Start-up Ariba Technologies has jumped into the emerging market to help large companies take control of spending on routine items to run their operations.
Ariba's still-unnamed, Java-based software aims to streamline and automate purchases of industrial and office supplies, capital equipment, services, and other goods.
Although a number of other vendors have products or services to automate the purchase of routine items from catalogs, Ariba claims to be the first to focus on the buyer and to offer an enterprise-wide approach. Chipmaker Advanced Micro Devices, Ariba's first announced customer, plans to put its software on 12,000 desktops.
"Many chief procurement officers say their departments spend 80 percent of their time on paperwork and only a small portion on working out deals with suppliers," said Ariba CEO Keith Krach. "From that perspective, they see this as strategic."
Ariba is entering a market segment shaken last week when Nets Incorporated, which runs the established industrial mall Industry.Net, filed for Chapter 11 bankruptcy protection and fired most of its employees. Former Lotus CEO Jim Manzi runs Nets Incorporated.
"[Nets] focused on the seller side; we're more an enterprise application for the buyer side," said Ariba's Krach. "Buyers want to consolidate the number of suppliers, establish long-term contracts with them, and channel all their purchases through them. Manzi's strategy is the reciprocal of that."
Ariba's software creates a single unified catalog for all of a company's authorized suppliers with volume pricing. It handles requisition requests, approvals, and payments and tracks which employees are authorized to buy what products. By automating purchases, the system reduces paperwork, speeds transactions, and lets purchasing departments control where money gets spent.
Because the software is written entirely in Java, it can run on any computer within a company without expensive alterations.
Ariba calls itself the first company with an offering in a nascent enterprise software market it calls Operating Resource Management (ORM). It notes that savings on routine purchases translate quickly into higher profits for a company.
"ORM captures the entire spending on purchasing by a company, rather than just the purchases for raw materials," said Torrey Byles, a former consultant for Giga Information Systems who coined the phrase Operating Resource Management and has worked with Ariba.
"It looks at things like the phone services a company buys, property rentals and leases, industrial supplies...a lot of thing that are purchased often outside the purchasing department by administrators and other company employees," Byles added. "In most companies, the bulk of spending is done on these kinds of nonproduction items."
Competition in the niche for procurement software and services is heating up. EDI companies have managed similar services over private networks for years, and other software vendors are entering the space. E-commerce vendor Connect has a similar application, and Actra Business Systems, the Netscape and GE Information Services joint venture, will unveil their plans next week. Commerce One has a similar service offering.
Founded in September 1996, Ariba received $6 million from Benchmark Capital and Crosspoint Ventures in their first round of funding. It has done intensive work with potential customers, particularly in the high-tech arena, to address their needs.