Yes, Teflon, I've been looking very hard at this company ARBA and come up with a few things. I already nibbled at a few shares in my IRA and watched the day traders run it up 40 to 45 percent in a burst of love - or was it infatuation?
The revenue growth is insane. Really insane. Of course, as they build out the cost of doing business is increasing as well. However, that's a given. The customer list is a who's who list that just keeps growing on almost a daily basis. National Semi, WCOM, Schwab, Motorola, Cisco, FedEx, Merck, HP, Honda, Visa and many more. What's more impressive is their list of sellers, software partners, commerce partners, system integrators, hardware partners and alliances.
And, they are in bed with Microsoft. Cuddling nicely. If you had to sleep with a gorilla, who better?
Ariba Inc. (Nasdaq: ARBA) and Microsoft Corp. (Nasdaq: MSFT) announced the extension of their alliance designed to speed the adoption and deployment of innovative e-commerce solutions based on the Microsoft(R) BizTalk(TM) Framework and the Ariba Network(TM).
Other gorillas involved in some shape or form with Ariba include SAP, Oracle, Cisco and Intel - all listed below. It's important to note that many sales and marketing veterans from SAP are providing their experience at Ariba. The competition is covered below, but I think it is important to realize that Ariba is trying to stay complementary and not competitive with other software vendors - namely the ERP sector like Oracle, SAP, Peoplesoft and JD Edwards.
I would hasten to add that it appears to me, competition is unclear at this point. Why? Ariba and others have created demand where none existed before making it much more difficult to draw a conclusion as to which company competes with which. Commerce One could be argued strongly as the current competitor. The debate is if it is an inferior product. MCI Worldcom dumped Commerce One in June in favor of Ariba. Once again, our clue is to watch for all the new customers signed on by Ariba vs. those signed on by Commerce One. Ariba certainly does have other competitors, such as Concur and Elco, but none of them have amounted to much lately. In the long run, the strongest competition will come from Commerce One, Oracle, and possibly Netscape. Ariba's sitting in the driver's seat right now. Remember, they are being careful to keep their product complementary when it comes to gorillas like Oracle and SAP.
Fortune 500 types tend to be very careful about choosing services such as these. Perhaps it will prove to be true that the winner will have the clear-cut superior product line. Too early to tell, but the clue should be new sign ons over the next few months and quarters.
Here are a few tidbits. It is happening all so fast that a week, a month, a quarter or two from now, the list will have many more names on it. That has got to be our main clue to watch as Ariba's business broadens out. I hope this all helps us take a deeper look at the prospects of Ariba as an investment in the eWorld portion of our portfolio. As I said, I have already taken a small stake.
BB
*Ariba is an $8 billion e-commerce company. It is engaged in business to business operating resource purchases.
Market
Operating resources can be defined as those goods and service required to operate a company.
Included in this definition are item such as information technologies, telecommunications
equipment, professional services, maintence and repair supplies, travel and entertainment
expenses, office equipment, and services such as legal, temporary, and maintenence.
Operating resources compose the largest segment of corporate expenditures at 35% of total.
Pre-Ariba Purchasing
Currently, companies manage purchasing though paper based and semi-automated processes.
This method has been proven costly, time consuming, and complex. Companies are unable to
fully leverage procurement economies of scale due to inefficencies. Companies lack systems to
monitor purchases and compile necessary data to negotiate better volume discounts.
Companies also are hurt by maverick purchasing, when personnel do not follow internal buying
guidelines, thus costing their companies a 15-25% premium.
In addition, suppliers lose revenue when buyers misdirect purchases from their preferred
suppliers. Suppliers also have to contend with inefficent, error prone, labor intensive order
fulfillment processes. They also incur sufficent sales costs, as they design and produce catalogs.
Ariba's Solution
Ariba's solution to these problems is twofold:
1. A solution for automating the internal processes of organizations.
2. A method for connecting buyers and sellers.
Ariba's Operating Resource Management System (ORMS) streamlines purchase requisitions,
expense reports, service requests, etc. It utilizes thorough analysis and reporting tools to help
organizations consolidate suppliers, lower costs of operating resources, and take advantage of
supply chain economies of scale. The system is easy to use, and requires no formal training of
end users. Systems currently cost between $500,000 and up into the millions, as the company
targets the largest of potential customers first.
