i2’s Rightworks deal shakes up B2B market

By : |March 14, 2001 0



Siobhan Kennedy

NEW YORK: The business-to-business software industry got its first big
shake-up last week, after software giant i2 Technologies Inc. scrapped its
troubled partnership with Ariba Inc. and said it would buy privately held
Rightworks instead. The announcement of the $114 million-deal immediately
prompted analysts to speculate about what the other leading players in the
market, i2 rival Manugistics Inc, Commerce One Inc. and SAP AG, might do next.

While most agreed that the Rightworks deal would have little impact on the
Commerce One and SAP alliance, the big question was what would happen to
Rightworks’ newly signed partnership with Manugistics, whose software – like
i2’s – helps manufacturers manage inventory and purchasing systems.

With Rightworks now under i2’s wing, the door is now left open for another
Internet commerce firm to come in and partner with Manugistics. And the vendor
most likely to fulfill this expectation is Ariba, whose software, like
Rightworks, automates the purchase of indirect or finished goods and services,
over the Web.

“There are all sorts of rumors flying around as to whether or not Ariba
should join up with Manugistics,” said Tom Berquist, an analyst with
brokerage firm Goldman Sachs. “I think it would be an interesting
combination.”

But Ariba in no hurry

A partnership with Manugistics would work in favor of Ariba’s strategy, by
giving it exposure in the raw material purchasing market. Moreover, the firm has
no business commitment to its former partner as i2 has broken its alliance.
Ariba’s chief marketing officer Michael Schmitt said the company was not in any
hurry to find itself another supply chain partner just yet. Though we do not
rule out such a possibility, we’re keeping all our options open, he said.

Analyst with the brokerage firm Dresdner Kleinwort Wasserstein, David Garrity
feels Ariba was right to concentrate on its message of buyer-supplier
collaboration. But the firm will have to inevitable look at means to add supply
chain software some time down the line, he said.

“The possibility of an Ariba, Manugistics arrangement is very
high,” he said. “It’s like walking into the bar at the end of the
night when everyone’s already partnered off. Who else is Manugistics going to go
home with?”

Manugistics may consider an acquisition
However, Manugistics chief executive Greg Owens said the deal is not done yet.
“We may decide we want to go the same route as i2 and acquire a smaller
vendor,” Owens said. While Owens did not dismiss outright the possibility
of a strategic alliance with Ariba, he said the partnership wouldn’t carry an
exclusive tag.

“Clearly I think the Rightworks acquisition opens up an opportunity to
partner with Ariba,” he said. “But I don’t know that we want to
partner exclusively.” Owens said he was in no rush to make that decision
either. Although he sees a need to offer integrated indirect and direct
purchasing software, right now customers are still buying the two separately, he
said.

“The buyers out there are buying separate solutions, they’re not looking
for a combined offering at this point,” he said. But when they do, it
should be Ariba out there doing the courting, not Manugistics. That’s because
about 75 per cent of a company’s total procurement spend is on raw materials,
Owens said, using Manugistics-type software, while the remainder is on indirect
goods using software from vendors like Ariba.

But analyst Brent Thill, of Credit Suisse First Boston, is not convinced.
“I think everyone expects Ariba to move into the supply chain planning
area, but I don’t think they will,” Thill said. “I think they’re going
to run as far away as possible from what i2’s doing now and build these new
collaborative processes that i2 can’t get to yet.”

(C) Reuters Limited 2001.

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