i2's Rightworks deal shakes up B2B market

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.