Ariba: Struggling Pioneer No. 2

Like Commerce One, Ariba has suffered a few rounds of layoffs in the past year and is losing money. And like Commerce One, Ariba has had to rearrange executive ranks a few times as it tries to find the right leadership. One CEO lasted just three months.

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One Ariba advantage for such enterprise users: no transaction fees. Rival Commerce One charges suppliers a fee for every transaction done via its software. For example, if you’re a Commerce One customer who buys pencils from Supplier X, Supplier X must pay Commerce One a fee, which Supplier X often then tacks on to your bill.

“Both software systems did pretty much the same thing, but we preferred the Ariba business model,” says Colin Clark, director of procurement at John Crane International, an industrial sealing company that plans to link 50 to 100 of its suppliers to an Ariba system.

Ariba has a reputation for responsiveness. For example, some companies in e-procurement projects want to buy or sell services, not just tangible goods like staplers. While Ariba’s system wasn’t originally made for that, the company has adapted its software.

“Hiring a short-term contract employee is a lot different from buying a case of toilet paper,” says Sue Marks, group vice president of e-business solutions at Kelly Services. Billing and payment are different in that you pay for the tissue once, but pay for a temporary staffer every week. “Ariba worked with us to figure all that out,” Marks says.

Ariba also is adding packages to its procurement suite, for example, to manage contracts and analyze users’ spending habits.

Despite all this, Ariba’s ongoing financial losses give some customers pause.

Allentown, Pa.-based Air Products and Chemicals liked Ariba’s software, but chose not to license it directly. It uses Ariba via a hosting setup at Electronic Data Systems. “We don’t know how this market will look in three to five years,” explains Tim Tulio, e-procurement systems manager at Air Products. “Our contract lets us move to another platform if we need to.”

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Reference Checks

Air Products and Chemicals
Tim Tulio
Manager, E-Procurement, Systems, and Support
[email protected]
Project: Using Ariba for procuring 750,000 to 1 million products, such as office supplies, online in the U.S. Plans to expand Ariba in company’s U.K. offices this year.

Dave Oppenheim
Director, Enterprise Excellence
(401) 421-2800
Project: Two thousand users buy office supplies online via Ariba software, with another 1,000 to be added this year.

Deborah L. Manos
Senior VP, Chief Sourcing Officer
(216) 689-6300
Project: Installed Ariba two years ago for procurement, expense report routing and approval, travel authorization and other functions. About 11,500 employees at the $7.4 billion bank use it.

John Crane
Colin Clark
Director, Procurement
(847) 967 2400
Project: About 500 users worldwide buy goods using Ariba, with another 1,500 to 2,500 to be added this year.

Kelly Services
Sue Marks
Group VP, E-Business and HR Solutions
(248) 362-4444
Project: The $4.3 billion staffing company lets clients place orders for temporary workers online with an Ariba system, one of the few firms to use Ariba in procuring services rather than goods.

Lincoln National
Gil Holmes
Director, Corporate Procurement
(260) 455-2000
Project: Installed Ariba in September 2001 to manage up to $300 million in annual spending.

Executives listed here are all users of Ariba’s products. Their willingness to talk has been confirmed by Baseline.