Selecting an ASP to Streamline Your Purchasing

While there's much focus on how to maximize the sales of products over the Internet through sell-side strategies, the savings attributable to automating transactions and creating more efficient links with suppliers has grown exponentially throughout the last five years. The fact that Ariba doesn't charge buyers or suppliers to enroll in their Ariba Commerce Services Network, and has over 10 million products represented online, shows how powerful e-procurement initiatives can be. With the recent acquisition of Agile Software, Ariba is quickly moving to a more comprehensive suite of applications, all included in the Value Chain Management (VCM) initiative. What's significant about this recent announcement by Ariba is that, instead of taking the acquisition as one of the many initiatives underway in the company, senior executives insist that VCM is going to be the dominant direction of the company going forward. With i2 Technologies going directly into the Ariba customers, look to see Ariba's VCM focus quickly on an integrated product roadmap for countering the growing strength of i2 in selected customers. Clearly the Ariba acquisition strategies will continue to focus on driving greater sustainable differentiation into the VCM initiative that was just announced in February, 2001. Ariba will continue to drive buyers and suppliers to its Ariba Commerce Services Network, as over 10 million products are already listed there, and the content is going to increasingly be transferable to sell-side e-commerce vendors. Blue Martini is the first company to take advantage of the content, with an adapter that's discussed later in this article.

The role of CommerceOne continues to be one of quickly and thoroughly building partnerships with sell-side vendors. Their focus on taking their roundtrip technology and propagating it to key vendors on the sell-side makes their efforts equally important to consider when selecting an ASP. Be sure to check whether the sell-side vendors you're working with for any e-business initiative have at least heard of and are working toward a partnership that includes roundtrip technology.

Ariba sees the VCM initiative as the singular focus for their company going forward. Briefly, here are the key messages of the initiative that Ariba announced in February:

• Relationship announcements for collaborative planning and replenishment (Syncra), value chain performance management (SeeCommerce), and operations value chain spend analytics (Zeborg)

• New extensions to the Ariba Commerce Services Network™ to support a broader range of direct materials transactions

• A comprehensive product and integration roadmap that include solutions from Agile Software Corporation (NASDAQ: AGIL), based on approval of the acquisition by the Securities and Exchange Commission

In the first week of March, i2 Technologies in turn acquired RightWorks, a leading e-procurement applications vendor. What once was a triad of Ariba, i2, and IBM is over, as Ariba is making obvious by its exclusion of i2 in its press releases and events—now featuring only Ariba and IBM. In response, i2 is quickly moving to aggressively position their TradeMatrix Network Platform's e-procurement features. The focus from i2 is going to be on the customer-facing processes on the one hand, and deepening the procurement functionality they've been able to develop on the other.

The Ariba/Agile acquisition is going to bring even greater focus onto the ASP model and its implications for both small businesses and the Global 2500. The intent of this article is to define how you can make the best possible decisions for selecting an ASP for outsourcing your purchasing and e-procurement needs. The fact that both Ariba and CommerceOne are actively driving to develop their own e-marketplaces—at no charge to the participants involved—shows the depth of commitment to the concept of creating content that can be used in a many-to-many model, uniting both buyers and sellers.

Ariba, CommerceOne, and the Future of E-Procurement with ASPs

Of the leading companies that are credited with bringing e-business to the Global 2500 in the last three years, Ariba is dominant. Yet, today, Ariba is battling with their once-strong partner i2, which will result in Ariba going even more aggressively in the direction of their Value Chain Management (VCM) initiative. The real purpose of the VCM is to tie together the Agile acquisition and show decisiveness in creating a unified product roadmap, in addition to driving greater value into the Ariba Commerce Services Network (ACSN). Ariba's partnership efforts are driving toward the sell-side as well; their relationship with Comergent shows great promise. The ability of Ariba to deliver punch-in/punch-out technology with their partners is evidence of a broader interest in creating a more sustainable value base in all Ariba applications going forward. CommerceOne is equally focused on their round-trip technology, and is equally adept at recruiting sell-side vendors.

