OTOTOTOT - Wake-Up Call for B2B Dream Team?
By Joe Bousquin
Senior Writer
11/16/00 9:40 AM ET
Ariba (ARBA:Nasdaq - news) executives are putting
together contingency plans in case the company's
partnership with i2 Technologies (ITWO:Nasdaq -
news) and IBM (IBM:NYSE - news) falls apart,
according to one industry analyst and two financial
analysts.
"Ariba has been fairly open recently that although the
partnership plays well in the marketplace, they're not
going to bank the future of the company on it, and they
shouldn't," says Eric Upin, an analyst at Robertson
Stephens who rates Ariba a buy. "Software
partnerships are almost never forever." (His firm hasn't
done underwriting for Ariba.)
Ariba, i2 and IBM have boldly played up their
partnership, launched in March, as the dream team of
B2B, dubbing it "the Alliance" with a capital A. They
backed it with a $90 million advertising campaign this
summer to promote the partnership as the key operator
of Internet marketplaces, where companies can buy
and sell things online. Along the way, the Alliance
landed at least 25 customers, something the partners
haven't been shy about sharing with the world.
But quietly, fissures began appearing. Ariba and i2
landed one customer without IBM. i2 announced a
partnership with BroadVision (BVSN:Nasdaq - news),
which has targeted Ariba's business. Meanwhile, Ariba
has landed deals with IBM that excluded i2. The
companies say these deals exhibit the Alliance's
flexibility. But all this provoked speculation about the
Alliance's life span, as observers began to believe that
Ariba and i2 were increasingly becoming competitors,
with IBM being the peacemaker in the middle.
Falling Down
If the partnership collapses, the companies may have a
tougher time landing customers on their own,
especially after touting their combined strength. And
Ariba, thanks to its focus on a specific part of
business-to-business e-commerce called procurement,
could have the toughest time on its own.
The companies say the talk of problems is overblown.
An Ariba spokeswoman says "nothing has changed"
regarding the Alliance. i2 declined to comment for this
story, but it did issue a press release Nov. 7 reaffirming
the strength of its partnership with IBM. The release
gave short shrift to Ariba's role. IBM didn't return a call
seeking a comment.
Kevin O'Marah, an analyst with AMR Research who
has followed the partnership closely, says his sources
have told him that "Ariba has been putting some
high-level executive energy into addressing the next
step." (AMR Research counts all three Alliance
companies as clients.)
"My opinion is that they are in the process of breaking
up," O'Marah says. "I think the players involved are
looking for a way to have a soft landing on this."
Analyst Gavin Mlinar, of Sands Brothers, also says
Ariba has held strategy sessions concerning the
Alliance. (He rates Ariba and i2 buys, and his firm
hasn't done underwriting for either. Sands Brothers
doesn't cover IBM, and it hasn't done underwriting for
the company.)
Hardly the End
Of course, the Alliance's end won't severely hamper
any of the companies involved, especially giant IBM.
But at this point, Ariba needs i2 more than i2 needs
Ariba, analysts say. i2 already offers what many
consider Ariba's main strength, procurement software.
i2's TradeMatrix platform contains the software,
computer programs that allow companies to buy office
supplies over the Internet. i2's specialty, on the other
hand, is supply-chain management software, computer
programs that help companies manage everything from
inventory to supplies for manufacturing to demand
projection. Ariba is building up this area but has further
to go than does i2. And supply-chain management
software is increasingly viewed as the future of B2B.
"In the B2B world, it's clear to me that's who in the
driver's seat," says Bert Hochfeld, an analyst with
Josephthal who rates i2 a buy. "This is no longer
one-point solution, casual stuff. This is
bet-your-company stuff." (His firm hasn't done
underwriting for i2 or Ariba.)
Carl Lenz, an analyst at research firm GartnerGroup,
agrees. "More and more businesses are starting to
understand it's not a marketplace or buying issue, it's a
supply-chain issue," Lenz says. "In that sense, Ariba
is just a spell-checker for indirect spend of office
supplies." (Gartner has done consulting work for Ariba.)
None of this is to say the Alliance folds tomorrow. But
sometime soon, onlookers are waiting for it to fall.
"I still think they're going to win additional deals," says
Upin at Robbie Stephens. "But clearly the competition
between the two companies [Ariba and i2] is going to
increase. And clearly, the relationship is moving in a
different direction." |
