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January 17, 2000

EDS Unit Taps Ariba For Internet Marketplaces
Leveraged Sourcing Networks combine the buying power of multiple companies

By Larry Greenemeier and Clinton Wilder

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DS CoNext last week inked a deal with Ariba Inc. aimed at saving businesses 5% to 15% when buying supplies on electronic marketplaces. The agreement combines Ariba's business-to-business procurement software and network with CoNext's Leveraged Sourcing Networks, Internet marketplaces that combine the buying power of multiple companies.

Ariba will provide members of each network with its Operating Resource Management System electronic-procurement software. Users will access the Ariba network via the Internet, where they can view supplier content and conduct transactions.

CoNext, an EDS subsidiary, plans to form 12 Leveraged Sourcing Networks during the next three years, each containing companies with similar purchasing requirements or locations. CoNext has already established a 12-member electronic marketplace in the United States that includes Bethlehem Steel, Clorox, Entergy, and Kellogg's.

"By midyear, we plan to have the technology in place to procure indirect materials such as office supplies, temporary labor, travel, and computer equipment online through the LSN," says Don Rueter, director of strategic sourcing for Entergy Corp., a New Orleans utility company that serves 2.5 million customers in Arkansas, Louisiana, Mississippi, and Texas.

Each of the marketplace members has already installed procurement software and buys online individually. Now, they'll switch to Ariba's software and make purchases jointly from the same suppliers over Ariba's network.

"We collected a group of 12 companies that had already developed advanced procurement capabilities and will now develop supplier arrangements for these companies," says Matthew Lekstutis, senior VP of marketing and sales for EDS CoNext. Networks for South American, European, and Asian companies will be formed this year.

The deal illustrates Ariba's strategy shift from single-company sales of licenses for Operating Resource Management System to Internet marketplaces that aggregate multiple buyers and sellers. "Net marketplaces will be the most visible manifestations of the new economy," chairman and CEO Keith Krach said in a conference call announcing Ariba's quarterly financial results. Ariba posted a strong revenue increase of 243% to $23.5 million in the quarter ended Dec. 31. Its $5.6 million loss, or 7 cents per share, was below analyst projections of 11 cents per share.

Ariba rival Commerce One Inc. also unveiled an online marketplace deal last week. It will work with the Royal Dutch/Shell Group to build an electronic exchange for energy companies, their suppliers, and customers.

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