Ariba turns its back on B2B

Ariba chief executive officer Larry Mueller has announced that the company will scale back its interests in business-to-business...

Ariba chief executive officer Larry Mueller has announced that the company will scale back its interests in business-to-business (B2B) e-commerce.

"The message you're getting here is we're going to focus on our roots and our basics," said Mueller, after just two days in the job. He went on to say the days of "B2B aerobics" are now over.

Ariba has been a major B2B player but has suffered heavy losses as a result of the IT slowdown. Its share price has fallen by 95%.

Ariba will now turn its attention back to "indirect procurement" software, according to Mueller. Speaking at the company's Ariba Live 2001 event in Las Vegas this week, Mueller explained that Ariba already had a 35% share of this market.

"In the past year we have seen the market getting very excited by B2B e-commerce, and we've also seen a lot of changes in the past year," said John Watton, Ariba's UK marketing manager. "We service two types of business: dotcoms, which have slowed down quite a lot, and large corporations whose buying habits have slowed down. We need to focus on what we do well, which is procurement and marketplace technologies," he said.

Judy Jerome, IT information analyst at Bloor Research, believes Ariba is doing the right thing. "They're being sensible," she said. "We will see the supply chain shrinking as customers or businesses are able to go direct on the Internet. Companies that build their businesses solely on B2B exchange-type solutions realise that and they're going to diversify."

Ariba announced at the end of January that it was going to buy Agile Software in a deal valued at around $2.55bn (£1.78bn). The acquisition, which was focused almost entirely on B2B commerce, was called off at the beginning of April when market conditions had forced the purchase price down to just $400m. Ariba then announced 700 job cuts - a third of the workforce.

The company will now focus more closely on its partnerships. This week it has announced an extension to an existing deal with IBM where the companies' offerings are more tightly integrated. IBM will integrate Ariba's technology with its WebSphere middleware suite.

Ariba's recent difficulties have made the company an acquisition target. Analysts firm AMR Research thinks it is likely the company will be taken over by IBM or Siebel.

Watton dismissed the idea. "That is pure speculation", he said. "We're growing at 125%, we have cash in the bank and a major partnership pipeline."

Emma Nash

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