B-to-B niche players on the ropes

Several business-to-business heavyweights that made their names with niche solutions are struggling to survive in a market that is turning to major ERP (enterprise resource planning) vendors for integrated ebusiness software.

Former Wall Street darlings and major buy-side on-ramp providers such as Ariba and Commerce One are struggling in the e-procurement arena. Sell-side vendors face further consolidation because they offer only a single solution, according to analysts.

In contrast, SAP this week acknowledged that it will be working with IBM to provide b-to-b e-commerce solutions.

"People have become disillusioned with the promise of b-to-b," said David Dobrin, president of B2B Analysts in Cambridge, Mass. "We are seeing a shift back toward ... solutions that [embrace] more than just a single niche," Dobrin said.

Underscoring this point, Gartner this week confirmed that it has added Mountain View, Calif.-based Ariba to its "problem watch" list and warned existing customers to minimize their investments in the company's e-procurement solutions. Gartner also urged potential customers to select the company's solution only if they are protected from the fallout that would occur should Ariba be acquired.

Meanwhile, Commerce One this month cut 10 percent of its work force, and Metiom, maker of software for public marketplaces, recently idled 100 workers and may file for bankruptcy protection.

Lauren Ames, Ariba's vice president of corporate communications, countered that "the market opportunity for e-procurement solutions ... continues to be attractive for customers."

However, the market is claiming casualties, including sell-side vendor SpaceWorks, which shut its doors earlier this month after investors backed out of a fifth round of financing. PurchasePro, which makes software to help businesses sell goods and services online, saw its CEO resign and restated its fourth-quarter earnings downward.

Shawn Willett, an analyst at Sterling, Va.-based Current Analysis, which tracked as many as 15 sell-side companies at one time, said he foresees only five surviving the next year, including IBM, Oracle, and Vignette.

The niche b-to-b players cannot match the connectivity to back-office systems that ERP players offer, B2B Analysts' Dobrin said.

Ariba should have handled the market hype better, said Bruce Richardson, an analyst at AMR Research in Boston. Instead, it "got sucked in by the i2 [Technologies] mystique of supplier relationship management," Richardson said.

"What [Ariba] should have done is put the pedal to the metal and trot out happy customers," Richardson said. "They've got to come out of the next couple of quarters with some momentum, or people won't care."

Nevertheless, some companies with narrowly defined b-to-b focuses continue to thrive. Although floundering only a few years ago, Manugistics, a Rockville, Md.-based supply-chain vendor, has regained positive financials.

According to Stanley "Skip" King, vice president of ebusiness at Manugistics, b-to-b is not dead. "If anything, we've seen the opposite," King said. Customers are expanding private networks with the approval of "C-level" executives, he added.

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