• United States



by J. Marino

Aribas Latest Release To Impact Strategic Sourcing

Dec 18, 200210 mins
CSO and CISOData and Information Security

Ariba(R), Inc., an Enterprise Spend Management (ESM) solutions provider, unveils the next release of Ariba Spend Management, an integrated solution that allows companies to manage their full spend lifecycle from planning to payment. In a related event, Ariba introduces Category Management, a new product addition to Enterprise Spend Management.

Analytical Summary

Current Perspective: Very positive on the Ariba’s Spend Management and Category Management release, as the company addresses product deficiencies and provides a clear differentiator in the crowded strategic sourcing segment.

Vendor Importance: Very high to Ariba, because the company is able to deliver more effectively on its Enterprise Spend Management Strategy with distinctive capabilities.

Market Impact: Very high to the strategic sourcing and value chain market, because competitors will need to adjust their strategies to development and marketing strategies to account for Ariba’s strengthened position.


Current Perspective: Very Positive

We are taking a very positive stance on Ariba’s new release of Ariba Spend Management and the introduction of the Category Management offering because the company has made great strides in developing a more seamless integrated enterprise strategic sourcing platform, has provided some important differentiators in project management, and has executed in delivering more effectively on its Enterprise Spend Management strategy. Strategic sourcing competitors will need to adjust their strategies because of Ariba’s strengthened technology base and product vision. In addition, Ariba still has the best customer base among the B2B Internet commerce pure-plays, and recent data that indirect materials e-procurement (MRO and office supplies) now accounts for only 10% of Ariba’s total sourcing activity indicating strong up-take for direct materials or strategic sourcing.

The new Ariba Spend Management release is important not so much for the enhancements to the feature sets of Ariba Enterprise Sourcing, Buyer, Analysis, Contracts, Invoice, Supplier Network, Workforce, and Travel and Expense, but rather for the delivery of a more seamless integrated platform that overcomes, in many areas, the obstacles created by the evolved nature of the offering and disparate product codes. For example, Analysis can now get data more easily out of legacy systems and share it more effectively with Buyer, Sourcing, Invoice, or Contracts. In effect, Ariba can now leverage Analysis better to deliver on its vision of enterprise spend management for supplier, commodity, or cost-center optimization and savings that is its hallmark. And Ariba has not neglected the details, as Analysis now includes 55 templates addressing spend, compliance, and performance analysis issues. Indeed, Ariba should be chided to being late in delivering more effectively on this vision while some competitors have caught up.

Ariba’s major advance is the Category Management offering that is positioned as the project management or planning component of the strategic sourcing cycle. Project management is not new to strategic sourcing and its importance is obvious: strategic sourcing itself is a project requiring the disciplining of the pre- sourcing, unstructured processes. The distinction of Ariba Category Management, however, is how Ariba has taught project management for strategic sourcing to speak the language of professional services. That is, Ariba has significantly enhanced the basic modelling, mapping, archiving, and tracking project management functionality, productizing and standardizing frameworks, methodologies and best practices to optimize the planning processes that comprise 70 to 80 percent of sourcing activity itself, and which is the site for generating savings by supplier, commodity, or cost-center. In effect, Ariba has changed the terms of the argument to make strategic sourcing not a technology, but a services play.

While we admire Commerce One’s process-centric architecture, there is nothing quite close to Ariba’s processed-informed Category Management on the market. The tight marriage of process and project management is a significant differentiator for Ariba. It should be well-received by clients, especially professional services firms that get run with the services-oriented, process-based technology solution for strategic sourcing.

The details of Ariba Category Management are very well thought out. The offering comprises six key areas including process management, activity management, integration management, resource management, knowledge management, and administrative management or dashboard. The development of Category Sourcing Kits (CSKs) are more than templates, but are designed to put into technology the process layer of best practices, thereby, integrating category information and methodology, process and workflow.

Knowledge management is handled in a similar intelligent fashion. Not only are features present to generate new ideas and identify new areas for savings in productizing spend and category analysis, but Ariba provides for the contextualization of knowledge through best practices pop-up menus. The overall goal is to create self-sufficiency for sourcing professionals, which serves the double purpose of enabling Ariba to expand its business model.

We offer the following qualifications and recommendations. Ariba needs to better clarify how it can provide greater specificity for not only process-based, but also vertical-oriented category and project management. Here, the company should work with its professional services partners. Also, Ariba has not yet announced its ETL strategy for data integration, and at the technology level, there is no automated backward integration of information into Analysis for improvement. We also offer that Category Management, perhaps, is misnamed because it suggests more commodity-specific processes and detracts from the larger vision of enterprise spend management based in cost- center assessment and analysis. In addition, the Ariba event is weakened due to the lack of client, or beta testimonial and the March 2003 delivery of the offering.

Market Impact: Very High

Ariba Category Management is a significant improvement to the project management or planning phase of strategic sourcing, and competitors will need to adjust their product development and marketing strategies.

