With its latest quarterly earnings announcement from last week, Ariba appears to be on a roll. While I plan to examine some of the details from the call and the earnings report in more detail next week along with the yearly and quarterly performance of other providers (the Capgemini/IBX news from this week took priority on Spend Matters), I thought I’d put on my contrarian hat this Friday and offer up a few thoughts on what could still hold Ariba back from building additional momentum. Now, don’t get me wrong; Ariba put on a good show with its numbers, and much of the trending was headed in the right direction. But any time I see the general market latch on to a binary (i.e., good/bad) view of a provider, I feel it’s worth taking the subject off the pedestal and offering a more balanced viewpoint. So just as I defended Ariba’s strengths when its earnings reports and forecasts did not delight investors, I’ll offer for consideration a few points on areas in which Ariba still needs to focus to take its performance to the next level.
First, Ariba still needs to fully nail the SaaS P2P integration story for larger customers with complex, heterogeneous environments. If Ariba won’t eventually punt all of its P2P business in in the $7.5+ billion customer range to Oracle and SAP, it’s got to nail enterprise SaaS, including, most important, complicated systems and process integration. CD upgrades for legacy customers are a good interim step, but there will be no reason for large customers to stay on Ariba P2P relative to SAP and Oracle if Ariba doesn’t develop a proven core competence and market reputation around enterprise SaaS. The network and associated services may prove essential as part of the value proposition for enterprise SaaS — especially since Ariba has been largely unsuccessfully at selling its network and connectivity services into ERP P2P environments — but the most critical element for this will clearly stem from integration and configuration proof points that companies can run a large, highly complicated, global purchasing environment with an even nastier looking back-end in a SaaS model.
Second, Ariba’s pricing needs to remain as competitive as it has been over the past twelve months (and especially the past few quarters)…
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Jason’s comments are absolutely right. The is going to become increasingly important in the P2P space and Ariba should consider carefully how they keep SAP and Oracle from their heels if large enterprises embrace further cloud based supply chain systems.