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Ariba's Comeback

Enterprise-apps vendor leverages FreeMarkets' technology with a suite of sourcing software.
Ariba Inc. last week introduced software features that combine its strength in E-procurement, transaction processing, and analytics with recently acquired FreeMarkets Inc.'s sourcing services and technology patents related to online auctions.

Ariba Visibility and Sourcing Solution includes advanced feature upgrades for each of Ariba's Strategic Sourcing modules: Sourcing, Analysis, Category Management, and Contracts Workbench. The tools have critical auction functionality that FreeMarkets has been using for years, including about 20 technology patents Ariba had wanted to build into its sourcing platform. Ariba had tried to license the technology from FreeMarkets, but FreeMarkets refused, says Roger Blumberg, Ariba's director of sourcing and visibility. The patents cover technology that lets bidders save and pause bids during online auctions.

The patents also bring important functions used to source products in the automotive markets, such as a more sophisticated way to conduct reverse auctions to drive down customer costs by letting suppliers specify costs for their parts using analysis and calculation, Blumberg says. This capability is popular with companies that have to make large, expensive capital-equipment purchases, he says.

More than 300 of Ariba's customers have used the reverse-auction functions, which save companies about 20% per project, Blumberg says.

Once the darling in business-to-business software, Ariba has spent the past few years shifting its focus and fighting for ground in the enterprise-applications market. The FreeMarkets acquisition, which cost Ariba about $500 million, gave the company's lineup a much-needed boost. And the new release was a long time coming: Ariba revealed plans to acquire FreeMarkets in January; the transaction was approved in June.

The companies have "done a good job of assessing the asset values of both companies and developing a rational single-product portfolio," says Andy Kyte, research fellow at research firm Gartner. Ariba customers already are benefiting from the increased financial stability of the merged organization, he says.

The combined strength of the two will make it easier to take on enterprise-resource-planning vendors in the enterprise-apps market. Says Kyte, "The new company is bigger, stronger, and seems to be winning business."

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