Friday Rant: Ariba's Cloud -- Net Impressions

Down in Orlando this week for Ariba LIVE, it was pretty clear that there was a changing of the positioning guard. Ariba attempted to leave behind the pack of procurement software providers by moving into its own cloud, 30,000 feet above the procurement, finance and supplier organizations it intends to enable and help transact more effectively with a new enabling intermediary positioning and role. Ironically, this position as a cloud provider harkens back to earlier marketplace positioning back in the Ariba/Tradex and Commerce One days -- yet there are some major differences this time around.

For one, the technology to enable a cloud-like vision is real today. Consider:

• SaaS makes software acquisition and usage costs for both buyers and suppliers that much lower today

• Roll-out costs are lower (often by an order of magnitude) than a decade ago

• Integration costs (system-to-system and inter-company) is that much lower risk and cost effective today

• Supplier networks are now enabling complex commerce in addition to paperclips and pencils

• Businesses (procurement and finance) are looking for tangible results (e.g., cash take-out) rather than the ability to IPO their spend; suppliers are looking to generate incremental, high margin revenue rather than simply big-bang, high-leverage technology investments

• Ariba's end-to-end product suite vision is real. Granted, Ariba has stronger capabilities in certain areas than others, but starting with spend analysis and progressing all the way through invoice/working capital management and payment, the technology exists today versus simply posing as cloud vapor

This is all positive news -- but the cloud also brings new types of risks for Ariba. Not only must they expend marketing capital evangelizing what it actually means for customers, they must also not take their eye off the product functionality ball in their core products. After all, companies still base technology buying decisions on functional capabilities versus a high-level commerce connectivity vision. I'd like to see Ariba spend part of the airtime it's positioning with the cloud in investing in truly leading product innovation and staying on their solution message.

Incidentally, I believe they're doing this in some areas (e.g., working capital), but not across the board. For example, what about delivering "cloud" optimization capabilities in software and as a service as strong as CombineNet and Trade Extensions (not to mention Emptoris, BravoSolution and Iasta) for logistics and other complex spend areas? What about enabling "cloud" line-item cost breakdowns tied to pricing indices in spend visibility for select spend categories (e.g., stampings, forgings, freight) to help customers understand the exact implications of commodity price movements and surcharges based on total cost vs. just showing a general price trending chart? What about creating a social network for companies sourcing like-categories that are non-strategic? (OK, Ariba Exchange is a good start here).

Ariba must not take its eye off potential breakthrough innovation (not to mention driving to functional/solution parity with niche best-of-breed providers in key modular areas). If they can keep the cloud vision and make these investments, the sky will be the potential solution limit. Stay tuned for further analysis of Ariba's cloud, including the channel/partner (consulting, systems implementation, BPO, supplier) implications in the coming weeks.

- Jason Busch