Competitors will need to respond to Ariba’s technology enhancements to its overall product portfolio that have strengthened the company’s competitive position, whereby Ariba can execute more effectively on its spend management strategy.

Vendor Importance: Very High

  • Ariba needed to introduce Category Management to provide a clear differentiator in changing the terms of the argument to make strategic sourcing not a technology, but a services play.
  • Ariba needed to upgrade its Ariba Spend Management offering to address product and module integration issues that have hampered the company from executing well on its enterprise spend management strategy (ESM).


Competitive Positives

  • Ariba Category Management provides a clear differentiator and effectively transforms strategic sourcing from a technology to a services play. This should be a clear advantage in winning support from professional services firms.
  • Ariba’s technology improvements inculcate self- sufficiency as both method and goal. This should be well-received with sourcing professionals, and enables Ariba to structurally expand its business model.
  • Ariba raises the stakes in the strategic sourcing space where a number of competitors have introduced a planning or project management component to their enterprise strategic sourcing platforms.
  • Ariba’s product integration and technology improvements to its overall portfolio address the “evolved” nature of its product set, and bring its platform more in line with some rival platforms that were designed “from the ground up” for strategic sourcing.
  • Ariba has continued to improve and prove itself in the direct materials segment, penetrating more effectively its very strong client base for strategic sourcing. The announced Ariba-IBM Spend Management Advantage provides strong endorsement for the technology direction, is evidence of the continuing strong relationship of the two companies, and enables Ariba to leverage the strong IBM channel for its new product suite.

Competitive Concerns

The March 2003 delivery date of the Category Management offering weakens the event, as well as the lack of testimony by major clients. The Category Management name deflects Ariba’s core identity and strength in leveraging process-informed planning for larger enterprise spend management goals.

  • Ariba has not yet clarified its plans for data integration/transformation that is central to facilitating spend analysis in large enterprises with heterogeneous legacy environments.
  • Ariba does not yet provide for backward integration with Analysis for improvement that weakens its offering in an area that recently has gained some visibility and currency.
  • Ariba has not clarified its plans for optimizing its process-informed project management capabilities for vertical- focused assessment and analysis.
  • Good products do not necessarily a good company make, and Ariba is late to market with a number of standard features, and the company has yet to prove its path to profitability. The ESM strategy is little over a year old, and a number of competitors can make a good case for delivering strategic sourcing as an overall corporate spend management strategy.


Recommended Vendor Actions

  • Ariba should move soon to partner with a best-in- class data integration vendor to provide integration, transformation and loading capabilities. The company should support this effort with a pre- packaged back-end integration strategy, providing adapters for standard e-business applications to strengthen its own best-in-class positioning to be flexible in addressing the needs of heterogeneous environments.
  • Ariba must provide for backward integration with Analysis for improvement to take advantage of its more seamless product integration capabilities, and to address this important area of concern for closing the loop on spend analysis.
  • Ariba should look in the direction of Emptoris and leverage more expansively its optimization capabilities for a closed loop strategic sourcing model. Again, the company will be able to take advantage of its more seamless product integration capabilities to strengthen its value proposition for purchasing organizations and for suppliers.
  • Ariba ought to work with its professional services partners to optimize its process-informed project management capabilities for vertical-focused assessment and analysis. Here, domain expertise is related as much to process as to category. Supporting this element with verticalized analysis and reporting will strengthen the initiative overall.

Recommended Competitor Actions

  • Strategic sourcing competitors (such as FreeMarkets, Commerce One, Frictionless Commerce, eBreviate, Oracle, PeopleSoft, SAP, GXS, Emptoris, Verticalnet, Tradec, Procuri, and so on) should adjust their product development and marketing strategies to account for the strengthened Ariba product suite.
  • Competitors with project management capabilities may strongly consider taking a page from Ariba’s process-informed, services-oriented project management initiative. This is important to facilitate client self-sufficiency, and to create greater appeal to professional services partners that may leverage their process-based strengths more efficiently.
  • Professional services competitors should strongly consider partnering with Ariba to take advantage of the technology development effort designed to transform strategic sourcing into a services play. The better integration of technology and business expertise afforded by the improved offering is critical to effective solutions development.

Target Markets

  • Global 2000
  • Large Enterprises
  • Systems Integrators

Recommended End User / Customer Actions

  • Organizations should strongly consider the new release of Ariba Spend Management because the company can now more effectively deliver on its ESM strategy, and the Category Management offering is a significant differentiator in bringing greater effectiveness and self-sufficiency to the pre-sourcing processes.
  • Organizations need to question Ariba about the provision of vertical domain expertise, either productized through automated processes, or through partnering relationships with professional services firms. These organizations should question the “sourcing educational level” of these partners that have earned their badges with event- based, commodity-specific e-sourcing, and may not necessarily be prepared to develop a larger spend management strategy.
  • Organizations ought to take advantage of the pre- released status of Category Management and apply for a beta test and offer customer testimonial and reference to get preferred pricing with Ariba and to take advantage of the technology.