Right, it’s only my point of view. Anyone can think differently and believe that the value of the merger lies on the synergies of the 2 companies, but I don’t myself, motivated by following arguments:
– The functional coverage of the 2 apps offered by Ariba and Procuri is more or less similar,
– The growth of Procuri compared to the one of Ariba was definitely threatening Ariba’s growth ambitions,
– The value of the transaction – 93M$ – to acquire Procuri is tremendous and goes beyond any kind of innovation strategy. Ariba is wiping-up competition.
However, the business model of the 2 companies is different and the combination of the 2 might be a solution to address a broader market compared to the one where Ariba is currently successful (Fortune 500). It shall enable Ariba to expand its go-to-market strategy and solution-offering, one for high-demanding and complex multinational accounts and the other one – more specialised – for the middle market.
You can read here the official press release, and some interesting bloggers’ point of view there: from Spend matters or from E-Sourcing Forum.
Or you can just skip the points of view entirely and go straight to a dramatization of what may have happened:
Here is a link to an article I wrote in the summer of 2007 that is still being widely read titled “The Ariba Interviews: Re-engineering the Future of On-Demand?,” (http://procureinsights.wordpress.com/2007/08/31/the-ariba-interviews-re-engineering-the-future-of-on-demand/).
After losing $3 billion on $1 billion in sales between 2001 and 2004, the purported synergies between Ariba and Procuri notwithstanding, the move is more designed to address the paradoxical differences tier one organizations are now facing relative to their pricing models and the continuing high rate of e-procurement/supply chain initiatives, and the emergence of SaaS metaprise-based solutions.
This is the reason that SAP introduced a $10K trial license for their strategic sourcing module in 2007, and why DUET (previously the Mendocino Project) as well as Service Oriented Architectures are a priority with SAP as well as Oracle.
When you read the The Ariba Interviews article, you will begin to see the thought process behind the Procuri move as being one of what will become many attempts by the company’s leadership to make the difficult transition to a model that is more reflective of the emerging platforms while simultaneously trying to maintain their present model.
In a period of discontinuous innovation in the ERP/software world, this is truly an attempt to steal second base while still keeping their foot on first. And has Kodak discovered with digital imaging, the likelihood of meaningful success with this type of dual strategy is remote.
In the second paragraph of my previous comment the sentance “the move is more designed to address the paradoxical differences tier one organizations are now facing relative to their pricing models and the continuing high rate of e-procurement/supply chain initiatives,” should have read, “and the continuing high rate of e-procurement/supply chain initiative failures, and the emergence of SaaS metaprise-based solutions.”
With 85% of all initiatives continuing to fail worldwide in both the private and public sectors, support of the traditional business models is becoming untenable.