Friday Rant: Ariba Earnings Watch — Three Things to Expect

Ariba will report its most recent quarterly earnings in late April. I know a number of analysts and investors will be watching the numbers closely because they will represent not just how well Ariba executes on sales, but because the vendor continues to serve as a proxy -- not entirely fairly, I might add -- for actual and potential growth in the sector. Still, especially given that we're coming off the bottom of the recession, and not to mention that fact that the previous quarter is one in which many enterprise software companies often turn in their best performance of the year, this quarter will be very important to watch. In my view, based on the activity that I'm seeing in the market, here are three things I expect from the quarter:

  1. Significant customer momentum, if not a healthy number of new signed deals (in relation to other quarters from the same period for Ariba). The amount of new deal activity I've seen in general in the space has continued to pick up nicely, gaining significant steam in Q4 of last year, which I believe will carry into the first quarter of this year. The big question is what was actually signed in the first quarter, but I suspect that compared to its performance in the past, overall customer traction based on marketplace interest solutions spanning upfront spend analysis through to the invoice management process will be high.

  2. A stronger overall competitive environment. Ariba is facing new competition from SAP (and soon Oracle) in the spend analysis area, and competitors are also picking up steam with solutions in hosted P2P as well. Emptoris is popping up more once again in deals, as are the other usual suspects Ariba often sees: BravoSolution, Iasta, Zycus, etc. Moreover, procurement outsourcing deals appear to be gaining some interest as well, which will potentially take away from services revenue and reallocate dollars to vendors partnered with BPOs (Ariba has fewer relationships than others in this area).

  3. Growth of installed and SaaS for P2P. Spend Matters has seen a significant pick-up in inquiries from customers, channel partners and competitors about some of the challenges of SaaS P2P integration in more complicated back-end and front-end application environments, e.g., VMS platforms -- environments with Ariba and others. Some of our channel and other checks suggest that Ariba may be picking up some momentum on closing CD upgrade deals. Whether this is the field shying away from pushing hosted P2P on the existing Buyer installed base, or is due to timing / other market issues is almost irrelevant. But it does suggest to me that even though Ariba is headed strongly down a SaaS development path, that installed software may still figure as a component of what it does for a while, at least in P2P. Interestingly, some of Ariba's competitors are also closing what feels like a greater number of non-SaaS deals in a number of areas including spend analysis, sourcing, P2P and contract management.

- Jason Busch

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