agreed to buy a catalog content company so it can sell more office supplies via the Internet. And in doing so, it cast its shadow a little bit further over its partner, and competitor,
With its proposed acquisition of niche content company
, i2 greatly expands the amount of listings of maintenance, repair and operation supplies -- standard office-type stuff -- that it can offer its customers, who use i2's software to set up open and private exchanges on the Internet to do business with customers and suppliers.
Yet last May, ec-Content announced an alliance with business-to-business software maker Ariba, which distributed those catalog listings over Ariba's network. Analysts say the acquisition shouldn't affect that partnership, because i2 and Ariba are partners themselves, albeit through a
shaky alliance moored by a third partner,
. But it could put Ariba much more under the thumb of i2, which has slowly but surely been growing at the expense of its partner.
"I see it as slightly negative for Ariba, because it makes them that much more dependent on their i2 partnership," says Chris Rowen, an analyst at
who rates i2 buy and Ariba outperform. (His firm hasn't done underwriting.) What's more, it expands i2's presence in the so-called indirect market, or trading things such as office supplies, which is Ariba's stronghold.
Going Through i2
"Now, even if it's an indirect marketplace, and a company wants to set up standardized catalog content, they're likely going to have to partner with i2 to get at the ec-Content listings," Rowen says.
That said, there's no indication that i2 would yank the ec-Content listings out of Ariba's own network. An Ariba spokeswoman didn't return a call to comment.
Ariba, i2 and IBM have boldly
played up their partnership, launched in March, as the dream team of B2B, even dubbing it "the Alliance" with a capital "A." But quietly,
fissures began appearing; observers began to believe that Ariba and i2 were increasingly becoming competitors, with IBM as the peacemaker.
At $5 million in cash and $130 million in stock, the ec-Content deal isn't a blockbuster. But analysts heaped praise on i2's move because it gives the company an easy way to let customers compare prices of everyday stuff like paper, pencils and cleaning supplies.
"One of the biggest barriers to keep moving on the B2B front is this whole catalog thing. It sounds mundane, but it's a huge issue," says Robert Johnson, an analyst at
, who reiterated his buy rating on i2. "Everyone wants this B2B stuff on the Web, but unless you have an accurate way to update it and keep it fresh, it's useless." (His firm hasn't done underwriting for either company.)
ec-Content, apparently, has a good way to do that. The company is actually a unit of
, which i2 agreed to buy Wednesday in order to acquire ec-Content. Trade Service has been managing catalog content for 70 years, and has more than 5 million items in its database. About 24,000 distributors, manufacturers, suppliers and contractors subscribe to its catalog services.
Those listings, combined with i2's earlier acquisition this year of
, which also operates in the content management area, gives i2 a broad reach as far as content is concerned.
"Quite frankly, it gives i2 a lot of leverage for marketplace operators other than Ariba," ABN Amro's Johnson says. "Where am I going to get a common catalog if Aspect is bought, and now ec-Content is purchased? It sets up an interesting situation for the players that are left."
For his part, Robinson-Humphrey's Rowen doesn't think that the acquisition necessarily raises tensions between i2 and Ariba. Instead, he sees the
much-maligned alliance between the companies, as well as IBM's part, as an arrangement of necessity, not convenience.
"I think that the partnership will likely survive because of mutual self-interest," Rowen says. In the indirect materials business, Ariba has better name recognition than i2, and i2 has better software when it comes to supply-chain management, a hot area of B2B right now. "It's in both their best interests to maintain it."
Still, should tensions grow between the companies, the ec-Commerce acquisition gives i2 another lever to use in squeezing Ariba.