Ariba StartSourcing: Just How Good is Free? (Part 1)

Earlier this week, Ariba unveiled their latest trick designed to drive sourcing marketplace volume to suppliers to generate supplier-paid fees -- Ariba's increasing, high-margin source of revenue. The announcement is Ariba's decision to make StartSourcing free, at least if you accept a number of caveats. According to the announcement, Ariba stated that "StartSourcing(TM) is now available at no cost." It also comes as no surprise that Ariba Discovery is included, allowing access to a "global community of over 700,000 selling organizations." Curiously, we have heard rumblings that Ariba may have scaled back its Discovery efforts internally, at least staffing wise, but this is unconfirmed. Still, regardless of internal growth initiatives for Discovery, this smaller footnote in the press release is undoubtedly one of the primary reasons that Ariba is making this offer free. But what do organizations get with StartSourcing, and how does it stack up?

In a series of two posts looking at Ariba StartSourcing and the new "free" model, we'll take a cursory glance at the solution and the updated announcement around its pricing. Later in December or January, we'll feature a more in-depth review -- much as we did with the recently launched Rearden/Ketera sourcing product -- after trying it ourselves. But before reporting on the news and offering our analysis, we want to first note that potential users of the solution should be comfortable with vendor-funded models such as which offer a similar "free" sourcing tool -- free to buyers as least. No doubt, Ariba is betting on a business model over the longer term where suppliers offset the costs for buyers.

The StartSourcing edition of Ariba Sourcing lets organizations have 1-2 seats for free (and finally, you don't need to enter a credit card as you had to with the previous "teaser" trial pricing that quickly estimated into a five-figure annual commitment, as our own configuration experience showed). You can read about our initial experience with the product (and pricing) here and here. The current free version includes, in Ariba's words, "RFX-Simple, Sourcing Reporting, Supplier Discovery, Site Enablement, Web-based Technical Support, Web-based tutorials, and Access to Ariba Exchange and RFP Hub." Provided on a "limited" basis are "Supplier Profile Management" and "Deployment/Project Management."

With this free version, Ariba addresses our previous fundamental concern with the offering. We previously criticized Ariba StartSourcing, noting that the "problem with both offerings has nothing to do with limited capability. It's the price. Relative to SAP, Ketera, Ivalua, Pool4Tool, and others offering relatively low-cost SaaS sourcing solutions, the real-world pricing for both products can rise to levels which begin to approach negotiated deals for traditional Ariba SaaS products." Granted, if users are looking for capability that goes beyond the basics, then StartSourcing is not for them. Still, as far as we're aware, Ariba is the first provider in the Spend Management sector of any material size/marketshare in a given product area to make a product free for buying organizations.

In addition, Ariba has invested in making Ariba Discovery's user interface more friendly for some time now, making the case that this is likely not a teaser offer because of the overall need to fuel growth for a more attractive business model to investors (i.e., network-based extensions). From a user interface perspective, Ariba retained an outside firm for this that has done a commendable job based on our experience using the tool. Yet from what we're aware -- and we plan to test the new "free" product soon to confirm -- the DNA of StartSourcing still goes back to the Ariba Sourcing product line, which remains a bit challenging to use, especially compared to more recent entrants in the market like Zycus and Rearden, which have completely redesigned the sourcing interface.

Stay tuned as our analysis continues. In the next post in this series, we'll investigate what making Ariba StartSourcing "free" for a segment of the market really means for customers and competitors -- and how we'll likely see a general migration of Ariba offering free or very low-cost solutions to enterprise customers as well in order to capture supplier-paid fees outside of the P2P area and to block potential competitors.

Note: Comments for this post have been closed, at least temporarily. I don't want to have to babysit and correct any inaccuracies over the weekend following a planned family/personal event which is taking the author of this post offline for a few days. I would also like to give SourceOne and WhyAbe a chance to share metrics, references and details in a non-charged manner should they opt to do so. Jason Busch

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