Ariba expands application footprint

Ariba's US$2.55 billion deal to acquire Agile Software signals a switch to vamp up the company's product line-up and corresponds with the B2B market's move toward incorporating greater business processes.

SINGAPORE - Close at the heels of a strategic alliance with Vignette, which gives the company content management functionalities, Ariba may be acquiring its way into collaborative commerce as well.

The e-business integration company announced last week a US$2.55 billion stock-swap deal to acquire Agile Software.

Words are already buzzing about Ariba's track to build out its products.

On Tuesday, one day after the announcement, Lehman Brothers raised its investment rating for Ariba Inc.

A research note accompanying the change in the rating noted, "this acquisition broadens (Ariba's application) footprint to include collaborative product design, an important part of the value chain not previously addressed by Ariba."

Agile's solution solves the problem of buyer and supplier collaboration as far up the value chain as the product development phase.

It gives manufacturers the capability to inform suppliers of any changes made to the design of a product any time during the development phase.

The flagship product, Anywhere, boasts the ability to solve the "problem of product change collaboration across the manufacturing supply chain."

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"The biggest challenge companies are facing today is, how do you collaborate between your suppliers and your design and move very-very-fast to market," said Mukesh Aghi, Ariba's managing director for Asia Pacific. "The market is now saying, how do you take commerce and collaboration and put them together."

Indeed, experts agree that Ariba's current offering, a main line-up of Buyer, Marketplace and Supplier, is a little skimpy without some major vamping up. Especially at a time when B2B exchanges are moving toward incorporating more business processes beyond the simple trading of goods.

At issue here is the transition of the B2B marketplace from a platform meant primarily for the trading of indirect material to direct material.

Indirect materials are supplies like pencils and stationary, materials essential to a business but peripheral to the production process itself.

By facilitating buyer and supplier collaboration at the product development level, procurement in an exchange environement can now expand to include materials directly related to the final product itself.

"With the massive uses of Internet in an e-commerce and collaborative commerce environment, the sequential process (of B2B) has changed and become more interactive," said Aghi. "And Ariba is taking the leadership in that."

The Agile acquisition, however, will not give Ariba the sophisticated payment and logistic capability that analysts believe is lacking in its products. And its scope comes nowhere near the ones Oracle claimed its new B2B products are capable of.

Further questions have also been raised about the timing and rationale of the acquisition.

Nevertheless, the deal shows a major player in the industry paying attention to changes in the market and moving relatively quickly to remain a step ahead of its competitors.

If all go well, products integrating Ariba's B2B market building solutions and Agile functionality will be rolling out as early as third quarter this year.