Ariba Goes the Reseller Route to Reach the Middle Market (Part 1)

Earlier today, Ariba announced it had signed up two existing partners as resellers of its solutions for the middle market. The principals of both firms, The Shelby Group and Spend Management Systems, have had long standing relationships with Ariba as boutique integrators serving larger organizations. In this post, I'd like to begin to discuss some perspectives on the broader challenge of driving Spend Management technology into the middle market, but first, I'll offer up a bit of analysis on this particular announcement.

As I look at this news, a few things jump out. To begin, I believe this news marks a symbolic changing of the partnership guard at Ariba. As I've written about before, for years following the acquisition of FreeMarkets and the integration of a large number of members of the Arthur Andersen business consulting organization into its consulting practice, Ariba developed a reputation for fee hoarding among its former integration partners. But in the past year, I've heard rumors from the Big 5 that Ariba has come full circle by once again embracing its larger channel partners, apologizing for its greedy go-to-market sins. "Mea maxima culpa," you can almost hear them exclaiming to their consulting partners. In my view with this announcement, by agreeing not only to share in the integration fee love, but also giving a piece of the license / SaaS deal to Shelby and Spend Management Systems, Ariba has finally realized that it is only one player in the broader Spend Management market and that partners are key to reaching a mass audience for its solutions. Bravo (not bravo solutions). Just bravo, I say.

But these observations say nothing about whether Ariba will be successful or not working with resellers to penetrate the middle market (in this case, let's define this sector as companies between $50 million and $2 billion in revenue). Working through resellers is an entirely different animal than selling directly, or even working indirectly with channel partners to close deals. And I also think that it will be even more challenging than Ariba envisions to achieve the kind of success they want to through the reseller channel because in my view, early adopters and early majority companies in the middle market -- the type of companies now considering more serious investments in procurement -- are now conditioned to self-select easy-to-implement solutions like a (which also tend to capture users through a culture of attraction rather than one of sales/promotion). In other words, something that customers can sign up for online and initially trial using a corporate card, rather than "being sold" a middle market ERP package.

Am I being too much of a curmudgeon here towards this announcement? Maybe. But I'm not convinced that it will be a great success unless Ariba makes serious investments in building out true, easy-to-implement and content- and expertise-driven solutions for the middle market with its resellers. Like pre-populated hosted catalogs with built-in discounts not to mention category and industry expertise wrapped around and embedded throughout every aspect of their middle market solutions. At the same time, it will also be critical for Ariba to equip its resellers with everything they need to succeed (otherwise it will be like sending in an under equipped mercenary army to invade hostile territory). Will Ariba go there? I hope so, but the proof will be in the results.

Late yesterday, I had the chance to trade notes with some Ariba competitors to get their views on the matter of penetrating the middle market and what it takes to succeed. Stay tuned for some additional thoughts on the subject tomorrow.

- Jason Busch

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