The article from this week introduced us a
company called Ariba, which plays the leading role in B2B business. I cannot be
more familiar with the B2B concept because in China, “online marketplace” has
already become normal in our daily use. China has one of the biggest B2B
service provider Alibaba, as well as the its subsidiary, maybe the biggest C2C
service provider, Taobao. Both as the leaders in the B2B business and
competitor with each other, how can the article miss Alibaba? The truth is,
although they both playing around in the same business, they apply different
business model.
According to the research by Yeoman
Technology Group, there are several hundred different B2B and supply chain
systems active today. The B2B market represents over $230 billion in US sales.
Yeoman segments the Internet B2B channel four general categories[1]:
Closed
Systems:
These systems are generally buyer-driven
and tightly integrate with the customer’s Internet supply chain or ERP systems.
Most also has a ‘bidding’ and catalog, letting customers put jobs out to a
pre-qualified community. Customers all pay a fee to use the system.
Open
Systems:
These systems allow free or low cost access
for buyers and sellers, positioning themselves as a B2B or industrial
marketplace. They generally have significantly more users than closed systems,
but lower overall deal sizes.
Bid/RFP
Systems:
This group focuses primarily on providing
listing and/or basic management services for bid and request posting. They tend
to focus solely on the posting and listing of requests, stopping short of the
management capabilities offered by closed and open systems. Many offer tracking
and aggregation services as well.
Basic
Listing Systems:
This group only provides basic listing and
directory services for different business segments. They have little direct
impact on sales, but should be watched given their history strength. Their
paper directories were the standard for most industrial purchasing departments
and they still average 1 million unique visitors per month for their online
directory.
According to this definition, Ariba is a
typical example of closed system while Alibaba is an open system. If we judge
from the customer size, ariba is much smaller than Alibaba. However, because Ariba
members have to pay a fee to use it, the quality and sustainability of Ariba is
assured. In contrast, Alibaba is more like a supermarket. It provides a great
variety of products but the quality is uneven.
The difference is mainly caused by the
platforms. Ariba is founded before the dot-com bubble, in the form of local
windows application. It requires its customers’ installment and maintenance.
Alibaba is the web-based, which makes it effortless for users to share their
information. Compared to Alibaba, Ariba has advantages when considering
benefits and risks to the firm. A local SRM application like could integrate
with other TMF like ERP. It can also ensure firms’ information security since
the information is under firms’ own control.
As the customer size of Ariba become
bigger, it become more valuable. In this May, SAP buys Ariba for $4.3 billion[2].
After the acquisition, the two companies say the acquisition will enable
retailers and others to more easily discover suppliers and share product and
transaction data through the Internet. This move will increase the chips of SAP
when competing with Oracle. We see years ago the software industry evolved into
three major groups of supply chain processes. Now these sub-processes is
starting to merge to provide customers a consistent and efficient experience.
Interestingly, when last year rumors say
Alibaba Group would acquire Yahoo, an article commented Alibaba should acquire
Ariba[3]. The customer base alibaba will help Ariba to monetize its
value. The fact is, Alibaba is not interesting in providing software services
to certain customers. It keeps its process as a platform provider. Now it has
expanded its business to B2C by releasing the new website TMall.
These two great companies may miss the
chance to merge into a marvelous B2B service provider. However, their different
paths create more possibility of shaping the supply chain network with technology.
We will see which one bring more value to our customers. Maybe one day, they
will meet each other again.
Sources:
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