A recent blog post talked about my attendance of the AribaLIVE 2012 user event and outlined the main premise of the event: Ariba has become a public cloud commerce network provider first and foremost, while also offering additional related spend management software as required. The vendor is striving to become a business-to-business (B2B) commerce version of Amazon.com and eBay to enable painless transactions by providing a behind-the-scene universal business translator. For more details, see the keynote presentation by Ariba’s president Kevin Costello.
This is what cloud commerce is all about: leveraging the power of a network to make business commerce as easy as personal commerce. And this is the direction that Ariba will continue to take. The vendor has gone all out to expand the Ariba Network (and the cloud-based solutions delivered within it) and extend its position as the world’s largest and most global business network. And these moves are apparently paying off.
Stellar Financial Performance
Ariba’s recent financial results and growth of subscriptions are stellar, and its capital valuation speaks for itself: about $3.3 billion or nearly eight times revenues, last time I checked. Consider this: Ariba finished Q4 and FY2011 on quite a high note — exceeding the top end of its guidance both for the quarter and the full year on the revenue, earnings per share (EPS), and operating cash flow (OCF) metrics. At the same time, the subscription backlog rose strongly as follows:
Moreover, the e-commerce volume exceeded $200 billion for the first time in 2011, coming in at $202 billion on a rolling 12 months basis or over 18 percent Y/Y. The total number of suppliers on Ariba Network (including Ariba Discovery, see the related article here) is over 730,000, whereby the number of chargeable relationships is 88,000 up 14,700 Y/Y or over 20 percent, and up 4,600 in Q4 2011. The number of transacting relationships was 145,000, which was up 17 percent Y/Y.
In Q4 2011 alone, Ariba signed 59 new logos, 275 unique customer transactions, 327 on-demand deals (246 excluding renewals, to be precise) which were all record numbers. Consequently, Ariba’s stock performance lead the extended peer group over the past 12 months with a gain of 68.5 percent; against the NASDAQ composite index it was up 9.2 percent and up 8.6 percent compared to the S&P index.
In 2011, Ariba beat out other top performing tech companies, including salesforce.com (up 21 percent), former independent SuccessFactors (down 0.7 percent), and Apple (up 33 percent). The industry heavyweights – Oracle (up 17 percent), SAP (up 22 percent), Google (down 3 percent), and Microsoft (up 4 percent) - were left in the dust. The increase in Ariba’s stock price through 2011 followed increases of 88 percent in 2010 and 74 percent in 2009 – taking Ariba up a whopping 211 percent over the past three years. It is thus a small wonder then that SAP recently forked out a hefty $4.3 billion to acquire Ariba.
Product Enhancements Keep on Coming
During his entertaining keynote presentation, Bhaskar Himatsingka, Ariba’s chief technology officer (CTO), explained how engaging, trustworthy, and reliable the Ariba Network has become: it currently has over 730,000 companies, 4 million individual users, and manages over a $300 billion spend. Generally speaking, social and commerce networks promote engagement by offering the following traits:
To that end, Ariba’s “Smart invoicing” capability with over 70 rules to set up for automated straight-through processing (STP) is outstanding. Item master data can now be managed in Ariba for procure-to-pay (P2P) processes, even if these processes do not necessarily go via an enterprise resource planning (ERP) back-office system.
To engage sellers and provide a unified seller’s experience, a supplier company profile and single login are the new features. A company profile is filled out only once and then accessible by many (á la public resumes in LinkedIn), and there are multiple tabs/pages of information such as Basic Info, Business Info, Marketing, Contacts, Certifications (e.g., green supplier, minority-owned, women-owned, small disadvantaged business, etc.), Customer Requested Info, etc.
For insight, suppliers are able to see near real-time Ariba Network Data, Ariba Sourcing Data, and Ariba Discovery Data, and can check their purchase order (PO) status, invoice status, early payments (and related discounts/rebates), leads, proposals, contracts, and so on and so forth. For its part, buyer engagement is promoted via role-based dashboards with pertinent information such as my suppliers, my expiring contracts, my requisitions, my invoices, watched projects, notifications, to do lists, my documents, recent searches, etc. Buyers can also check the so-called 360-degree reports on supplier performance management (SPM) trends.
To increase ease-of-use, Ariba is preparing the offering for casual users – the so-called Facebook generation. Those users will be able to do casual “no-brainer” ordering by categories, search both catalog and non-catalog items, select items to compare, etc. Familiar features such as favorites, shop cart, recently viewed, most popular categories, etc. will also be available to promote use. For more information on Himatsingka’s keynote presentation, see the slide deck here.
For a wealth of other upcoming functional enhancements, the following are worth mentioning:
Another positive fact is that Ariba is now intent on promotion more via channel and partners rather than mostly via direct sales, as it has done in the past. For the first time in its history the company truly wants to expand its reseller community to grow commerce on Ariba Network and open new markets and new industry segments. Ariba is also getting out of the integration (plumbing) business, whereby compliance rules will no longer be part of the integration layer, but rather in the network layer.
The major announcement was the Microsoft Dynamics partnership along the lines to extend the value of ERP in terms of supplier connectivity, invoice automation, catalogs, etc. In July 2011 the vendor announced Ariba Collaborative Commerce for SAP ERP customers and there were similar attempts with Oracle in the past. But the major difference now seems to be that now 5,000 Microsoft Dynamics resellers will sell Ariba Network with Microsoft Dynamics AX first (other Dynamics ERP products will follow).
With this alliance, Ariba hopes to tap 350,000 customers (typically smaller companies than are SAP customers) with 5 million users in 40 languages. Dell Boomi will provide rapid buyer/seller productized integration to connect Ariba Network to Dynamics AX, SAP, Oracle, and other back-office systems. Integration is pre-packaged or out-of-the-box (OOTB) and no additional services will be needed.
The following are other notable partnerships that were either announced at AribaLIVE 2012 or were present as longstanding alliances:
It appears that Ariba is firing on all cylinders. Still, Ariba is not yet all things to all people and the next part of this blog will discuss some potential challenges and room for improvement, perhaps with SAP’s help.
In the meantime, what are your comments and opinions with regards to networked economy practices, and Ariba’s aforementioned capabilities? What are your current buying, selling, and cash management practices and experiences with Ariba’s products and services?