This borrowed from another thread..
Wednesday, Feb 28, 2001 10:00 PM
Ariba cuts ties from i2 with new B2B strategy
By Siobhan Kennedy
NEW YORK, Feb 28 (Reuters) - Ariba Inc. (NasdaqNM:ARBA - news) on Wednesday
all but closed the door on its alliance with i2 Technologies Inc. (NasdaqNM:ITWO - news),
outlining a strategy for business-to-business electronic commerce that decreases Ariba's
dependence on i2 and puts the two firms in closer competition.
``The divorce is final,'' said Bob Ferrari, an analyst with Boston based AMR Research. ``Clearly Ariba is saying it can do this
without (i2's) supply chain software.''
i2 and Ariba got together with International Business Machines Corp. (NYSE:IBM - news) last year to form an alliance to
target the market for online marketplaces. But ever since that time, analysts have been predicting a break up between i2 and
Ariba as the two continue to introduce software that encroaches upon each other's territory.
Speaking at a press and analyst conference in New York, Ariba's president and chief operating officer, Larry Mueller
reinforced that view by downplaying the importance of i2's supply chain management software, which helps companies cut
costs by more efficiently planning their purchasing requirements with suppliers.
``The supply chain is important,'' he said. ``But it has limited perspective.''
Mueller said the future of electronic commerce wasn't about internal plans and efficiencies, which is what companies like i2 and
German software giant SAP AG offer.
``Future competitive advantage is driven by inter-enterprise process improvement,'' he said. ``It's all about partner relationships
and creating value by connecting companies.''
That market -- what Ariba is calling Value Chain Management -- is estimated to be worth around $42 billion by 2005,
according to Ariba. The company based the estimate on research it compiled in conjunction with analysts firms including AMR
and International Data Corp.
Morgan Stanley's top rated analyst Charles Phillips said Ariba did a good job of contrasting itself against ``last generation
applications,'' and positioning itself as a provider of networked-based collaborative applications."
``Today was a much better defined Ariba strategy,'' Phillips said, adding that, at the moment, i2 does not have any products
that fit in the collaborative commerce space.
``For the areas they (Ariba) are focused on, it puts them in the lead,'' Phillips said.
Letting companies collaborate over the Web was the driving force behind Ariba's recent deal to acquire Agile Software Corp,
which will give the company a firm footing in the market for software that lets manufacturers share product information with
their suppliers across the Internet.
Then on Wednesday, Ariba sought to extend that capability by announcing a reseller agreement with Synchra Systems, a maker
of software that lets buyers and suppliers communicate more efficiently about inventory levels and purchasing requirements over
the Web.
While neither deal brings Ariba into direct competition with i2, both agreements bring the two vendors closer together by
pushing Ariba into the market for direct procurement -- the purchasing of raw materials and components -- which is i2's
mainstay.
Up till now, Ariba has only played in the indirect procurement market which automates the purchasing of office supplies and
services over the Internet. Citing IDC research, Mueller said Ariba had 32 percent of that market, or 2 million users, and was
looking to increase that to 40 million by 2005.
But he admitted the real opportunity was in the direct space, where inefficiencies in procuring raw materials cost manufacturers
billions of dollars a year.
``Indirect procurement was the low-hanging fruit, but that's all gone'' said David Hilal, an analyst with Friedman, Billings,
Ramsey & Co. ``Ariba's recognized that but the question is whether or not it can deliver on its new strategy.'' |
