Ariba survived the high-flying Internet years, but it now risks losing business to the big boys.
When the Internet bubble burst, it spit out Ariba battered, but alive. The company is still in the red, which has been true for most of the time since it was founded in 1996, and sales have steadily dropped over the past year. But Ariba's still in the game, and it demonstrated some competitive flair with the $493 million acquisition this year of FreeMarkets, a competing provider of business e-commerce software and services. That deal, customers say, should bolster Ariba's expertise in some industries, including automotive and electronic components.
Ariba has shored up its tech support and improved the quality of its software, says Carter Cherry, assistant vice president of corporate procurement at insurance provider St. Paul Travelers. "They're growing from a startup to a full-fledged software company," he says. The company fixed some of its early problems, Cherry says, including "very weak" technical support: "Our technical folks used to not call them because it was a waste of time."
Simply being a dot-com survivor, however, won't ensure its continued existence, and Ariba is now at risk of losing business to the likes of SAP and PeopleSoft. For example, when specialty chemical supplier Rohm and Haas rolled out Ariba Buyer in 2000, it was running multiple existing enterprise resource planning systems. Since then, Rohm and Haas has standardized on SAP's ERP software worldwide. "We have four years of experience with Ariba, and our users are comfortable with the tool," says Cindy Passamonti, global e-procurement process manager. "But SAP's suite has matured in the intervening time, so we're going to go back and take a look at what they have."
Meanwhile, Ariba's past shortcomings still irk some customers. At Purdue University, more than 16,000 faculty and staff members buy everything from lab beakers to pencils through Ariba Buyer. Larry Pherson, Purdue's director of purchasing services, says Version 7 of the software gets bogged down if it's swamped with large queries. "It's possible to really screw up the responsiveness of the system," he says. The performance degradation "is noticeable, especially if you're working in the system for significant portions of the day."
Pherson and his staff are gearing up to upgrade to Version 8, which he expects to help alleviate the slowdowns. "I'm generally satisfied with Ariba," he says, "but not ecstatic."
Supplier Relationship Management
807 11th Ave.,
Sunnyvale, CA 94089
(650) 390-1000 www.ariba.com
Ticker: ARBAD (NADSAQ)
Joined the company in 2000 as chief financial officer and was named CEO a year later. Previously, he was CFO at Avery Dennison.
Formerly president and CEO of FreeMarkets. Prior to that, he was a management consultant with McKinsey & Co.
Ariba Buyer lets employees purchase products or services from contracted suppliers via a Web browser. Ariba Sourcing hosts online auctions and manages the request-for- proposal process for prospective suppliers. Ariba Supplier Performance Management provides scorecards to analyze spending by vendor and compare suppliers in a category.
Rohm and Haas Cindy Passamonti
Mgr., Global E-Procurement Process
Project: Chemical manufacturer installed Ariba Buyer in 2000; last year, the system handled 70,000 purchase orders, representing 23% of the company's transactions.
Purdue University Larry Pherson
Dir., Purchasing Services firstname.lastname@example.org
Project: The West Lafayette, Ind., university purchases about $100 million per year in products and services from 3,000 suppliers via Ariba Buyer.
St. Paul Travelers Carter Cherry
Assistant VP, Corporate Procurement
Project: Insurance company hosts 70 product catalogs on Ariba Buyer, connected to 550 suppliers.
Tyco International Shelley Stewart Jr.
VP, Supply Chain
Project: Uses FreeMarkets' reverse-auction tools and recently purchased Ariba's Data Enrichment to analyze companywide spending.
General Dynamics C4 Systems Robert Kane
Dir., Supply Chain Operations
Project: Defense-industry systems integrator has used Ariba Sourcing software for 3,000 auctions and supplier-selection events in three years.
Air Products and Chemicals Tim Tulio
Mgr., E-Procurement Systems & Support email@example.com
Project: Chemicals producer uses Buyer to purchase $50 million in non-technical commodity materials yearly, representing 30% of its transactional volume in the U.S.
Executives listed here are all users of Ariba's products. Their willingness to talk has been confirmed by Baseline.
Ariba Operating Results*
Earnings per share
* Fiscal year ends Sept. 30; FYTD reflects first nine months; Results include special charges of $113M for 2003FY and $559M for 2002FY
Total assets - $471.55M
Stockholders' equity - $219.98M
Cash and equivalents - $123.85M
Long-term debt - None
Shares outstanding - 45.45M
Market value as of 7/27 - $404.85M
** As of june 30, 2004, except as noted
Includes short-term investments