Ariba: Caught in the Trough

Dave Stephens has the scoop on another lackluster revenue quarter from Ariba. Clearly, Ariba remains caught in the On Demand revenue trough as it transitions traditional software license sales to recurring subscription revenue. The challenge on the revenue side of the software business makes sense to me. And I won't beat them up for it because I believe they are acquiring new customers and making significant inroads selling new solutions to existing ones. Moreover, On Demand is the right long-term business model. But I remain surprised that Ariba is not making up the revenue transition gap on the services front. Supply chain and procurement consulting -- much of it outside of category- and event-based sourcing -- is booming of late and Ariba has a golden opportunity here given their installed base and the need for solution based approaches to solving Spend Management challenges.

Many of the boutique firms -- not to mention the larger more established players -- are having banner years within the Spend Management services arena. And I've not even mentioned the rise of procurement outsourcing in this growth equation (where IBM and Accenture are both having good years). You can bet that Ariba's services and consulting opportunity will be on my list of questions as I head to Pittsburgh later this week for their industry analyst day. I plan to ask some tough questions, but I'll also be looking around the room to see if the other attendees really get the services and process side of Spend Management before I take off the gloves. (They should given that clients are paying them to understand it and services and content are so critical to Spend Management, but in my experience, few industry analysts really understand anything but the technology itself.)

Jason Busch

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