Keith Krach: At Vanguard of Digital Exchange

SAN MATEO (07/03/2000) - As CEO of Ariba Inc., Keith Krach has been at the forefront of the digital exchange phenomenon. Today, Ariba is a dominant platform provider in one of the hottest spaces in the digital economy.

In an interview with InfoWorld Editor in Chief Michael Vizard and Executive Producer/New Media Katherine Bull, Krach outlines his plans for moving the company forward.

InfoWorld: What is the growth rate of Ariba?

Krach: Today we power probably well in excess of 100 marketplaces, more than anybody else by a factor of two, and we doubled the number of customers this last quarter. We actually booked more customers last quarter than we have year to the date of the company.

InfoWorld: Some industry analysts are forecasting that there will be well over 4,000 exchanges by the time this space matures. Does this mean we're going to see alternate waves of expansion and consolidation over the next few years?

Krach: We're seeing exchanges in all different shapes and forms, whether it's the verticals, the horizontals, the dot-coms, or the ones that are geographically based. I think that the strong are definitely going to survive.

There's no question about that, but we'll continue to see a lot of specialization.

InfoWorld: What role will Ariba play as an integrator of these diverse exchanges?

Krach: That's probably where a significant part of our research-and-development dollars are going, and that was something that we demonstrated at our Advisory Council session down in San Diego last March. As these marketplaces' e-procurement customers come live, we're going to be hooking them up.

InfoWorld: As the traditional brick-and-mortar companies fight it out with start-ups for dominance of this space, which type of company has the strongest edge?

Krach: I think it will be the one that executes the best. It's all about speed.

I don't think it's going to be the big that's going to eat the small. I think it's the fast that's going to eat the slow.

And I think that the most important factor is leadership, and the biggest element to obtaining leadership is an ability to get these marketplaces up and running fast, get transactions going, and get these marketplaces to be profitable.

InfoWorld: How hard is it to get an exchange up and running?

Krach: We have what we call the Aribawide methodology, which we use to train third-party systems integrators. If you look at that, we really focus on three key areas. One key area is the technology platform itself. The second is to help our customers strategically with their business model as to whether they should form a business unit or a new company. And if it's a new company, how should the equity ownership go? What should be the revenue model? What should be the value-added services model? And then the third area we help our customers with is in the area of culture. A lot of the big companies are saying they can't operate with Fortune 500 policies, procedures, and guidelines. We can't rely on a command-and-control management style. We need more empowerment.

It's got to be a virtual organization, not hierarchical. Those are the really three key areas in terms of getting these marketplaces up and running.

InfoWorld: A few years ago conventional wisdom held that ERP [enterprise resource planning] vendors would dominate the business-to-business e-commerce space. In your opinion, what has changed?

Krach: First of all there's a huge paradigm shift from a technology standpoint.

To make the shift from client/server to network application architecture on the Internet is a huge undertaking. And whenever there's a paradigm shift like that, the existing players go back to ground zero.

When we formed the company three and a half years ago, the Internet had just come out, and we were able to start with a clean sheet of paper. I think that's absolutely huge because the companies that didn't begin with the Internet already in place are struggling to re-invent themselves.

InfoWorld: Do you think the ERP vendors will look to play in this market by building suites that include digital exchanges?

Krach: I don't see that at all. The beauty of the Internet is that is the ultimate enabler for the best of breed.

InfoWorld: Right now there are procurement applications, sell-side e-commerce applications, and digital exchanges. At what point will we see some consolidation take place among these types of applications?

Krach: I think you're already seeing some of these things come together. From day one, we always believed in what we call the golden rule: The guy with the gold rules, and that's the buyer. So our strategy is to work with all those different guys on the sell side. The beauty of that strategy is that it allows the suppliers to hook up to the network. So the key is that it's open.

InfoWorld: There's a school of thought that says an exchange is really just a portal with a transaction engine attached. Is it that simple?

Krach: I think it's a lot more sophisticated than that. Two big components are the buyer on-ramps and the supplier on-ramps. Our dominant lead in terms of e-procurement has really put us in the catbird position in terms of these marketplaces. The other thing too is that if you look at these marketplaces, there's a lot of industry specialization in the verticals. It's not just, 'Build a portal, and they will come.'

InfoWorld: So what does the future hold for the digital exchange market and industry?

Krach: I think what you're going to see is these thousands of marketplaces segmented by industry. You're going to see literally hundreds of different value-added services running across these networks, and I think it's going to be the biggest network in the world.

And you're going to see marketplace-to-marketplace capabilities, where everybody's going to be able to take advantage of the specialization in the different marketplaces and huge economies of scale.

InfoWorld: What's your biggest challenge right now in leading Ariba?

Krach: Sometimes you feel like a fly in a nudist camp in that you don't know where to land first because there's so much opportunity out there. The thing that's really turbocharging our business is the success of our early customers.

Keith Krach, Ariba

Age: 43

Title: CEO

Biggest success: Assembling a team of the best and brightest employees at AribaKey challenges: Making sure Ariba retains the culture on which the company was founded while growing the company in a manageable wayPersonal note: Enjoys spending time with his wife and three children, aged 14, 11, and 8, and attending Little League games in which his children participate.

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