Amazon vs. Ariba: The Coming Battleground?

Over the past year, we’ve begun to take a closer look at Amazon’s strategy in a B2B environment, including targeting the SMB industrial and MRO market with Amazon Supply (see coverage here and here). But the big question on our minds is not whether Amazon will become a thorn in the side of Grainger, MSC, Wesco, or even metal distributors like O’Neal or Reliance with its warehousing and fulfillment network combined with a storefront. Rather it’s a question of whether we’ll see Amazon on the corporate purchasing desktop competing against the likes of Ariba for supplier network dominance.

It’s not too far-fetched of a thought if you consider the following:

  • Amazon has adopted a service oriented architecture (SOA) approach that would enable it to tie together any of its various services (from content to order entry) with a front-end buying tool set, either internally created or acquired (or through partnership, for that matter)
  • Since Ariba and other supplier networks are not party to a transaction itself but are merely serving as an intermediary for the exchange of information (and supplier search), they will always lack the type of visibility that owning a fulfillment infrastructure can enable, including the ability to re-route or expedite dynamically orders based on events in the supply chain (not to mention providing value-added services to suppliers of all shapes and sizes)
  • Amazon has become a true financial partner with its suppliers (even if it’s a partner that some suppliers aren’t overly fond of). Ariba offers such benefits as early-payment discounting and factoring option. Amazon goes much further – it offers its own credit lines to suppliers!
  • Amazon has flexibility as to where it plays in the corporate procurement world. It can be a vendor/distributor (e.g., Amazon Supply) with titles to goods and ownership of every step of order fulfillment. Or it can play the role of intermediary (with fulfillment or not). It could also play the role of supplier enablement/on-boarding partner (which it does with vendors in its network already, although in a B2C context (B2B on-boarding is not much different but could involve the collection and validation of additional information such as TIN numbers, banking details, diversity status, code-of-conduct sign offs, etc.)
  • Amazon also owns a national logistics and warehousing infrastructure – really everything but true “last mile” fulfillment. Contrast that with Ariba and SAP, which have some nice real estate in Palo Alto, Sunnyvale, Newtown Square and Waldorf. For Amazon, the combination of physical and virtual assets, including a potential next-generation supplier network that links fulfillment, warehousing, working capital management programs (they do it for suppliers, why not corporate buyers!!!) and other potential value-added capabilities for both suppliers and buyers is potentially disruptive.

Whether Amazon sets its sight on the true B2B corporate procurement market as a new type of supplier network intermediary or instead dabble with Amazon Supply and Prime (which many small businesses use) remains to be seen. But if they do, Ariba and others should watch out for a potentially disruptive force.

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