Ariba Targets Services Spend

Incorporates CascadeWorks solution for workforce spend management

Tempe, AZ  October 30, 2001  e-Procurement software companies Ariba and CascadeWorks are teaming up to offer a solution for procuring temporary workers, contractors and consultants.

Ariba's new Workforce software combines the functionality of CascadeWorks' Clarity solution for services e-procurement with a user interface that the two companies say will be very familiar to users of the Ariba Buyer application, which is used to procure indirect materials.

Based on the functionality within Clarity, Workforce allows services suppliers to submit timesheets and expenses online and routes documents for approvals electronically, allowing suppliers to be paid more quickly and buyers to take advantage of fast-payment incentives. In addition, billing, change order, volume discount and other critical information can be collected and tracked, handing purchasing departments and chief financial officers a tool for managing this area of spend.

The average Fortune 1000 company spends 11 to 19 percent of its annual purchasing dollars on workforce procurement, according to the Center for Advanced Purchasing Studies (CAPS). Further, it has been reported that as much as 30 percent of contract labor spend is, ironically, spent off-contract, not surprising considering that CAPS has found that purchasing departments only control about 60 percent of all services purchases.

As a result, procurement executives frequently have poor visibility into their services spend, which is often fragmented among multiple divisions and functions within enterprises. This makes it difficult for purchasing departments to enforce preferred staffing contracts that they negotiate with national suppliers, or to ensure against overbilling. In fact, CAPS has estimated that 3 to 5 percent of the funds spent on contingent workforce is overbilled because systems are not in place to ensure, for instance, that timesheets are not being submitted to more than one department or that timesheets including overtime are approved, despite contractual provisions barring overtime.

All of which makes services e-procurement a likely target for potential cost savings. Technology consultancy Aberdeen Group reports, for example, that initial investigations of companies implementing services e-procurement show savings in line with those achieved by moving to e-procurement for indirect materials, estimated at 5 to 10 percent savings resulting from supplier negotiation support and a reduction in maverick spending. Aberdeen also says that it expects Internet automation to improve services procurement process costs by 20-40 percent.

Solutions from Mountain View, Calif.-based Ariba and CascadeWorks, of San Francisco, have been compatible in the past, but now Ariba users will be able to take advantage of services e-procurement features within an Ariba interface.

"Ariba Workforce leverages all the capabilities within the Clarity product offering, but we've applied to this the Ariba look and feel, so the user interface between Workforce and the other offerings within Ariba's spend management suite are consistent," said Diana Jovin, CEO of CascadeWorks.

The advantage to this, according to Martin Boyd, product marketing director for Ariba, is that a company already using Buyer would be able to license Workforce and have the software up and running as part of their e-procurement infrastructure "within a day or two."

Pricing for Workforce will be based on the number of end users within an organization, as it is for other Ariba products, Boyd said.

The Ariba-CascadeWorks combination could shore up support for Ariba among its installed base of customers seeking ways to extend the return on their investment in the Buyer platform. "Once companies see the time and cost savings that can be gained through automating the procurement of goods, they want to apply that discipline to all areas of spend, with labor being the biggest outlay," said Christa Degnan, a research analyst at Aberdeen.

The two companies already share a handful of joint customers, including San Rafael, Calif.-based software company Autodesk, which has been using a solution similar to the new release of Ariba Workforce since January. Lindsay Myers, a senior buyer with Autodesk, said that her company has rolled the solution out to two groups within the company, with plans for expansion over time.

Myers said that Autodesk has already realized a 1 percent reduction in its billing for those of its service providers that are invoicing through its services solution, and overall the company was saving more than it was spending by using the solution. Autodesk is looking for process cost savings, as well as savings from consolidating the company's services spend and from reducing or eliminating maverick spending for services.

For CascadeWorks, the new alliance gives this software company immediate access to Ariba's installed customer base. Besides Autodesk, CascadeWorks currently has three announced customers: ABN AMRO North America, Charles Schwab and Texas Instruments. But Jovin also expressed the hope that the joint solution will expand the customer base for both software companies. "We think that this alliance ... will really accelerate the adoption of workforce procurement capabilities throughout the global 2000 organizations," she said.

Jovin did not rule out the possibility that her company would seek relationships with other enterprise application providers, but she said that for the moment CascadeWorks would concentrate on its alliance with Ariba while also pursuing customers independent of its new partner.

Meanwhile, the new announcement represents another step for Ariba as the e-procurement platform pioneer seeks to broaden its offering beyond the stagnating market for indirect materials. Some analysts say that this move is necessary for Ariba to compete against enterprise software companies such as SAP or PeopleSoft offering procurement functionality on top of their enterprise resource planning (ERP) systems.

At the end of September, for example, Ariba, which recently reported a precipitous drop in third quarter revenues for 2001 compared to a year ago, released a new strategic sourcing application. The company's new CEO, Robert Calderoni, said upon his appointment two weeks ago that Ariba would soon launch software to provide greater spend analysis for enterprises. In fact, Ariba now bills itself as a provider of enterprise spend management solutions provider, perhaps reflecting Calderoni's past experience as a chief financial officer for several technology companies.

Boyd, of Ariba, confirmed that the release of Workforce furthered Ariba's push to provide chief purchasing officers with better control over their companies' spend. "Ariba is already working at producing an overall spend-management solution for chief purchasing officers [CPOs]," Boyd said. "With this announcement, we're really extending that into the specific area of temporary workforce and contingent labor." For instance, the planned "dashboard" giving CPOs and chief financial officers (CFOs) visibility into a corporation's spend will incorporate data generated by the Workforce application.

PeopleSoft, for its part, acquired online services e-procurement provider SkillsVillage in May in a bid to extend its own offering in this area, and it unveiled on Monday its PeopleSoft 8.4 Strategic Sourcing solution, which includes support for the Web-based procurement of services as well as direct and indirect materials.

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