InformationWeek

Ariba is one of the leading vendors in what is arguably the most dynamic market around: business-to-business marketplaces. These online exchanges promise substantial savings for buyers and sellers of goods and services, and analysts predict that eventually they will grab a major share of business transactions.

Ariba president and CEO Keith Krach recently sat down with InformationWeek senior editor Matthew G. Nelson to discuss a variety of topics, including the company's strategy for maintaining leadership in the booming business-to-business market.

InformationWeek: Ariba has found itself in a busy arena, the creation of business-to-business marketplaces. How is that affecting your strategy?

Keith Krach: Last quarter, we doubled our customer base, and we now power well in excess of 100 different marketplaces. We are probably the industry leader by a factor of two, so our business has significantly accelerated. Our strategy is to go out there and power thousands of marketplaces in all segments of the business.

One of the other things that has happened is that we've increased our distribution capabilities fiftyfold. A big part of that was the strategic alliance we announced with IBM, where they are reselling our products worldwide in addition to being a customer for us. The other thing that has happened is expansion globally-in Europe, in Asia. We just went live with Sony in Japan. That was our No. 1 target customer over there. We have expanded into seven Asian countries. Same within Europe.

The other thing is we've added a lot more commerce services to the network. We announced the E-payment services with American Express and Bank of America. Recently we announced logistics commerce services with a company called Descartes. This is a publicly traded company out of Toronto, which is really the leader in the logistics area.

InformationWeek: What does Ariba provide its customers as a marketplace platform? And what other pieces are necessary in marketplaces that are being developed by Ariba?

Krach: In essence, it's really five elements. The first element is the classic exchange or electronic procurement- channeling all this purchasing power to that preferred set of suppliers or to the marketplace.

The second is the network that connects all of the buyers to the suppliers. The third is supplier enablement. We've got a whole division that does nothing but supplier enablement.

The fourth element is the marketplace that rests on top-the multibuying, multiselling marketplace. The fifth element is the valued-added services that rest on that network-electronic payments, logistics, auctions. We acquired the leader in business-to-business online auctions with Trading Dynamics, which was kind of like an eBay on steroids.

InformationWeek: Ariba acquired Tradex and Trading Dynamics earlier this year. What areas do you see that still need to be developed either through acquisition and/or partnerships?

Krach: A big area is serious commerce services and the value-added services that hang off the network. The question always is, make, buy, or partner? I think in 85% of the cases, what we're going to do is partner like we did with Descartes. Every now and then we'll say there is a strategic piece of technology that we've got to go out and acquire. Auctions was one of those that just made really good sense for us, especially if we want to sell. These guys had such a big lead, so it is a real competitive differentiator for us. That is the biggest area in terms of partnering, from a product and services standpoint. The other big area for partnership is distribution.

InformationWeek: Is there a point at which there are simply no more services to add?

Krach: In terms of commerce services that could go on the network, your imagination is your only limitation. It can include all types of electronic payment systems or credit or escrow, all types of logistics systems for fulfillment systems, all types of sourcing, auctions, and surplus material, supply-chain collaboration like things that we have done with i2 Technologies, all the way to putting 3-D solid models on the network. There are just a ton of them.

InformationWeek: You mentioned parts that you see as being horizontal across most businesses. One of those is logistics, which comes in with one of your most recent deals. What is the thought process behind that deal, and how is it going to affect Ariba's overall offering?

Krach: This is really a strategic one for us because it is Ariba, the leader in this network of marketplaces and buyers and sellers, with Descartes, which has the largest global logistics network with thousands of service providers and transportation providers and carriers. Actually, what we're doing is merging those two networks together. So that will expand our breadth and reach, and also provide those value-added services directly for our customers. And the beauty is we design both networks to be integratable.