IBM’s Marketplace Solutions: Is Ariba Not Enough?

  • Written By: D. Geller
  • Published On: June 8 2000



IBM’s Marketplace Solutions: Is Ariba Not Enough?
D. Geller - June 8, 2000

Event Summary

IBM announced the WebSphere Commerce Suite, Marketplace Edition to help businesses build scalable marketplaces. Among the functions of the software are a variety of dynamic trading models, aggregated catalogs, secure membership registration, and business intelligence and reporting functions. A particular and notable feature of the software is that it fully integrates the WAP and SMS protocols for wireless devices - according to IBM it is the first marketplace software to support such wireless devices as mobile phones, PDAs, and pagers.

Providing wireless support to a marketplace promises to create much greater market efficiency and inventory liquidity. Participants in an auction, for example, can receive notice of significant events in real time when they are at meetings, on the golf course, or watching Rocky VII at the multiplex. The software is currently in a "limited availability" release with nine customers.

IBM has signed on a number of business partners to provide supporting services to market makers. These include Xerox Connect, Ernst & Young, CheckFree, eBX, and eCredit.com. The software also makes use of Lotus Sametime, which allows buyer and sellers to engage in real-time conversations, much like a private chat room or Instant Messenger.

Market Impact

IBM is the world's largest information technology company. There is no doubt that having its thousands of salespeople out in the road pushing marketplace software will have some effects. To better understand the implications of this and other IBM announcements we requested an audience with Dr. Pat Augur, the Director of TEC's Department 124C - Corporate Predictions. Dr. Augur had just watched a taped copy of the previous day's NFL game. Following is a transcript of our discussion:

Dr. Augur:

What a rout! Didn't I tell you that they'd make it a passing game?

TEC:

Not that we recall. Given that your time is limited, let's get down to business. What is the biggest effect that you see from IBM's announcement?

Dr. Augur:

When IBM gets into a market it gives it a new kind of legitimacy. When analysts predict thousands of vertical marketplaces and millions of participants they aren't talking about early adopters going with products just out of the IPO chute.

TEC:

But companies like Ariba, Commerce One, Peregrine, VerticalNet and others are constantly in the news and seem to be signing customers right and left. Surely there's no doubt that electronic marketplaces are part of the business framework by now.

Dr. Augur:

Maybe so. But maybe you guys in the Research Department spend too much time reading press releases. I don't doubt that companies will be building marketplaces right and left in the next few years, but so far the only real success stories have been functional: "So-and-so managed to actually install their software at their first customer site," or something similar. The revenues haven't yet started to flow, and most of the companies that will end up being the bedrock of the vertical market business are average companies - the kind that prefer to be in the second or third wave, not those who are willing to take the chance of getting washed up on the beach.

TEC:

And this has something to do with IBM?

Dr. Augur:

When IBM says that something is cooked enough for a product offering that tells the business world that it's time to think about pulling up to the table. Of course, IBM's existing e-commerce customers will probably sign with IBM, but the halo effect will reflect on other software makers as well.

TEC:

And that leads into our next question. What about Ariba?

Dr. Augur:

Ah, Ariba. There was something about them and IBM in the news recently, wasn't there?

TEC:

Surely you remember. On March 9 IBM, Ariba and i2 made a huge partnership announcement. (See B2Big Deal for IBM, Ariba, and i2). The companies were going to integrate technologies, build a "competency center" and cooperate massively. IBM will create a team of "several thousand" salespeople who will be dedicated to selling the alliance's solution. IBM promised to develop a team of specialists in this solution from among the 138,000 employees of its Global Services division, and said that Ariba and i2 will acquire IBM's current e-procurement software capabilities. IBM's recent announcement doesn't seem to completely square with that announcement.

Dr. Augur:

Things change, you know. Although, to be fair, they also stay the same. It does seem to me that the IBM.Ariba.i2 alliance is still going strong. For example, IBM and Ariba just announced that Ariba would be the backbone of IBM's internal eProcurement solution, running on the new copper RS/6000 models.

