Oracle turns up the heat in B-to-B software market

Siobhan Kennedy

NEW YORK: Oracle Corp. and Commerce One Inc., on Wednesday separately

announced plans to enter the potentially lucrative market of sourcing software,

which allows companies to buy components for complex goods like computers and

airplanes over the Web.

The move puts Oracle, the No. 2 software maker and largest provider of

database software, into a market that was previously dominated by smaller

business-to-business software players such as Ariba Inc. Commerce One and

FreeMarkets Inc.

While the first generation of business-to-business software focused on

helping companies buy simple goods and services, such as office furniture,

sourcing software is used to automate the purchase of components needed to

manufacture complex goods such as computers, cars or airplanes.

Making those processes simpler is where the big savings are to be had,

analysts said. "This is serious B-to-B, it's not a pipe dream," said

Joseph Marino, director of Internet commerce for industry analyst firm Current

Analysis in Sterling, Virginia.

Typically, companies have to contact their suppliers via phone, fax and

email, and the time it takes to actually secure the goods is long and drawn out,

analysts said.

By contrast, sourcing software lets companies bring all their suppliers

together at once via online auctions, thereby cutting the time and costs

associated with purchasing goods.

Earlier this year, Ariba announced its first foray into sourcing software,

and rival FreeMarkets has already established itself as one of the leaders in

the B-to-B space by focusing exclusively on sourcing software and services.

Oracle's entrance into the market, however, will definitely heat things up,

Marino said. "When Oracle enters a market that just makes it harder for

other people to sell into it," Marino said. "Oracle is always a

serious competitor due to its size, resources and customer base."

"We think the market is still up for grabs," said Aseem Chandry,

Oracle's director of supply chain applications marketing.

Chandry said Oracle's software can cut the cost of company purchases by

between 5 per cent and 20 per cent, cut the time to find and buy products by 25

per cent to 30 per cent, and cut the time to bring their products to market by

10 per cent to 15 per cent

One company, Miami-based Todo 1, a technology services provider set up by

four Latin American banks, said it saved $380,000 conducting an auction to

select suppliers that make credit and debit cards for banks. Now the company has

14 other auctions planned for the first quarter of 2002.

Unlike online marketplaces, which have largely failed, Marino said sourcing

software can offer real savings because it helps businesses analyze spending

patterns and identify areas where savings can be made.

"Strategic sourcing is focusing on the enterprise as opposed to creating

these virtual business models," Marino said, referring to online

marketplaces which bring buyers and suppliers together in virtual shopping malls

on the Web. Of the hundreds of marketplaces which sprung up in 1999 and 2000,

just a handful are still around today.

(C) Reuters Limited.