Spending Wisely

Ariba expands product focus from B2B e-procurement to enterprise cost management

In today's economy, the biggest headache for CFOs and chief purchasing officers is managing the bottom line. Tim Minahan, research director of e-business at The Aberdeen Group, in a research brief states, "Internet-based sourcing, procurement, and supply chain management (SCM) technologies have delivered considerable cost and performance benefits. However, deployment of these technologies has often been isolated and disconnected from larger SCM and business initiatives." The result is a "leakage" of procurement savings ("Total Cost Management: Your Next Procurement Strategy," Aberdeen Group, March 15, 2002).

Ariba Inc. is trying to move beyond its B2B e-procurement origins with a new line of strategic business applications to help organizations avoid losing the savings initially promised by e-procurement. Ariba recently introduced an integrated suite of products — the Enterprise Spend Management (ESM) suite. "Spend management" is Ariba's term for controlling expenditures and costs in procurement, purchasing, and other enterprise operations. The ESM suite divides the spend life cycle into three parts: Analysis (finding savings opportunities), sourcing (getting the savings), and procurement (keeping them).

Analysis. The spend life cycle begins with Ariba Analysis, according to the company. Ariba Analysis offers an integrated view of all spend data, identifies opportunities for savings and process improvements, and leverages existing enterprise systems. It pulls information from Ariba Buyer and A/P systems to start looking at savings opportunities.

According to Martin Boyd, director of product marketing at Ariba, most companies have ERP systems and analytics, but they can't get accurate spend data because the information is either formatted improperly or has little granularity. Getting this information is labor-intensive and can only be done infrequently, unless ERP and analytic systems are integrated.

Sourcing. Once savings opportunities have been identified, the Ariba sourcing solution, which includes Ariba Enterprise Sourcing and Ariba Contracts (bridging procurement and sourcing), helps manage all sourcing-related activity, automates the capture of agreed supplier contracts, offers team-based collaborative process management, and leverages enterprise category expertise.

Procurement. Minahan estimates that "80 percent of business transactions are governed by contracts, yet few companies effectively communicate and manage the terms of these contracts," resulting in missed savings opportunities. Ariba said it designed its procurement solution, which includes Ariba Invoice, Ariba Workforce, and Ariba Contracts (integrated with Ariba Buyer) to manage procurement compliance by automating invoice management and managing contract usage. Information from these applications then feeds into Ariba Analysis to start the cycle anew.

According to Minnahan, "Early signs indicate that [total cost management] will ... be the next hotly contested enterprise business segment." This space is attracting the leading ERP players (such as PeopleSoft Inc., Oracle, SAP AG, and others), consulting firms (such as PricewaterhouseCoopers, KPMG Consulting Inc., IBM Global Services, and the like), and other solution providers (such as Imany Inc., Dun & Bradstreet Inc., Agile Software Corp., and others), which are partnering and expanding their solutions to enter this new cost management space.

Boyd recognizes the movement to get into this space, but believes that Ariba is ahead of the game with implementations already in the works and customer satisfaction reported with the integration of these products. "These systems are usually treated as silos, but it is the synergies in the linkages that provide the main value," Boyd said.

— Michelle M. Young

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