Gartner says Ariba is in trouble

Gartner says Ariba is in trouble

Existing Ariba customers should minimise their investment in the company's e-procurement solution, and potential customers should select that solution only if they are protected from fallout from a possible Ariba acquisition, according to a Gartner Group report scheduled to be released this week.

Gartner has placed Ariba on its "problem watch" list, which the analyst firm reserves for vendors with solutions where the risk of buying the software is greater than the potential benefits, according to a copy of the report obtained by ARN sister publication InfoWorld.

Ariba has been wounded by the recent downturn in the e-procurement market and its inability to expand its product offerings beyond generic indirect procurement, the report said. Once the Wall Street darling of the e-procurement market, the company has been plagued by problems this year including disappointing first-quarter earnings, job layoffs, and the recent failed $US2.5 billion acquisition of Agile Software.

As a result, it likely will be acquired or will have to acquire direct materials procurement, supplier relationship management, collaborative product commerce, and/or supply-chain management solutions to augment its current market offerings.

Likely candidates to acquire Ariba would be IBM, PeopleSoft, JD Edwards, or a CRM (customer relationship management) company like Siebel Systems, according to Gartner.

Lauren Ames, Ariba's vice president of corporate communications, said company officials had not seen a copy of the final report. However, she noted that "the market opportunity for e-procurement is in no way dried up."

In addition, Ames said Ariba officials have not met in person with the authors of the Gartner report in six months.

The report notes that Ariba has a strong balance sheet with $400 million in cash and continues to cut costs with a 30 per cent reduction of its workforce; however, the company is facing mounting challenges. That is because it generates 80 per cent of its revenue from the Buyer product, according to Gartner.

Gartner clients that have implemented or are implementing Ariba's Buyer e-procurement solution are increasingly dissatisfied with deployment results, according to the report. Ariba has been late in releasing promised upgrades, and when delivered the migration has been expensive and problematic for integration, the report said.

Enterprises considering e-procurement solutions for indirect materials should consider only other solutions with lower price points, such as those offered by Commerce One and Clarus, the report said.

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