Ariba, which three weeks ago broke through the doom and gloom on Wall Street to post strong quarterly financial results, is the market leader in software for wringing inefficiencies out of corporate purchasing.
It is also one of the top technology suppliers to public and private e-marketplaces. All of this is keeping Ariba boss Keith Krach busy - so busy in fact that this interview with Network World US news editor Bob Brown had to be held in the back of a chauffeured car on the way to a meeting.
What's your take on the e-marketplace shakeout?
It's a very natural thing. Everyone always asks me who's going to win - is it going to be the public or private or industry consortium exchanges? It really depends on the industry and the overall objectives of that particular entity.
What we've seen is a back-to-basics approach. Six to 12 months ago it was, "Let's form this consortium and put in a management team and take the thing public." But reality has set in, and that has got to help these companies focus on the bottom line. There's no magic fairy dust here.
How is the shakeout affecting Ariba?
The slowdown in public net markets does signal that more consortia and private marketplaces will be deployed by Global 2000 companies ... Since Ariba has valuable assets in both public and private marketplace areas, we are well-positioned here. In terms of strategy, this does mean that we are accelerating some of the componentisation and crossover projects aimed at sharing common elements across the product lines. Primarily, this will allow more sophisticated e-procurement functions in marketplace apps; many-to-many administration capabilities in the e-procurement apps; and complete flexibility of choice in deploying [our technology] as a hosted or local system.
Who does Ariba generally deal with when pitching its procurement or marketplace technology to a potential customer?
Three major constituencies. The CFO, because our software is so bottom-line focused. Then typically the CIO or vice president of MIS. Then an operating guy, like the CEO, president or COO.
What are the primary concerns of the technology executives considering your software?
Ninety-eight percent of them have a heterogeneous financial or [enterprise resource planning] system. What's key for them is that it runs with SAP, Oracle, PeopleSoft, you name it. I remember one customer that had 77 different ERP systems - multiple versions of some of them and some homegrown.
Network infrastructure doesn't appear to be a big issue. What's been interesting is that everyone invested millions of dollars on their intranet infrastructures over the past few years and the thing the MIS executives love is that Ariba is their killer app for their intranets. When they look at the bottom line, our software helps with their cost justification.
How long does it typically take a company to roll out a private exchange?
Anywhere from three months to a little over a year. It depends to a large extent on how far along a company is in documenting its business rules. Cisco's, for example, were incredibly well-documented and others I won't mention had nothing documented. For those companies, we supply a "best practices" template.
The other big issue is supplier enablement. In the early days a company like Cisco had to go to each of its suppliers and individually hook them up to their network. Now when we go into a Fortune 500 company and say, "Give us your top 100 suppliers", there's a high probability we'll have 95% of them hooked up on our system already.
How much of a threat is Oracle or another more-established player to Ariba's business?
We never underestimate any potential competition. Obviously we partner with them on the database side, but ever since [former president] Ray Lane left we don't see them in the e-marketplace business at all. On the [electronic procurement side], you look at their showcase financial application customers like Cisco, Seagate and Fidelity, and they've all standardised on the Ariba e-commerce platform.
Will Ariba's strategy targeting large customers continue?
With our direct sales model primarily focused on companies with $US1 billion and greater revenue, and about 4000 of those companies in the world, there is still work to do since only 6% of that market has been penetrated. But for the small and medium-sized enterprises we've got a distribution strategy involving ASPs and others.