Ariba StartSourcing/StartContracts — Commendable SMB Effort, But not as Cheap as It Seems (Part 1)

I recently dug into Ariba's new down-market SmartSourcing and SmartContracts offerings that represent simplified yet decent products for the mid-market in their own right. Information Week -- which ironically published an article I wrote on e-sourcing/reverse auctions back in 2009, which led to my joining FreeMarkets -- offers a superficial analysis of these new bundles/packages in a recent post you can check out here. According to the blog entry, Ariba's "two new 'Start' solutions are intended to bring" a range of benefits to small businesses. To wit, StartSourcing "provides tools for creating an RFX, managing auctions and bids, and handling communications ... StartSourcing also gives companies access to Ariba Discovery for finding members of the Ariba Network."

And "StartContracts lets businesses set up an online contract repository for all its business agreements and make them searchable across the organization" while also delivering a range of other basic contract management capabilities. In other words, both products represent simplified versions of Ariba's "Basic" and "Enteprise" packages.

Ariba positions these solutions at a very attractive initial entry point (but as we'll get to in Part 2 of this post, you'll see this is a teaser pricing model that rockets up after the trial period as quickly as suppliers bid down prices during an auction). Specifically, Ariba offers both three and six month subscription/access agreements to each product at a cost of $199 per user, per month. And you can even use your credit card to sign up.

StartSourcing's limitations relative to Ariba's "Basic" and "Professional" sourcing package are significant -- but unlikely to be missed by many small companies. StartSourcing includes basic RFX capabilities in a package that also combines the ability to search for suppliers via Discovery, a very basic vendor master capability/supplier management capability and that includes simple reporting.

StartSourcing also includes fundamental support services and what Ariba describes as "site enablement," a service that others like SAP charge for in addition to their monthly charges. In contrast to Ariba's more expensive packages, the offering misses out on areas such as greater flexibility in negotiations (e.g. more advanced weighting, scoring and optimization), configurable workflow and process management and more advanced supplier management capabilities. Still the interface is straightforward and I suspect the average purchasing manager in a small company could walk up to it with little or no training.

Yet 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. Stay tuned for Part 2 of our analysis, where we'll explore the specifics of Ariba's pricing for these solutions (and competitive solutions) in more detail.

Jason Busch

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