- Using such phrases as "software interoperability is a fool's game" and "marketplaces are dead," Ariba's vice president of corporate strategy, Marcus Ryu, painted a grim picture of the value of many major business-to-business initiatives.
Ryu was a last-minute substitute at the Gartner Group's iEB conference for what was scheduled to be an Ariba presentation on best practices.
"Ariba announced dismal earnings, and I am sure it is foremost in your mind and it is certainly foremost in mine," he told a room filled with corporate executives, industry analysts, and the press as he explained the change in topics and speaker.
Lessons learned and "where do we go from here" were the themes of Ryu's presentation, with the word "we" clearly meant to encompass the business community at large rather than Ariba in particular.
Ryu had a long list of false business assumptions and reasons why they proved to be false as he cast the blame equally among most of the industry analyst organisations, his own company, and competitors.
Among mistaken assumptions he included the following beliefs: Value would be created by lowering cost through market transparency; the creation of dynamic trading environments would reduce the frequency of market failures; the potential to share fixed costs of communications platforms and implementation of a new class of standard technology would reduce costs; and the reinvention of supply-chain collaboration hosted on the web and accessed through thin clients would reduce inventory for buyers and suppliers.
Most of the beneficial results coming from these false assumptions "won't happen," Ryu said, and he explained that expectations were set much too high. On the technology side, he said the need to translate structured content from heterogeneous platforms so that companies can share content with partners and their supply chain requires too much data mapping and is "intrinsically impossible to automate," he said.
Obliquely referring to the recent cancellation of Ariba's intention to buy Agile Software, Ryu said that attempts to graft software and services from one company often created for different industries and on different platforms onto another company's platform an applications is a "fools game."
Ryu also explained why he believes public marketplaces or public industry exchanges will fail.
"No one party was willing or able to take charge and make it happen," Ryu said.
Also skewered by Ryu was the assumption that a "global trading market would eventually create a giant universal e-business ecosystem of buyers and sellers. This, he said, was never thought out. Although a big-picture view of this global network was envisioned, no one really laid out what industry-specific services and applications would be found on these global trading Web sites.
"What was that entity supposed to look like? The business processes were too vague." And Ryu asked, "Who would run it?"
Lack of trust among partners was given as another reason for the non-start of most marketplaces. Although the value of building out the infrastructure to deploy the platforms and processes required were seen as beneficial and was on a theoretical level supported, no one company wanted to make the first move. All paid lip service to the concept but each held back committing money to a capital intensive project.
Supply-chain integration having as its goal the ability to reduce inventory will also fail, Ryu said. This is mainly because the current technology that determines inventory are made by using complex "constraint-based programming models," which he called computing-intensive mathematical technology used to make projections. The belief that this methodology can be scrapped in favor of real-time input of manufacturing schedules and current demand is unrealistic and impractical.
Ryu offered a "silver lining," as he called it, to the precipitous downturn he foresees in e-business initiatives, identifying two areas where value remains: e-procurement and creating what he called connections to a company's value chain rather than its supply chain.
"Procurement is the killer business-to-business application," Ryu said. Scaling back from the broad, expensive initiatives, Ryu listed the components of a successful e-business initiative as one designed for a business user rather than a technologist, with a concentration on messaging and interaction, rapid deployment, and improved interoperability in a company's outside business relationships that is not necessarily the supply chain. Rather, it would include the many businesses a company must interact with, including financial institutions, insurance companies, and suppliers.
"The sourcing process and the procurement process are the ones that can generate ROI and have been overlooked in the quest for global trading networks and marketplaces," Ryu said.