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Pioneering SaaS In Business Process Optimization: Ariba’s Kevin Costello (Part 6)

Posted on Monday, Jun 7th 2010

SM: Is it safe to say that at this point Ariba is a reasonably well-situated SaaS company in the procurement management space?

KC: Clearly there were doubters, both internally and externally, when we first laid out our SaaS strategy. The results we’ve achieved in the past four years prove that we made the right decision and demonstrate that we are in fact very well positioned. Today, SaaS is the fastest growing segment in the spending management market, and Ariba is the clear leader with a more than 50% share according to AMR Research, now a unit of Gartner.

People thought we were crazy to give up our perpetual licensing model, but recurring revenues are far more valuable and are growing rapidly. For the quarter ended March 31, we reported subscription software revenue of $42.3 million, a 16% increase over the same period a year earlier, and a backlog of $140 million, which is up 9%.

SM: Who are your competitors? How do Oracle and SAP stack up? Is there any other pure play left? What is the market share distribution?

KC: Any application provider can offer a SaaS solution, but being a viable provider means permeating the model through every aspect of operations, from application architecture and delivery to pricing, packaging, and customer service. It also means being able to provide more than just technology. It means delivering technology, specialized service, and expertise within a community. Competitors can’t just pick up those competencies at the corner market.

There are plenty of pure-play software providers and consulting and services vendors out there addressing pieces of business commerce with software applications. Oracle and SAP are great at managing the transactional aspects of the finance process. You have companies such as Rearden, Zycus, Emptoris, Bravo Solutions, and others that provide software to manage contract management, sourcing, and so forth. But no other vendor provides a complete set of solutions for managing business commerce from end-to-end, from sourcing and orders through to invoice and payment. Ariba provides that through the Ariba Commerce Cloud. The Ariba Commerce Cloud is the most efficient, effective, and universally adopted platform for collaborative global commerce between businesses.

The Ariba Commerce Cloud gives companies everything they need for collaborative business commerce. We have market-leading applications for spending management, collaborative financial management, and sales acceleration management. Those are all delivered as scalable, cost-effective, and burden-free cloud-based services.

The Ariba Network is the world’s largest Web-based trading community, allowing over 300,000 global businesses to discover, connect, and collaborate. Ariba Exchange is our industry-leading customer community where companies can network, share best practices, and collaborate with partners and peers. We have many expert capabilities that can be accessed on-site or remotely via the Web to support ever-changing business needs and objectives.

SM: What about SAP? Do you compete head-to-head with them?

KC: SAP has been working to develop and deliver SaaS offerings related to spending management for a long time and investing aggressively [in it]. They have more people working in supply chain than we have employees, yet they are no closer than they were 10 years ago. They just don’t understand spending management or SaaS. We feel very well positioned against them.

The problem is that SAP expects everyone to wait for them. I’m not so sure there are many CEOs telling their teams, let’s wait two more years before cutting costs and driving efficiencies. Diebold could have waited for SAP to save $100 million, but they decided to do something sooner with us.

This segment is part 6 in the series : Pioneering SaaS In Business Process Optimization: Ariba's Kevin Costello
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