Will Ariba Acquire to Fill Gaps or Accelerate Penetration in Key Sectors? (Part 2)

In this second post looking at potential Ariba acquisition targets (see the first post here), I'll start with a few additional areas that make logical solution depth/extension sense. The first is supplier management, which Ariba currently has a solution in today, but is not gaining the level of traction that RollStream and others in the market are around compliance, performance, risk and related supplier management issues within the context of the application itself (versus as a service). If Ariba is serious about expanding its influence and potential customer base outside of solely procurement (and to a lesser degree, finance, which they're messaging to today, but not quite yet hitting the mark), doubling-down on supplier information management, supply base management, supplier community management -- or whatever you want to call it -- is a no brainer. Moreover, Rollstream in particular would blend in well to the social networking and community side of what Ariba is trying to do with Exchange, Discovery, etc.

Aside from supplier management, in Ariba's current solution focus areas, I'm not sure it makes much sense to go after contract management that much more aggressively. The market has pretty much bifurcated between those willing to pay a premium to vendors like Upside and Emptoris and those who want less expensive and/or fully-suite integrated solutions on both the buy- and sell-side. Even though Ariba has convinced some analysts about their broader ability to compete in this market on features and capability, I really don't see them playing in the same ballpark as the specialists in the market who demand (and get) price premiums for their contract management products. It would be a type of spend middle finger to Emptoris to pick off Upside and offer a premium solution in this area, but I don't see anything like this happening (nor do I see Ariba willing to pay the valuation it would require to purchase the leading best of breed vendor in the space).

So to sum up the most likely areas for solution consolidation expansion, it seems likely we could see something in the P2P/network area -- which makes the most sense -- and possibility something in spend visibility, if Ariba is worried about getting flanked in this area (which they should be). Other areas are less interesting, but supplier management remains somewhat of a possibility as well. But in what areas outside of their established markets might Ariba get more serious on the acquisition hunt?

I'd argue a few, potentially. I think Ariba Discovery is a fascinating market move and Ariba could potentially leverage this capability -- along with Surplus Record, a company it owns, but that 99% of Ariba's employees don't even know about -- to create new supplier-paid offerings based on advertising, demand generation and closed business. In this area, I could see a situation where Ariba looks for both geographic and vertical specific marketplace specialists to accelerate their penetration into the marketplace world. Supplier directories probably aren't out of the realm of possibility, either. All of these potential capabilities could become highly synergistic to their expanding network business strategy.

I also think Ariba could -- and should -- make a much bigger push into both the contingent and non-contingent services world as well, potentially building both VMS and MSP capability either organically or inorganically (the technology piece, of which they have today, would only be part of such a strategy; however, it would probably be easier just to rip this out and start anew by buying an asset like Fieldglass or IQNavigator, the latter of which would also give them an MSP base on which to build from). Of course being both a VMS and MSP might potentially alienate existing staffing and MSP providers, but making partners feel welcomed and appreciated has not exactly been a priority in recent years now, anyway.

The final area I see as a no-brainer and therefore logical extension for Ariba to push hard through acquisition is working capital management and treasury focused solutions that more broadly tackle the intersection of purchasing, payables and cash management. Today, Ariba only owns a subset of its solution IP in this area, working with multiple partners to deliver what I'd describe as only a partial solution to the market. Pollenware, Oxygen and many other upstarts in this area could turbo charge Ariba's capability (not to mention potentially buying out partners like Orbian, The Receivables Exchange, etc., which would also put Ariba's pedal to the working capital metal ;-). If Ariba is serious about this space -- and judging by marketing, it appears to be -- it would make logical M&A sense that they'd want to take ownership of their own solution destiny versus being reliant on piecing together different partner capabilities.

Jason Busch

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