Ariba is coming out of LIVE on the up-and-up. With strong quarterly revenue and margin performance and a unified company message (i.e., the "cloud"), Ariba's appearance has not been better in a decade. Yet in the past few weeks, I've given quite a bit of thought to recent discussions with Ariba customers/prospects, partners/former partners and competitors. These notes, when combined with my own observations and direct recent interactions, suggest a pragmatic, market-driven need to temper this optimistic outlook by stopping to pause to ask a few important questions, many of which are directly tied to customer wants and needs. Even if you've bought into the new cloud orientation and worldview, it's worth considering the following areas and their implications on the alignment of Ariba's strategy with what the market is looking for:
- Recent price aggression. Ariba has been very aggressive recently in a number of deals we have tracked, including those where two competitors have partnered together to compete against Ariba for broader footprint deals. Consider recent bundled source-to-pay deals at a fraction of what they used to cost (even six months ago) in the Fortune 1000 that suggest a willingness to give up both immediate and SaaS "license" revenue in exchange for an NPV calculation based on other out-year revenue numbers (e.g., supplier-paid network fees). The problem is that customers might not know the value of the NPV pricing when it comes to future fees, including supplier generated revenue (which buyers will inevitably end up paying something for down the road, but might not fully be aware of up-front, given fee changes and other new ways of getting suppliers to pay, even if they derive new types of value in the process)
- CD customers (from a functional upgrade/release perspective) are not necessarily receiving the same treatment as larger SaaS prospects
- Putting SaaS revenue ahead of deployment models that might be right for certain prospects (e.g., selling complex SaaS deals to customers for global P2P enablement when a customized CD deal may be more appropriate given the level of complexity and integration requirements, not to mention the material roll-out risk that our research suggests SaaS can still present for large, global organizations with heterogeneous systems and systems integration needs)
- A continued embrace of SaaS from a solution perspective and an overall growth strategy, yet limited progress in bringing peripheral yet important SaaS application integration to specific third-party solution areas outside core ERP/MRP financials (e.g., asset management, VMS, T&E)
- Investing in a broader marketing message and lock-in approach (e.g., the cloud) over functional solution innovation in core areas as a leading strategy
- A continuing power shift away from an engineering-led Silicon Valley (and an expert- and process-led environment in Pittsburgh) to one built around a corporate, sales-led HQ in Atlanta that is one-step removed from development and operations, geographically if not culturally
- Public uncertainty around the role Ariba intends to play in the sourcing, BPO and general services ecosystem. Will they focus on enabling partners? Will they deliver their own capabilities, etc?
- Continued recent competitor (e.g., Emptoris, SAP) partnering successes relative to Ariba in large deals
- Driving a closed network transactional environment based on value-pricing (which may not always be perceived as such) vs. an open environment that provides buyers with greater flexibility for inter-connectivity and network options (including inclusive or fixed-fee per transaction-based pricing)
- Continued quiet -- which may change at any time -- around investing in expanded solution capabilities that could significantly benefit clients (e.g., services procurement) through acquisition: as an example, numerous Ariba customers have told Spend Matters they would like to see Ariba acquire and integrate a services procurement provider like Fieldglass
There are many things to get excited about when it comes to Ariba's direction and momentum in recent quarters -- and coming out of LIVE. Yet customers, prospects and partners should challenge Ariba in these areas to ensure that their own goals, needs and requirements are aligned. I suspect that we will have more clarity around solution roadmap and positioning in a number of these areas once Ariba begins to take its cloud messaging down to a functional level (which appears to be a logical next step). If they get this next critical part right, the sky really could be the limit.
- Jason Busch