Help Wanted: Number One Procurement Vendor To Fill Ariba’s Shoes?

Authored by Jason Busch and Pierre Mitchell

The four primary leads here on the Spend Matters research team have been busy attending and speaking at various spring customer events and industry conferences this Spring. We think it’s safe to say that no other firm is speaking to as many procurement practitioners in-person or on the phone within the realm of how frequently we are. It’s pretty funny, because at some of these big conferences, we don’t even see the traditional analysts out on the floor talking to customers and banging on the demo systems. This is partly because there are so few left, but also because the remainder are likely cloistered away by analyst relations groups.

But, one thing is for sure: in discovering what people really think about things, web surveys just won’t give you the dirty details. Discussions on the phone and in-person at events are telling us so much more than survey data could ever gather.

Based on the conversations and the notes we’ve traded, the Spend Matters team feels that no one is even close to filling the shoes left by Ariba now that it’s part of SAP. Yes, we know this isn't the death of Ariba since SAP is obviously letting them drive the train, but it's certainly going to be a major distraction to deal with some of those 'pesky' integration issues (applications, infrastructure, and organizational integration).

Yet this rush to fill the void seems like a primary goal of just about all the remaining vendors with multi-module suites. We believe this is the wrong strategy (but hold that thought).

Starting at the bottom of the alphabet, Zycus has made good progress in the sourcing and supplier management areas, but it is still in the very early days with P2P capabilities and needs many more integrated suite success stories to get close to having the footprint of what Ariba delivered. Although pricing like Ariba (i.e., going in higher than competitors) shows panache, but it might not deliver the deal volume they need to establish more beach heads to fuel their large-scale development efforts – and their clear desire to claim the top independent position.

At the other end of the alphabet, Coupa is heading in many directions at once as it builds out a suite and puts some pretty impressive growth numbers on the board at the same time. But the next year will be telling based on how deep it goes in other areas besides e-Procurement, and whether it continues to “go upmarket,” targeting middle-tier and larger Fortune 500s as well as everyone else – not to mention whether it can build a track record enabling the largest scale deployments that mirror some of Ariba’s bigger old deals (something we haven't seen much evidence of yet).

Of course many others, including Emptoris/IBM, BravoSolution, Iasta, and GEP, would undoubtedly like to fill Ariba's shoes as well, and drive to a dominant market position. And there are some dark horses in this race – Ivalua, perhaps, has one of the better current end-to-end product footprints. Yet in the next 12 months, we can't predict a single provider that will emerge to fill Ariba’s shoes.

The dozens of customers we’ve spoken with lately echo this sentiment. Ariba played a key role in the vendor ecosystem as the alpha dog for the best-of-breed players. It was credible threat to the ERP vendors (even though they wanted it both ways, touting many ERP-like benefits of inter-module integration). It was nimble and fairly innovative. As went Ariba, so went the other vendors who wanted Ariba to succeed (unless it was at their expense in a deal, of course!) But most buyers don’t want another Ariba/SAP combination, because the pairing creates limits around choice, interoperability, single vendor accountability ('a single throat to choke'), and innovation (which will undoubtedly re-accelerate at some point). This is happening on multiple dimensions in terms of analytics, knowledge management, supply chain integration (physical and financial supply chains), globalization, social, mobile, etc.

That said, we believe that the acquisition will force companies like Oracle, IBM, Microsoft, etc. to get their acts together to provide a business network strategy that builds a coherent partner ecosystem for multi-tier value chain integration:

  • Will Oracle acquire Coupa (ex-Oracle guys) for not just the applications, but the Open Supplier Network?
  • Will IBM put together all its impressive piece parts to create some of integrated IBM Business Commerce Network?
  • Will Microsoft acquire someone like Hubwoo (which is written on .Net technology - other than the SAP SRM applications portion of course)?
  • Will Amazon Supply add some ePro/eInvoice on-ramps to transcend its current B2C-like uber-marketplace focus?  Will Salesforce offer a credible offering built on its Force.com technology stack?
  • Will a dark horse acquire the suite assets of a SciQuest, the specialist capability of a Basware or a next generation platform play such as Tradeshift or Nipendo -- or all of the above in a disruptive roll-up?

This will be heightened by the network market consolidation that is still needed (e.g., in Europe), the re-emergence of supply chain business networks like E2open, Elemica, etc., and the blow back that we expect to happen based on the Ariba Network supplier fee model that we wrote about years ago – but is only now really reaching the tipping point of concern.

The bottom line is that prospective customers are now running these scenarios – and are wary of who will acquire the next best-of-breed leader that may emerge.

So, we expect the “help wanted” sign to be hanging for some time. In the meantime, we expect the rise of many new markets. If Ariba was the original “Converse All Star” or cross trainer, we expect to see many new (and more specialized) procurement shoes rise up in the coming years – running shoes, track shoes, trail shoes, crocs, flip flops, cleats, golf shoes, high tops, you name it.

Perhaps filling the void left by the giant old multi-purpose shoe is not a goal that vendors should strive to fill. For one shoe does not necessarily fit all! This is what we feel will happen. We believe that there will be some market segmentations that won’t follow the “module menu” dimension, but on things like integrated category knowledge and/or industry focus (e.g., PowerAdvocate is a real sleeper of a provider that has kept itself focused on the energy sector for now), business network focus, supply chain orientation, and other factors which we’ll cover in future posts. This is exactly the focus we are taking on our sourcing market analysis currently underway and will continue more broadly – especially as the market matures and morphs.

And you can be sure that we’ll be out in front of it (hopefully) helping to make sense of it all – and stirring the pot a little too!

Voices (4)

  1. Pierre Mitchell:

    Casualthinker, we completely agree! See the 2nd to last paragraph. The smarter companies are wisely choosing how to mix and match the different aspects of their overall procurement architecture, which is why we chose to do a whole series on procurement systems architecture to maximize the value from providers. Lumping all the requirements into a mega market basket for a single ERP and single best-of-breed and then doing a ‘winner take all’ approach is not very wise, See: http://www.spendmatterspro.com/pro/2013/04/09/winner-take-all-is-a-losing-strategy-for-sourcing-procurement-solutions/

  2. casualthinker:

    This is certainly a big open question, but besides anxiety do we really need someone to fill the shoes? The best of breed are traditionally known for nimbleness and innovation which is normally missing with big ERP vendors. There are already pocket of excellence with current best-of-breed vendors and they will blossom in this fragmented scenario – which is good for customers.

  3. Harry:

    Great article, and you are absolutely correct with the pricing escalating too high. given with cloud technology many start-ups are emerging to fill in this space like procurify.com, tradeshift, and nipendo that are agile and can compete with the old, traditional systems.

  4. Richard Shine:

    I certainly believe that the answer is not to try and ‘shoe-horn’ in a single solution for everything, but to ensure you mix and match components from different vendors that work best for you. That’s not to say you cannot strategically bring best of breed joined up solutions together; Procserve and Invapay have done exactly that through Procserve ePayments. We provide an innovative solution that eliminates the unnecessary manual activities from the payment process by automating the settlement activity for goods and services bought within the Procserve Commerce Network; the eMarketplace which underpins the Government eMarketplace, National Police Procurement Hub and the xchangewales eTrading programme. We will continue to be a niche player, expanding into new markets by continuing to do what we do well and in a cost effective manner for the customer.

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