On-demand tech firms react to Ariba strategy

21 November 2005
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21 November 2005 | SM reporters

Two pay-as-you-go software suppliers have hit back at Ariba's new on-demand offering.

Ketera and Marrakech made the comments after Ariba announced it will also now offer on-demand management systems.

It is a radical policy shift for Ariba, which has traditionally targeted larger firms which pay a licence fee for software designed for them. It means Ariba now offers small to medium-sized firms a similar service but on a pay-as-you-go basis. However, competitors Ketera and Marrakech said they doubted it would make a successful transition, adding that the strategy mirrored the failed attempt by relationship management solutions firm Siebel in 2003 to move from a licence fee to pay-as-you-go cost model. Siebel was bought by Oracle this year.

John Bantleman, chief executive of Marrakech, told SM on-demand was "not just a technology but a business model".

"It will be interesting to see how Ariba attempts to convince UK companies they are not just paying lip-service to on-demand, but genuinely committed to delivering," he said.

Ketera chief executive Steve Savignano, said: "It's impossible for a traditional software company to go on-demand while staying focused on delivering technology advantages to customers that made their solutions successful in the first place."

He said buyers looking to invest in on-demand software should be wary of "sheep in wolves' clothing".

Savignano denied it was a case of sour grapes and said Ariba's new strategy was not a threat to business. However, he questioned why large multinational firms would continue to pay expensive licence and installation fees when they could also take-up on-demand offerings.

Ariba said it did not wish to respond to the comments.

Analysts told SM Ariba was making a sensible shift into a growing market that would give it a steady revenue stream (see Tech news, 17 November).

Mickey North Rizza, research director at AMR Research, added: "It is hardly a saturated market. They [Ariba] are repositioning to better serve customers."

Albert Pang, analyst at research firm IDC, told SM that Ariba's competitors, such as Perfect Commerce, Concur and traditional enterprise resource planning suppliers, had made similar moves and Ariba was now "trying to catch up".

"It's realised it can no longer compete as a standalone procurement software company," he said. "Ariba is behind these companies but the moment of reckoning is upon them to move quickly to narrow the gap."

However, Pang added: "It is unclear how Ariba, which has never really been able to sell to thousands of customers, will be able to support small organisations with 24-7 e-mail and telephone support."

Related articles:

Ariba launches 'cheaper' spend software for SMEs



SMnov2005

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