Today, companies responsible for building the technologies to deliver e-commerce site-enabling software have broader choices of interlinking with their e-procurement counterparts. This flexibility is so strong in the sell-side of e-commerce that it's an imperative to look for when working with ASPs who will be hosting your site. The reason this is so important is that the commitment to providing procurement-side access for transactions and the opportunity to tie back to an e-procurement system when the opportunity presents itself in your business model is crucial to developing a cohesive e-business strategy. The key metrics of business going into 2002 and beyond will be how efficient the fulfillment process is for companies serving both their supply chains and end customers. The focus on unifying sell-side and e-procurement will be the single largest trend in Web-enabled applications throughout 2002 to 2005.

Both Ariba and CommerceOne are setting the stage for driving greater value into the sell-side e-commerce vendors' applications. Think of a unified strategy for both ordering and replenishment of hot-selling products—suddenly you can create an e-business ecosystem that self-regulates through purchasing driving response times. Forget about the concept of precision demand forecasting—it's important, yes, but what's critical over and above forecasting is the ability to respond. That's the true revolutionary contribution of Ariba and CommerceOne—the focus on being part of a larger, heterogeneous, yet more connected set of applications.

What makes the focus from Ariba and CommerceOne so relevant to the ASP model is that their actions in turn can have a major positive effect on where you go with your relationships with ASPs. Consider these points when working with ASPs even on your sell-side applications:

• Ariba's punch-in/punch-out and CommerceOne's roundtrip technologies are clear winners. Be sure when qualifying an ASP who is building an e-commerce site that their applications are capable of handling either or both of these approaches to getting procurement information. It's very important to delve into this aspect of an e-commerce application, as the world is quickly moving to a more unified approach to handling transactions. Chances are that your ASP is not actively developing these technologies, but rather is relying on a third-party software company to provide this functionality. Don't just settle for a promise of this technology in the future; some companies are delivering one or the other of these approaches today with their applications—Comergent, NetVendor, Haht Commerce, Ironside Technologies, and several others.

• Think beyond MRO to the supply chain in your business. The standard items you purchase for your company are handled just as easily over the Staples Web site, for example. The MRO purchases is what any ASP providing e-procurement applications needs to provide, at a minimum. The focus on delivering the advanced procurement features necessary for handling supply-chain transactions is one of the best measures of an ASP's ability to scale to the needs of procurement organizations.

• Metrics, metrics, metrics. The world of the ASP has been dominated by hype and overcommitment for long enough. You need to insist that the ASPs you're considering for both e-commerce and procurement tasks have the ability to report metrics and define just how successful their customers have been at being responsive to the needs of the channel members—and even internal clients served. The need for driving a business based on metrics cannot be overstated; you need to build the measurement of metrics into the contract.

• Look for Ariba and CommerceOne to build content sharing with e-commerce vendors next. This is another great reason to qualify the e-commerce vendors you deal with—to make sure that they at least have either the CommerceOne roundtrip or the Ariba punch-in/punch-out compatibility already included in their sell-side applications. The next step in the progression of this functionality is the development of content-sharing approaches. Blue Martini just this week announced their Adapter for CommerceOne, enabling Blue Martini's catalog vendors to move content from the catalog into CommerceOne marketplaces and vice versa. This is a development indicative of a longer-range trend and shouldn't be ignored, but rather embraced as the future of interoperability between e-commerce and procurement vendors.

• Look for the ASP to be a business partner. This is a critical aspect of bringing in an ASP for any work. The fact that the ASP consolidation is now in full progress means that many are looking to differentiate themselves through enhanced services. If your ASP is just clinging to a Service Level Agreement (SLA) and not willing to extend services and contributions past that, continue looking. ASPs who are growing and continuing to add customers to their base consider SLAs just the starting point.