redherring.com
Slander
Netscape misrepresents its competition.
By Blaise Zerega
The Red Herring magazine
From the March 1999 issue
During the America Online/Netscape merger, the Red Herring was sent a confidential document written by Netscape (NSCP). The memo blasted Ariba Technologies' Operating Resource Management System (ORMS), a software suite used for online purchasing, claiming that Ariba's customers were "very unhappy," and touted the virtues of Netscape's own procurement applications. More specifically, it charged that Ariba's "scalability is low" (it said ORMS can handle only 20 concurrent users) and "deployability is very poor." In other words, Netscape was saying that Ariba implementations were going badly.
But after thorough investigation, the Red Herring found the charges against Ariba -- whose CEO, Keith Krach, was one of our top entrepreneurs of 1998 (see "Pencil Pusher," July 1998) -- to be baseless. The document was forwarded to us by a self-described "unhappy Ariba customer" who claimed to have received it from a "reliable, solid source at Netscape." Was Netscape trying to spread misinformation about Ariba through the Red Herring? Or was the document sent by a genuinely disgruntled Ariba customer with a score of its own to settle?
Netscape says that it was surprised that the document, intended for field representatives, would have been given to an Ariba customer. "Clearly, we would not encourage anyone to ship a document like this externally," says Steve Savignano, Netscape's general manager of application products. Regardless of whether the document was meant for customers' eyes, if Netscape's sales force was telling Ariba's customers this stuff, it was lying.
With Sun's role in the AOL-Netscape deal, we wondered what would happen to Netscape's server technology.
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Ariba was named best-managed in our top 50 private companies for 1998.
The document described the supposed dissatisfaction of seven of Ariba's biggest customers, including Cisco Systems (CSCO), which uses ORMS as part of its highly regarded electronic commerce operation. According to Netscape, a Cisco IT director stated that if the company could turn back the clock two years, it would have selected a Netscape application server instead of Ariba's ORMS. But investigation revealed the opposite to be true. In October Cisco gave Ariba a supplier appreciation award. Carolyn DePalmo, a finance program manager at Cisco, says that ORMS functions very well and that it is processing nearly 3,000 purchase orders each month. Ms. DePalmo adds that 10,600 seats have been deployed and that the Ariba system handled more than $200 million's worth of transactions last year.
We found several other allegations to be groundless. The memo said that another Ariba customer, Advanced Micro Devices (NYSE: AMD), had stopped deploying ORMS and was looking for an alternative. But Barbara Kuo, AMD's manager of procurement systems, denied this. "We are still in deployment and happy with Ariba," she told us. AMD plans to have most of its 10,000-person staff using ORMS by year-end.
And although the document stated that Chevron was stopping payment to Ariba in protest and that Ariba's interfaces to SAP enterprise resource planning software were inoperable, Ariba's vice president of marketing, David Rome, says that Chevron's account is paid in full and that Ariba is an SAP-certified partner.
Netscape declined to explain any of these discrepancies. "It's not a publicly released document so I can't comment on it," Mr. Savignano told us.
Finger-pointing aside, the document's existence raises the issue of how difficult it is to install online procurement software, regardless of its developer. Bringing suppliers online can take between 6 and 18 months depending on the number of back-end systems to be integrated and the number of business rules to be incorporated into a front-end application.
Perhaps Ariba's only misdeed is that its marketing team has been too successful at convincing companies of potential benefits without making them fully aware of installation complexities. "The Ariba management team is a very polished group of seasoned executives who all excel in customer relationships," says Roy Satterthwaite, an analyst at the Gartner Group, with pointed diplomacy. Indeed, the company continues to announce big-name customers -- including Federal Express, Lucent, and Visa -- while keeping Netscape and the rest of the competition at bay. |
