Ariba to focus on 5 industries
Targets include auto, finance, new CEO says
BY MICHAEL MEEHAN AND LEE COPELAND
(May 07, 2001) Las Vegas
Ariba Inc., sporting a fresh CEO after a bad quarter, announced at
its annual user conference here last week that it will concentrate
its development efforts in five vertical industries, even though
some users in those fields have already chosen competing vendors.
The market-leading e-procurement software
company has targeted financial services,
automotive, pharmaceutical, high-tech and
consumer packaged-goods firms. CEO Larry
Mueller said he believes that customers'
allegiance is up for grabs and that they will switch
to technologies that can deliver a solid return on
investment.
But customers were skeptical that Mountain
View, Calif.-based Ariba could obtain the critical
mass it seeks. The market for purveyors of online
procurement software is extremely diverse: Ariba
holds an 18% market share in a space with more
than 90 vendors, according to Framingham,
Mass.-based research firm IDC, and many users
have already committed large sums of money to
disparate technology paths.
"What I want to know is, Will the major vendors
be able to put aside their egos and do something
that's good for the market?" said Melissa
Spangler, director of e-marketplaces at Ariba
customer FleetBoston Financial Corp.
The auto sector is one industry that's already
largely committed. Ford Motor Co. and General
Motors Corp. bought 14.4 million shares each in
Ariba rival Commerce One Inc. in January as part
of the equity structure of Covisint LLC, the
massive automotive exchange founded by the Big
Three automakers. Southfield, Mich.-based
Covisint picked Oracle Corp. and Pleasanton,
Calif.-based Commerce One as its lead
technology providers.
However, Ariba claims Volkswagen AG,
Bayerische Motoren Werke AG and Honda Motor
Co. among its customers, as well as Toledo,
Ohio-based Dana Corp., the largest supplier of
drive shafts and piston rings.
Mueller argued that the Big Three seem more
interested in operating Covisint "as a manipulated
puppet." He said he believes that they will drop
their support of the exchange if they see
competitors getting better value with other
models.
"I think ultimately, GM will use technology to do
their own thing, and Ford will use Oracle to do
their own thing, and they'll go their separate
ways," Mueller said.
Covisint spokesman Dan Jankowski said the
perception that the marketplace has stalled is
incorrect. He said Covisint has been building an
infrastructure "that can serve an incredibly large
industry," and it hopes to be operational before
the end of the year.
No Clear Winners
In the pharmaceutical industry, Ariba has captured several high-profile
customers, including Merck & Co., Bristol-Myers Squibb Co. and Pfizer Inc.
But some players have gone elsewhere. GlaxoSmithKline PLC in London
decided to throw its business to FreeMarkets Inc. because of the premerger
relationship SmithKline Beecham had with Pittsburgh-based FreeMarkets,
dating to 1999. In January of last year, Eli Lilly and Co. in Indianapolis chose
Commerce One to automate the purchasing of goods and services throughout
the company.
"What this means is you're going to see some real fights for dominance in
those areas, and the winners will set the standards," said Hari Srinivasan, an
analyst at Banc of America Securities LLC in San Francisco. Srinivasan
added that it will likely leave customers searching for the best of breed in a
dogfight with no clear winners.
Mueller, who last week replaced Chairman Keith Krach as CEO, said Ariba
will be offering better business-to-business network connectors and
extensions to help link trading partners in the coming months.
Ariba is coming off a quarter in which it lost $48.3 million from operations.
Revenue came in well below expectations, at $90.7 million. |
