B2Big Deal for IBM, Ariba, and i2

  • Written By: D. Geller
  • Published: March 13 2000

Event Summary

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.

Under this alliance:

  • 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 technologies.

  • 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.

The 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.

Market Impact

Of 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 today.

Some 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.

More 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.

Clearly, 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.

User Recommendations

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.


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