Network theory underlies Ariba's success

By ADAM GIFFORD

There's a tenet of networking theory which says that the value of the network increases logarithmically as the network grows.

So, too, does the value of each node on the network grow with the network.

It's a principle that business-to-business software provider Ariba is taking to heart as it sets about supplying the tools for companies to build electronic procurement systems and public and private marketplaces.

Ariba kicked off its annual series of Ariba Live showcases in Sydney last week with typical American razzle-dazzle, bringing over Olympic gold medal sprinter Michael Johnson - "the world's fastest man" - for an inspirational keynote address.

As chief executive Keith Krach pointed out, Ariba, still less than five years old, is the fastest-growing software company ever, with revenues for the first quarter of this financial year of $US170.2 million ($NZ391 million), up 625 per cent on the same quarter last year.

"It's not the big will eat the small, it will be the fast will eat the slow," he told the 1000 visitors at the Darling Harbour Convention Centre.

While Ariba has only eight New Zealand customers - Telecom, Biolab subsidiary Onezone and a number of global firms doing local roll-outs - its actions impact on the whole electronic business arena.

That's because of its creation of UDDI (Universal Describe, Discover and Integrate), a set of platform-neutral specifications to enable businesses to describe themselves and indicate their preferred means of conducting e-commerce transactions.

Product marketing vice-president Nick Solinger said that to create UDDI, Ariba sat down with IBM and Microsoft to work up the basic framework for how integration should be done. They then went out to get agreement from more than 100 other software vendors.

The result owes less to the quasi-regulatory standards bodies or the consortium models of standard setting and more to the domain name system (DNS) underlying the internet.

UDDI includes the shared operation of a globally distributed UDDI Business Registry, where firms publish information describing how they conduct commerce and search for other businesses that provide the capabilities, web services or products.

Companies wanting to send a purchase order to a business they haven't previously dealt with can go to the directory and look up how that company wants to do business.

Mr Solinger said the industry was wary of new standards after the disputes over the way Sun Microsystems handled the creation of Java, insisting that the industry buy into proprietary formats. "We created a new way for standards to be created which broke the Java mould and got broad industry participation and support."

The result is that when Ariba customers create electronic procurement systems or marketplaces, they will be able to easily connect into the growing number of other such marketplaces, whether those sites use Ariba or not.

It's the perception of leadership in previously uncharted waters which encouraged Biolab to buy Ariba when it decided to make the leap from its own commerce website, Biolab.Direct, to a wider portal, Onezone.

Onezone chief executive Catherine Calarco said Ariba seemed to have the right philosophy and it was the largest service provider in the e-procurement space.

"You've got to go with the big boys. If you're going to last, you have to work with someone who will work with you to ensure what you do is sustainable. You can't develop a proprietary system and end up down a blind alley."

Biolab has annual revenues of $90 million from sales of scientific equipment and services. About a quarter of sales go through its Biolab.Direct site, which Onezone will replace. Onezone also includes the catalogues of Corporate Express, Computerland, Dick Smith Electronics and other suppliers.

The project is costing Biolab $10 million, but Ms Calarco said it was forecast to be turning over $150 million in transactions within a year.

Onezone is looking for equity investors, and Biolab intends to spin it off.

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