LIVE Dispatch: Ariba's Third Transformation

It's my opinion that Ariba is about to embark on its third transformation. And this one will prove no less challenging -- though perhaps significantly longer-lived -- than the first two. But if Ariba gets this one right, they'll have a huge Blue Ocean ahead of them loaded with opportunity rather than competition. And in the process, they'll transform not only their face to the market, but how customers will ultimately work with and use their capabilities. What is this third transformation I speak of? Well, let's label it as the "Networked Platform Ariba" placeholder for now (even though the actual name is a bit irrelevant, it's as good as any that I can think of).

But before we get to the new era of an Ariba Networked Platform, I'll first touch on the two earlier transformations which the provider went through. The first was its move to emerge as a suite-driven Spend Management provider out of its legacy cocoon as a focused eProcurement and marketplace player driven more by hype than business processes or customer value. The success of this transformation should not go un-noted in the annals of enterprise software history. Many other vendors of the time like Commerce One failed to make this transition (and one could argue that even i2 became largely irrelevant outside of a dozen or two custom solution-driven accounts in the post-marketplace era).

Ariba's second transformation -- which is not yet complete -- was the move from selling traditional licensed software and day- and blended-rate driven services to a subscription-based, On Demand business model. As noted, this transformation is a work in progress, but appears to largely be progressing forward. I base this on the fact that the bottom has not fallen out of Ariba from a revenues perspective (everything is relative and even though Ariba's revenue has declined, it's not been a death-blow of a drop). Granted, the transition has not been as smooth as it might have been, but Ariba is still standing (which is not something you can say about many other vendors who grew up in the same era).

Ariba's third transformation -- which I've already hinted at before -- places a networked business model at the center of the strategy rather than at the periphery. Granted, this transformation will take years to pull off. And at times, I'm guessing that you'll still see more of the "old Ariba" going head-to-head against SAP, Oracle, Emptoris, Ketera, Procuri and others in the Spend Management space rather than the new, new Ariba. But in the end -- maybe five years from now, if they're still independent -- I'm guessing Ariba's traditional applications business will be largely irrelevant from a core perspective, especially as they embrace new revenue opportunities such as supply chain finance and network-driven RFQs. In this new era, the applications and services become merely a hook to get customers into the Ariba ecosystem where the real value -- and revenue -- will be created.

One could easily imagine second generation "applications" -- either provided by Ariba or partners within the ecosystem -- that could be created and developed out of a networked-based business model. Consider the following possibilities:

- A bottoms-up, Google-esque network and index driven approach to data gathering, cleansing and classification, not to mention automated analysis (Pierre Mitchell should get the original credit for coming up with this idea, BTW).

- Next level supply chain finance (i.e., the selling of capacity and the trading of risk and the components of contracts); I've also suggested that get into this business as well.

- A network-based risk predictive risk management solution (think eBay meets Open Ratings meets the extended supply chain).

- Fully or partially outsourced supplier enablement and management (what ADP did for payroll, Ariba could do for complete SRM).

- Network- and content-driven consulting and services with a focus based on such areas as benchmarking and analysis.

- Intelligent matching services for suppliers, employees, expertise, etc.

- Community owned and shared content (e.g., RFQ templates) with a subscription business model.

- Online learning, training and education (think something like an Ariba flavor of the University of Phoenix meeting -- and beating -- ISM with both academic and peer-based certifications and credentialing).

- Recruiting and talent management (why not partner or work with Linked-in to build a specific procurement and supply chain talent exchange?)

- Trading services and enablement for outside third parties who want to come in and either use aggregate network information and trends to make investment decisions or to take positions or make investments within the network (i.e., in individual payables / receivables, in commodities, etc.)

These ideas are just a start. But one thing's for sure. And that's the Ariba of tomorrow -- if it is to succeed and stay independent -- will look very different from the solution provider of today. Let's hope they pay more than lip service to the massive opportunity at hand.

Jason Busch

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