Former b-to-b kings losing ground to ERP players

More than the flailing economy is plaguing former business-to-business heavyweights Ariba and Commerce One as they struggle to gain traction against ERP (enterprise resource planning) vendors who are leveraging broader installed bases and enterprise offerings.

Both Ariba, based in Mountain View, Calif., and Commerce One, in Pleasanton, Calif., reported widening second-quarter losses this month while competitors SAP AG and PeopleSoft Inc. reported positive results for the corresponding period.

To help stem its losses, Commerce One last week announced that, starting with Intel Online Services, it will be partnering with infrastructure providers to offer hosted versions of its e-marketplace software.

David Dobrin, president of B2B Analysts in Cambridge, Mass., said ERP vendors like PeopleSoft and SAP have developed competitive e-procurement products that they can sell cheaply to their installed base. But Ariba and Commerce One are struggling to sell new licenses to a market for indirect procurement that comprises only two percent of the total market for automating enterprise processes, Dobrin said.

"They are returning to their natural positions ... from a huge overvaluation," Dobrin said. "Ariba and Commerce One are becoming niche vendors in a small niche. You should expect overvalued niche vendors to be sucking wind."

But Ariba's Chairman Keith Krach said the company has an advantage when competing against ERP vendors because its product can interface with multiple vendors' back-office systems. Ariba can also sell strategic sourcing software, Krach said.

Still, Ariba is in a "dangerous, tenuous" position because it has begun focusing on specific vertical industries without the aid of a lucrative partnership, said Louis Columbus, an analyst at AMR Research in Boston. "They don't have an SAP to help them survive," Columbus said. "They have to build their own domain expertise."

Although Commerce One does have the partnerships with SAP and now Intel to aid it, the company still must focus on executing these partnerships, Columbus said.

"Commerce One is looking for every potential revenue opportunity it can get its hands on," Columbus said. "They need to prove they can execute partnerships ... they've always had a problem with making partnerships pay off."

But not all e-procurement players are caught up in this conflict. Clarus this month announced partnerships with Microsoft Great Plains and Manugistics to embed its e-procurement and settlement application into their solutions. In addition, Clarus announced last week that it has aligned with Commerce One in a global, multiyear strategic agreement where Clarus will offer its settlement service -- to complete b-to-b financial transactions -- to Commerce One customers. In addition, Clarus will offer its customers access to Commerce One-powered e-marketplaces from its e-procurement platform.

Steve Hornyak, executive vice president and chief strategy officer at Atlanta-based Clarus Corp., said the company has elected to focus on collaborative selling rather than combat ERP vendors in potential deals "where the customer loves them and they're upgrading."

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