may be the first names in B2B, but they're certainly not the last.
Even as the two big business-to-business companies crow about new customers, a raft of smaller, faster-moving companies is snatching business from them.
Signs of pressure from the bottom started cropping up a few weeks back, when the
Global Health Care Exchange
as the technology providers for its Internet marketplace, where companies will buy and sell supplies. Instead, it picked the smaller, more specialized
, an online marketplace for the shipping business, chose rug rat
over Ariba and Commerce One.
Since then, the competition has gotten even more intense. Last week, little-known
, a marketplace for the marine fuels industry backed by big oil companies like
. On Oct. 6,
, a new health care exchange in Britain that's targeting the national health agency there, picked smaller
. And last Thursday, tiny hosted software provider
, a division of
, landed a pilot program for the procurement business of
, a British maker of plumbing and electrical products that had $2.2 billion in sales last year.
Ariba and Commerce One competed for each of those deals.
So are the two leading companies of B2B already being knocked aside by younger, faster upstarts that can maneuver more deftly in the surging sector? Unlikely. But more significant is that while Ariba and Commerce One like to brag about being able to meet all of a company's B2B needs, these deals show that sometimes they can't, which raises questions about just how fast the two companies will grow.
Ellie Javadi, a spokeswoman for Ariba, says the company picks and chooses its customers, saying it even walked away from
, the huge online marketplace in the auto industry that's being powered by Commerce One and
"We actually walk away from customers, just like we walked away from Covisint, and I think that we're glad we did," says Javadi. "There are some customers that we don't want to take on, or they're not ready for us to take them on. Some deals go because it's the right decision for the company."
A Commerce One spokesman would say only that business is going well.
Better Than Big
Meanwhile, OceanConnect, Caradon and Medipurchase say they chose the small companies because they did certain things better than the biggies, or could give them the individual attention they crave. Pricing seemed to be a secondary issue. And in some cases, the small guys did things that Ariba and Commerce One couldn't.
At Medipurchase, commercial director Peter Buckley says Ariba's marketplace and auction products aren't well integrated. It's a
criticism other customers have made about Ariba's software, as the company has tried to build on its technology by buying other firms. InfoBank also seemed willing to pay more attention to Medipurchase, Buckley says.
"The fact is, they're willing to be flexible to us as we grow together," he says.
Commerce One, he says, didn't seem to want Medipurchase's business. "I apologize, but I found them to be quite arrogant," he says. "The U.K. marketing manager at a conference turned around and said 'We do not want to work with dot-coms.' "
Buckley's not the only corporate technology buyer espousing the view that Ariba and Commerce One have already gotten too big. Since last spring, when demand for products from Commerce One and Ariba started rising dramatically, analysts have talked about smaller potential customers not being able to get calls returned. This could be a problem because Ariba and Commerce One have said they
want to target smaller companies, too.
Technology issues were a recurring theme as well when this group of companies picked B2B suppliers.
"For our business, the capabilities that were required just weren't out there," says Tom Riley, OceanConnect.com's president and chief operating officer. "Moai was the one we identified to have the greatest flexibility in doing complex transactions."
Riley says it's tough to find a catalog for marine fuel, which his company pegs as a $100 billion industry, because surpluses and shortages crop up at different ports at different times. In order to sell or buy that fuel when an opportunity arises, OceanConnect needs software focused on specific transactions, not the product itself.
In contrast, both Ariba's and Commerce One's software was originally designed to move things like office supplies, which could be ordered out of a catalog, to buyers over the Internet. While each company has beefed up its software to handle more complex transactions, they're still best at selling more straightforward products online.
"Most of the technology out there was on the catalog and procurement type of things," Riley says. "There were a lot of bigger names out there, but when you're a start-up, you have to use your own brain to determine what the best is. That's what we did."
Caradon, the British plumbing and electrical supplies maker, chose elcom because of its ability to provide its software over the Internet, says Kevin Barry, the buyer's senior category manager for e-commerce. Typically, software from Ariba and Commerce One sits inside a customer's firewall, which means a lot of work for programmers who have to make the software tick with existing computer systems.
If they want to maintain their hefty leads, maybe the big B2B players need to remember what it was like when they were small.