The next phase of e-procurement
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Technology merger and acquisition activity in January pointed to a watershed in e-procurement technologies that centred on one of that turbulent sectors more robust vendors, Ariba.
During the month, Ariba picked up three e-procurement providers with services that will largely compliment its software-centric focus on 'spend management'. The purchases suggest that CEO Bob Calderoni has big ambitions for Ariba to provide a broad base of e-procurement offerings covering both services and software for a range of vertical industries.
The first buy, a seemingly modest one, was of privately held Alliente, and will move Ariba into the e-procurement business process outsourcing sector. The underpinnings of Alliente's service will certainly be familiar: it uses Ariba software to provide application hosting, transaction processing and other managed services to its clients.
A more audacious move came in late January when Ariba laid down $493 million in shares to buy reverse auction specialist Freemarkets. The integration of FreeMarkets will undoubtedly be a bigger challenge on more than one level. First, Calderoni plans to integrate the two companies' technology base, a project that will take about a year, he says.
AMR analyst Bruce Richardson says that timeframe is "aggressive". Second, at the level of corporate culture, Calderoni will have to iron out the aggressive rivalry that exists between the two companies, particularly their sales teams. This is despite the fact that the two companies are strong in different vertical sectors.
The Ariba-FreeMarkets deal was all the more surprising coming as it did almost immediately after FreeMarkets had snapped up the auction services of COVISINT, the automotive exchange set up by the 'big three' US car makers, France's Renault and Japan's Nissan.
But the pace of consolidation quickened, if anything. Days later, Detriot-based Compuware, the Nasdaq-listed application management and services company, pounced on the remaining assets of Covisint for an undisclosed sum.
At its inception in February 2000, Covisint sought to drive down prices in the parts industry by introducing online trading across its hub. Despite becoming profitable in 2003, however, it largely failed to live up to its early promise.
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