TEC:

That's true. That's a marketplace that will eventually support 300,000 IBM employees buying from 14,000 suppliers. But

Dr. Augur:

Wait. You were going to protest that this is just an internal marketplace, weren't you?

TEC:

No, actually we were going to ask you to find out what happened to the coffee. But, yes, you're right about this being internal to IBM. It isn't the same kind of thing that the WebSphere Marketplace Edition does. Is that the important distinction?

Dr. Augur:
Well, let's look at the facts. With i2 as part of the mix it should have been clear that the original alliance announcement was mainly about supply chain issues.
TEC:

But was it? IBM's own press release listed three "critical aspects of accelerating the B2B economy" that the alliance would address. These were:

  • Full-service marketplaces

  • Integrated supply chain

  • Open services

And the announcement went on to state "The companies will integrate their technologies to provide a comprehensive open market platform, which will be resold to both vertical and horizontal market makers through IBM, i2 and Ariba channels." So it certainly looked to us like IBM would be making Ariba's software the basis of its own marketplace solutions. In fact, that's what you told us to expect.

Dr. Augur:
Ridiculous! I would never have suggested that IBM would put all its eggs into one basket.
TEC:
We're not sure about that, Doc. Here in our notes it says
Dr. Augur:
Are you going to believe your notes or me?
TEC:
Never mind. What we want to know is, what does the future hold for IBM and Ariba?
Dr. Augur:
If you mean the alliance, it's still going strong. Doesn't this recent press release say... oh, here it is - "The alliance will focus on providing solutions for large corporate exchanges." So where's your problem. The alliance is for the largest customers, and IBM will sell its own solutions to everyone else. Just as I predicted.
TEC:
Maybe you did. But isn't that emphasis on "large corporate exchanges" a fairly new qualification? Certainly Ariba wouldn't want to be thought of as a solution that only the top tier of companies could use. And its hard to see why IBM would need several thousand sales people for a market that's limited only to companies big enough to create their own supply chain marketplaces. There aren't that many companies like GM and Ford, after all. The whole Global 2000 only has two thousand companies in it.
Dr. Augur:
And if IBM wanted to put five or six sales people at each one, what's it to you?
TEC:
And more important, the "corporate exchanges" part of the limitation seems to be a shift in emphasis. It wasn't too long ago that IBM was saying "the integrated solution [will deliver] greater cost savings, efficiencies and competitive advantage to global corporations and marketplaces."
Dr. Augur:
How did you make your voice do that?
TEC:
I was just adding italics to the last quote. Doesn't it seem to you that there's been a change in what this alliance really means?
Dr. Augur:
Ah, meaning! What is meaning, anyway? I agree that the words have changed, but words are slippery. When IBM says "marketplace" do they mean a corporate exchange like the one they are using Ariba's software to build for themselves or a publicly available vertical market, or even an MRO market, the way B2B commerce started back in the last millennium? You know, I could see back then they way things would be turning out.
TEC:
But the last millennium was less than six months ago. Let's just focus on IBM and Ariba. Do you think that the way this alliance is going to turn out is more like the current limited statement about large corporate exchanges or more like the earlier statements? Will IBM and Ariba end up being competitors in the mid-market?
Dr. Augur:
Is that all you want to know? I'll get right on it. Give me a call in a couple of months. Right now I'm looking into that other question you asked, about whether the big ERP vendors are going to try to move into e-commerce.

User Recommendations

Companies with interest in becoming market makers will welcome this announcement simply because it provides another option - especially for those who still believe that "nobody ever got fired for choosing IBM." Companies that already rely on other elements of IBM's WebSphere Software platform will be particularly interested because of the possibility of simplifying integration costs.

However, most companies with current serious interest will probably choose not to wait for general availability of the product, which is expected for September 2000 on the AIX platform only, with other platform support promised but yet to be announced. So there is no overriding reason to delay an urgent selection decision as a result of this announcement. But those who are looking to the future will want to watch how the product performs before general availability and how quickly support for other platforms can be implemented.

 
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