Ariba: More to life than e-markets

At a half-day event here for press and analysts, Ariba said it is looking to move beyond its past, during which it focused on electronic marketplaces, into a new category it is calling "value-chain management" through acquisitions and partnerships.

At the same time, the Mountain View, Calif., company is attempting to put some distance between itself and its up-and-coming competition, which includes established enterprise software companies like SAP and Oracle, as well as former partners like i2 Technologies.

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Value-chain management, according to Ariba's loose definition, goes beyond supply-chain management to include the management of both materials and business processes. By streamlining materials handling, collaboration, analytics, catalog content management and partner relationships--all of which are elements of value-chain management--customers can make their manufacturing and delivery processes more efficient, Ariba executives said.

The executives cited combined "industry analyst" predictions in saying that the value-chain management market will be worth $42 billion by 2005.

Company brass promised they would articulate when and how Ariba plans to build its existing Ariba Buyer and Agile Anywhere products into full operations-oriented and production-oriented value-chain-management suites over the next several months. No new products or services were announced.

But the company did unveil deals with e-commerce players Wednesday, including Syncra Systems, a collaborative commerce software provider; Zeborg, an online procurement company; and SeeCommerce, a supply-chain-management software company. These companies' wares will figure into Ariba's value-chain management efforts, executives said.

The company had little to say about the disintegration of the year-old partnership between Ariba, i2 and IBM. IBM remains an Ariba customer and partner, but i2 is increasingly competing with Ariba in the supply-chain management arena.

Ariba Chief Operating Officer Larry Mueller made a passing reference to an i2 software glitch that i2 customer Nike on Tuesday attributed as a cause for its expected third-quarter earnings shortfall.

In itemizing the results of the "very tough times" that tech companies find themselves facing, Mueller joked, "I probably won't get delivery of my Nike tennis shoes, and that's very disconcerting." i2 executives weren't available to comment on the alleged glitch Tuesday, but analysts had said the concerns about the company's software were overblown.

Ariba believes that the tough financial climate will result in a shakeout of the weaker business-to-business players, Mueller said.

But even Ariba, a former Wall Street darling, has not been unscathed by stock market corrections and reductions in information technology spending, according to some Wall Street analysts who attended the Ariba Value Chain Summit at New York's Radio City Music Hall on Wednesday.

Ariba "is in a product-transition phase," said David Garrity, an analyst with Dresdner Kleinwort Wasserstein. "They are portraying themselves now as a company focusing on a collaborative commerce model."

Garrity said he considered it a sign of weakness that Ariba spent so much time Wednesday focusing on its competitors and partners, rather than on its own products. And Ariba has had little to say about recent sales and marketing turnovers that the company has experienced, Garrity said.

Another Wall Street analyst, who spoke on condition of anonymity, said his perception was that Ariba was attempting to work a piece of revisionist history with its claims that it always has intended to go the value-chain/collaborative commerce route. Changes in the way the company accounts for software licensing revenue--rather than holes in its existing product line--are more to blame than anything for Ariba's stock price drop in recent months, the analyst added.

Ariba was down 75 cents to $16.50 in late afternoon trading Wednesday.

Mueller reiterated on Wednesday his belief that Ariba will remain fairly immune to the vagaries of the market. He said Ariba believes that it can grow its total number of business-desktop customers from its current base of 2 million to more than 40 million by 2006.

"Even in this economy, we'll remain strong," Mueller told the Value Chain Summit audience. In the company's e-procurement and sourcing strongholds, "we're even seeing less competition," he added.

Ariba said it is moving to a wider value-chain-management model at the request of customers. CEO Keith Krach said Wednesday that the company surveyed 60 of the Fortune 500 companies about what they want in business-to-business systems, and that the company's new value-chain focus in the result.