Ariba expects subscription model to broaden its customer base
By Malcolm Wheatley, senior contributing editor -- Manufacturing Business Technology, 12/1/2005 12:00:00 AM
Studies of strategic sourcing generally produce the same conclusion: the practice yields substantial benefits—ranging from lower procurement costs to improved product quality—but developing a successful strategic sourcing program isn't easy.
The difficulty stems largely from the numerous processes—from synchronizing data stored in multiple systems to monitoring supplier performance—that must be managed for strategic sourcing to pay off. Forrester Research, Cambridge, Mass., cited these factors in a November 2004 report that indicates true strategic sourcing is practiced mostly by large corporations with the resources to overcome these obstacles.
Considering these circumstances, it's not surprising that strategic sourcing vendors have aimed their software primarily at large companies. But Ariba says its new set of on-demand "spend management" offerings will change that dynamic.
According to Ariba CEO Bob Calderoni, "While we continue to expand the value that we deliver to our long-term enterprise customers, we are now putting powerful spend management results within the reach of every company, regardless of size."
Rick Collison, Ariba's director of spend management marketing, says the new solutions will help small and midsize manufacturers overcome three distinct barriers to the adoption of e-sourcing: expensive software, lack of IT skills needed to benefit from the software, and unfamiliarity with the subtleties of acquiring new suppliers—particularly in newly emerging markets such as China.
Ariba offers three on-demand products, with subscription-based pricing starting as low as $25 per user per month. Collison says the packages contain templates, scripts, and best practices for automating tasks such as loading product catalogs, or hosting sourcing events. In essence, he explains, the idea is to bundle together everything required for small and midsize companies—as well as departments or divisions of larger companies—to begin using the same strategic sourcing practices that have proven successful for larger companies.
Collison says that as companies grow, they can transition to Ariba's more sophisticated enterprise-level offerings with minimal involvement from an IT department, and without data migration, new systems implementation, or configuration.
Early reviews of Ariba's new model are favorable. "It's like having an extra pair of arms and legs supporting our sourcing projects," says William Northup, director of sourcing at Orange, Conn.-based electrical component manufacturer Hubbell, a beta test customer. "We're a resource-slim business, but we can now take advantage of functionality that we've not been able to exploit before."
For the first time, Northup adds, Hubbell is successfully combining the purchasing requirements of multiple plants for single-sourcing events. "We were never very good at doing that—now we are," he says.
