In the first post in this series covering Accenture’s acquisition of Ariba’s sourcing services business (i.e., the legacy FreeMarkets asset), I took an Accenture point of view. In this post, I’ll look at the deal through the eyes of Ariba, examining what it means for the future of the company. If you’re curious to learn about the basics of the deal and how Ariba positioned it internally and to financial analysts, you can also read our initial take on the topic as well. In our view, for those close to Ariba’s inner circle, this deal should not come as much of as a surprise as it might seem to those on the outside (even those who think they’re close to the company) if you consider:
- Ariba largely failed to integrate FreeMarkets DNA into its organization. In fact, the Pittsburgh, PA operation, where the original “sourcing factory” and many category experts resided, became the unofficial third office of Ariba, well behind Sunnyvalle, CA and Alpharetta, GA in pecking order (Alpharetta, an office which Kevin Costello built around his base of operations, is where all of the important shots are being called these days)
- Ariba’s greatest chance for sale to an SAP, Oracle or IBM is to have a clean, simple asset. Ideally a SaaS asset. The services business, while very valuable from an IP standpoint, would have complicated any potential transaction (while also pulling down overall valuation multiples)
- Ariba’s top executives never really grasped how sourcing and procurement operations work in the field (with the exception of Kent Parker and a number of other FreeMarkets leaders, nearly all of whom left within a few years of the original deal closing); the core make-up of the current customer leadership organization, built around Kevin Costello’s team, came out of a technology/marketplace background and not a procurement/operations one
Given this, I’ll take a contrarian argument relative to what many have suggested to me yesterday, and posit that this deal is actually a good thing for Ariba and Ariba’s customers. Think about the following points:
- Ariba can now focus on doing one thing right — software (SaaS software to be specific). Granted, this will require continuing to rebuild a product engineering and management organization process that looks very different than it did a few years ago, but I personally believe focus is the right thing for customers looking to Ariba for product innovation (which they’ve sorely lacked in recent years)
- Since Ariba had essentially wasted the asset of my former employer, FreeMarkets, into a barely recognizable form…
