accompanied by a chorus
of the top people at such business customers as Unilever, Chevron, and American
Express - including one CEO who came running in late, from her sickbed, because
she didn't want a severe cold to make her miss the announcement - the three
companies laid out a comprehensive plan for changing E-commerce as we know it.
- The companies will integrate their technologies to provide a comprehensive,
open-standards, end-to-end marketplace platform, which will be resold to both
horizontal and vertical market makers.
- IBM will build
its own $45 billion private supplier marketplace on Ariba's and i2's technologies.
- IBM will make
minority equity investments in Ariba and i2.
- Ariba and i2
will target their products to use IBM's business software and hardware, and
will run on the Linux operating system.
- The three companies
will create a "competency center" to further the application of E-commerce
- IBM Global Services
will provide hosting, support and systems integration services.
- IBM will create
a team of "several thousand" salespeople who will be dedicated to selling
the alliance's solution.
- IBM will develop
a team of specialists in this solution from among the 138,000 employees of
its Global Services division.
- Ariba and i2
will acquire IBM's current E-procurement software capabilities; i2 will gain
existing IBM solutions for supply chain planning, retail merchandising and
replenishment, and other related business functions.
- Ariba and i2
will enter into patent cross-licensing agreements with IBM.
- Both Ariba and
i2 are free to maintain current partnership agreements.
- IBM is free
to do anything it wants to do.
companies present a vision in which the information that flows through a marketplace
is sufficient to allow every step in the supply chain to be optimized. In an
example that was given by on of the alliance's ecstatic customers, the system
could advise a retail merchant to give more shelf space to Calvin Klein underwear
and then advise the manufacturer and its suppliers to adjust their processes
and inventory accordingly. At this, the three main speakers assured the audience
that they were all wearing Calvin Klein underwear.
course there are other ways available today to achieve the kind of supply chain
integration that the alliance promises. The difference is the extraordinary
nature of the partnership, involving both tight integration by the vendors and
the tremendous leverage of IBM. This alliance dwarfs all else happening in E-commerce
vendors are going to feel pain as a result of this announcement. Looking first
at E-procurement, we think that although Commerce One will be impacted the alliance
is not a serious threat to them, given the size of the E-procurement market,
their own recent moves to extend their reach along the supply chain, and their
many alliances with powerful companies across the globe.
likely to be concerned are mid-market vendors who may have a good story but
who cannot easily compete with the allure and marketing power of IBM. These
companies tend to augment their procurement offering with other employee self-service
applications, which gives them a good selling point against Ariba and Commerce
One. The danger for them now is that someplace within IBM those same applications
are sitting on a shelf, and will be dusted off and integrated with Ariba's front
end. We expect to see some shake up in the mid-market, with some vendors rushing
to make alliances with larger protectors.
the IBM pact bodes ill for Manugistics Group, which recently boasted that its
WebWorks architecture for linking e-procurement to back-end fulfillment surpassed
anything from either Ariba or Commerce One. For all its bravura, Manugistics
is still recovering from execution problems in 1999 and is poorly situated to
combat a triple-threat of this magnitude. Other supply chain planning vendors
are even less equipped. Consider Adexa (formerly Paragon Management Systems)
who recently paired with Commerce One. Their strategic alliance pales in proportion
to IBM's in both scope and level of partner commitment.
One part of the evaluation of any vendor's product is the vendor itself, including
stability, viability, and commitment to the product. On those grounds it would
be hard to do better than this alliance. However, those are not the only grounds
on which to do an evaluation. Features, price, add-ons, and many other issues
come into play. A company that plans to move quickly into the kind of end-to-end
E-commerce that the alliance offers may indeed find them to be the best choice.
Others, whose present plans include only one component should choose the best
package for the job, because it is certain that additional alliances of this
nature will be forming around other best-of-breed combinations.