Friday Rant: What Does Ariba Have Up Its Services Procurement Sleeve?
Ariba has known for some time that in order to fulfill its vision -- call it the "commerce cloud," "spend management" or what have you -- that services procurement must be on the table. For a while now, Ariba has had a decent if not overwhelming ability to address SOW spend through a custom driver that users can configure (we know companies have used it for print, legal and other spend areas). Last we reviewed it in 2009, it was not industry leading, but it worked. At that point in time, contingent spend going through Ariba's services procurement solutions accounted for roughly 50% of volume, while SOW spend accounted for the other half. Yet as the market went then (as it does now), Ariba was rarely considered a player compared to independent VMS platforms in the majority of larger platform deals for contingent or non-contingent spend (Fieldglass, IQNavigator, Beeline, PeopleClick Authoria and Provade, in certain cases, are much more common VMS choices). It's clearly Ariba's hope to change this now.
There's a material body of evidence that suggests Ariba is embarking on initiatives -- not just marketing rhetoric -- to pursue this sector more aggressively. Consider the following:
- Ariba was one of the parties bidding for Fieldglass (eventually purchased by Madison Dearborn, a PE firm)
- Ariba continues a partnership with numerous VMS providers that integrate into its solutions (and Ariba has made some strides on SaaS P2P integration for VMS, but not as many as some organizations may require)
- The company has continued to seek out and maintain partnerships with focused consultants in the past year in the area -- they've also recently worked with expert partners on roll-outs of their service procurement capabilities, something that was often off the table before (as Ariba kept services in house in the past); yet hurdles remain on establishing and maintaining relationships with the staffing firms and MSPs
- At Ariba LIVE in April, Ariba employees were overheard telling Beeline employees that they would soon buy them (which was news to folks at Beeline, especially considering Adecco's strong commitment to the organization and growing R&D investment in it)
- Just a week or two prior to LIVE, Ariba decided to make the decision to boot out another VMS partner from the event (perhaps who they saw as competition, or future competition?)
Still, no one should count them out of this critical and growing procurement market segment. From a business model fit with network/transactional-based revenue on the VMS/contingent front to the ability to further penetrate existing accounts (many of which aren't doing much in the area) with an up-sell that could result in greater annual revenue than standard P2P deployments, the services spend opportunity is an ideal one for Ariba. And this why we believe there's something up their sleeve in this area.
TweetBacks
Oh, and those ASN fees are really unrealistic in the contingent workforce space if Ariba isn't going to help the CD/9r1 customers with more than what all their competitors do for the same fee.
My take is that Ariba missed several opportunities. They didn't integrate a former SP acquisition. Then they built 10s1 while igoring SP completely for the entire time. And now they have an application that is good, but is really not a strong competitor in SP. They missed the opportunity to get Fieldglass, which is cloud-based and would have been an awesome add to the Ariba suite.
Where to next? DEFINITELY not organic development. They need to acquire a VMS. However, they need to ask themselves if they want the technology AND the services, or just the technology. Given Ariba sold all its services, I have a hard time believing they want the services. However, all the VMS players, except Fieldglass, have integrated services.
My guess, Jason, is that Ariba either waits to get Fieldglass in the future, or goes after a lesser, more technology driven player. I know Provade is an Oracle partner, but that's the type of target I'd consider if I was Ariba.
As Tony points out, HR, IT and other business owners and specific hiring managers drive specific process themselves; sometimes with each department/process utilizing separate VMS/technology solutions. These silo approaches lead to poor visibility and spend aggregation problems. This is because of two issues. First, each of these “owners” needs to get some results fast, and a “big bang” or enterprise-wide initiative would take too long and involve way too many stakeholders. Secondly, what makes sense for some departments/business owners in terms of how to use these kinds of solutions, is foreign to others and is way too difficult to adoption and get any meaningful use of it. As a result, some of these owners just off-load the entire headache over to a “Managed Services Provider” (MSP) or BPO, who are generally the very same people who will supply and decide on the technology as it best fits their operational objectives.
In terms of technology (VMS), the real “ah-ha” moment for this area of spend management is going to be what’s happened in other areas. Like the difference between what Siebel was doing and what SalesForce.com was able to do. The difference between what Lycos/AltaVista tried to do and what Google did. The difference is adoption and throughput.
So like what Coupa has proven by its approach on the goods P2P side, (less “procurement” features and more consumer led capabilities into the business world) a 10x adoption rate will produce better results every time. Does Ariba really needs to concern itself so heavily on very specific and very often times unused VMS feature sets in order to transform this area of an organization's spend? They’re close now. An acquisition requires a ton of capital outlay and years of integration. I don’t know if that’s the better move for a product set that’s being successfully deployed in 10 weeks and already has hundreds of millions going through it.
“K” also commented on their partnership being “challenging”. While, like any “big”, public and popular software company, the “big fish” will by in large get their attention, I can verify that Ariba is open to learning from thought leaders in this space about how to make their SP product better and are making immediate changes based on feedback “in the field”.
But what these VMS providers (Ariba or otherwise) generally miss is the realization that there are multiple users and varying skill levels with varying needs that use these VMS applications. As such, what has been given the most attention is (like the old P2P world) is the procurement and hiring manager’s needs. This has meant yet another software to source, implement, learn, integrate and pull spend data. I would contend that the casual requisitioner has not been as heavily factored into the R&D and as a result, the most comprehensive solutions have a fraction of the adoption and throughput of those lesser capable, but easier to use, solutions.
Ariba has the infrastructure to pull this off, sure, but do they have the ability to recognize the greater opportunity; adoption and throughput? Whomever nails that will no doubt control a market opportunity that makes the P2P goods side of the house look like an after thought.