The Ariba Network is an internet based means of connecting buyers and sellers. It is indexed (a
la Excite/Yahoo) and supportive of all major e-commerce technical standards. It can be
conceptualized as a business to business portal. The company still does not have a transaction
pricing system, but one needs to buy ORMS to get on the Ariba Network.
Ariba's Customers
Ariba's current customers include leaders across all industries. Over 10% of the Fortune 100 are
now customers. Included are companies such as: Nestle, Sonoco, Staples, Chevron, Charles
Schwab, CIBC, Transamerica, Visa, AMD, Cisco, Hewlett Packard, Philips, Seagate, GM, Honda of
America, Bristol-Myers Squibb, Merck, Purdue University, the State of California, FedEx, MCI
Worldcom, Motorola, and US West.
Ariba's Sellers
Ariba's list of participating suppliers also is composed of industry leaders. Included are companies
such as: Airtouch, Barnes and Noble.com, Beyond.com, Boise Cascade Office Products,
chemdex.com, Dell, ftd.com, Hewlett Packard, Grainger, Office Depot, pcorder.com,
sciquest.com, Staples, and Tiffany and Co.
Alliances
Ariba has partnered with a number of firms to help deliver maximum benefits.
System Integrators to help clients realize maximum business impact: Anderson Consulting,
Deloitte Consulting, Hewlett Packard, Litton-PRC.
Commerce partners to help provide end to end solutions: American Express, Cisco, FedEx,
Verifone, and Visa.
Software partners to insure integrations with other leading solutions: JD Edwards, Microsoft,
Peoplesoft, Oracle, SAP.
Hardware partners to ensure superior performance delivery: Sun Microsystems, Intel, Hewlett
Packard.
Competition
Ariba faces direct competition from players such as CommerceOne (CMRC), Clarus (CLRS), and
Concur Technology (CNQR). CommerceOne is perhaps the closest competitor, but suffered a
major setback in June of 1999. MCI Worldcom was CommerceOne's main network partner in
building internet marketplaces. In June, MCI defected to become an Ariba customer. That should
say something about the superiority of Ariba's service. Ariba could also face competition from
ERP companies such as Oracle, PeopleSoft, JD Edwards, and SAP. Ariba is working towards
making their products complementary and not competitive to these software giants.
Growth Strategy
Ariba's intends to initially target large multinational buyers in a broad range of industries. Their
large spending power will attract suppliers and thus improve create a network effect. They also
intend to extend and build upon a community of partners in IT, Consulting, Distribution, and
Content Aggregation. Ariba strives to provide superior customer satisfaction, as employees are
paid in part based on customer satisfaction. Finally, the company intends to expand global
operations.
Management
Ariba's management was rated #1 among private companies in a 1998 Red Herring survery. 6
co-founders are still with the company, and insiders own nearly 60% of the company's shares.
The sales and marketing forces are composed of a number of SAP veterens, giving the company
a great deal of combined experience.
Ariba, Inc. is the world's leader in business-to-business electronic commerce services and software for
operating resources, the non-production goods and services companies require for day-to-day
operations. The company provides the Ariba Network platform, the industry's leading open, global
platform for business-to-business commerce on the Internet. Together, Ariba's software and services
leverage the Ariba Network platform to automate and integrate the internal and external commerce
processes of buyers, suppliers, and value-added service providers, delivering a global eCommerce
infrastructure that provides cost saving and revenue opportunities for businesses of all sizes. Ariba can
be contacted in the U.S. at 408-543-3800 or at www.ariba.com.
NOTE: Ariba and the Ariba logo are registered trademarks of Ariba, Inc. Ariba Network and Ariba
ORMS are trademarks of Ariba, Inc. All other products or company names mentioned are used for
identification purposes only, and may be trademarks of their respective owners.
Contact: Michele McMahon-Cost of Blanc & Otus, 415-912-2339, or michelemc@bando.com, for Ariba, Inc.; or Dave
Wilt of Ariba, Inc., 408-990-7584, or dwilt@ariba.com |
