Ariba simplifies B2B strategy and focuses on ROI

At Ariba's user conference in Las Vegas this week, the struggling business-to-business software vendor has been espousing a new...

At Ariba's user conference in Las Vegas this week, the struggling business-to-business software vendor has been espousing a new mantra straight out of the Elvis Presley songbook: viva ROI (return on investment).

The Live 2001 Las Vegas conference comes at a time when Ariba and its B2B rivals have suddenly found themselves in precarious business positions. Ariba is rounding off a quarter in which it lost $48.3m (£33.75m) from operations and a total of $1.84bn after special charges and writedowns, with revenue coming in well below expectations at $90.7m.

In addition, a precipitous drop in the price of Ariba's stock forced the company to scrap ambitious plans to acquire Agile Software and create a new suite of collaborative commerce tools. Ariba has now retrenched around its flagship business of delivering more efficient procurement tools to corporate users.

As a result, the theme of return on investment (ROI) has been hammered out continuously at this week's conference. Larry Mueller, who took over the CEO job at Ariba two days ago, said the company's ability to streamline and centralise corporate purchasing is "our greatest competitive advantage".

Loftier visions such as the development of a dynamically computerised supply chain are being put on hold, added Mueller, who was previously Ariba's president and chief operating officer. "It's back to basics for us," Mueller said. "We're not going into manufacturing collaboration. We're not going to be doing design collaboration anytime soon."

Hari Srinivasan, an analyst at Banc of America Securities in San Francisco, called the revamped strategy one that was born more of circumstance than design. "The reason they're saying that is they don't really have a [collaborative] solution at this time," he said. "Since the Agile deal fell through, collaborative commerce isn't something they can deliver."

But Ariba's new approach makes sense given the tight economy and the reluctance of users to take financial risks by making large investments in advanced business-to-business applications, said Bruce Richardson, an analyst at AMR Research. "These guys are smart by focusing on something simple," he said. "The key now will be delivering that [promised ROI] value."

Speaking at the conference, Cisco CIO Peter Solvik said early adoption of Ariba's software has helped the networking technology vendor avoid more than $100m in costs that it otherwise would have had to bear. The ROI that Cisco has gained from the software is "so high I don't even calculate it anymore", Solvik said.

Other users also remain committed to Ariba's technology. For example, Masayoshi Son, president and CEO of Japan-based Softbank, promised that the 600-plus companies in which his company holds a majority stake will be required to make all of their indirect purchases -- from office supplies to computers -- through Ariba's software.

Mueller targeted better analysis, networking, integration and payment tools as areas in which Ariba will look to extend its business-to-business functionality. He added that the company also plans to focus heavily on five vertical markets; the automotive, consumer packaged goods, financial services, high technology and pharmaceutical industries.

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