Hooking up is becoming hot in B2B.
While business-to-business companies once bragged about having end-to-end software programs that took care of everything, they're now increasingly looking toward alliances with potential competitors to stay ahead of the game in e-commerce.
Big companies are doing it. There's the
triangle and the trans-Atlantic love affair blooming between
And smaller B2B companies don't want to feel left out, so they're starting to hold hands in bids to meet the sector's burgeoning demand. Just last week,
announced an alliance with
Electronic Data Systems
strengthened their partnership to help companies plug in to B2B.
Once Upon a Time
In the beginning, some B2B companies talked about doing everything for their customers. But all the while, the industry was still full of players that attacked niches. webMethods, for example, concentrated on getting different computer systems to talk to each other. Ariba, on the other hand, focused on getting companies to buy office supplies over the Web.
But users of B2B products need software that can help them run their entire businesses, so they're turning to partnerships to fill in what they lack. So far, this approach is working.
The Ariba/i2/IBM troika, for example, is expected soon to announce a deal to power
, a mega-exchange in the food industry, according to an analyst and a press report. And the Commerce One-SAP alliance has resulted in six new customers since June. An exchange is simply a place on the Internet where companies can buy and sell goods.
On the other hand, companies that don't partner may be left behind eventually. Even when a company does offer everything, customers may want pieces from different providers. At least that's what
fiscal first quarter indicated. Sales of the company's all-encompassing e-business software were
softer than expected.
Oracle has been adamant about going it alone in the B2B software space, while its competitors have turned to partnerships.
Seeking the Solution
"These partnerships are doing what they're doing right now to do the end-to-end solution," says Jon Ekoniak, B2B analyst at
U.S. Bancorp Piper Jaffray
. "They're trying to build out what they can in their own areas, but they're realizing that their specific spaces affect five, 10, 15 other spaces. So they're trying to do partnerships."
That's what drove the Commerce One-SAP alliance, which was announced in June. At that time, each company admitted that the B2B sector was too big, and moving too fast, for either to go it alone. And their products fit. While Commerce One's software allows companies to buy and sell materials over the Internet, the company might not be the best at running an accounting program. That's where SAP, with its deep business software offering, known as enterprise resource planning software, came in.
On the other hand, while software companies are usually good at writing software, they're not always great at making it work with other systems. That's where an alliance like the webMethods-EDS deal comes in. webMethods' software allows different companies' systems to talk to each other, but someone has to install it. EDS consultants have the tools and knowledge to do that.
"The fact that no one company can provide the solutions and services needed to do it all is really the major driver behind these partnerships," says Phillip Merrick, webMethod's CEO.
Then There's the Money
At the same time, it's not just about being big enough to get the job done. It's also, of course, about money.
Dale Boeth, PurchasePro's vice president of strategic development, says his company is partnering to grow without having to pay the cost of global expansion.
"Clearly, I think it's an issue of cost effectiveness," Boeth says. "When you have a stated objective, like we do to build out a global database of participants on our platform, if you do that by yourself, you incur the overhead expenses of expanding your sales force.
"Then the question becomes can we scale quickly enough using those primary sales channels to capture the opportunity before us. It becomes much more cost-effective -- and time-effective -- to gain access to customers through partnerships than it is to build out those relationships yourself."
If He Jumps off a Bridge ...
There's peer pressure, too.
"It kind of feeds on itself," says Ekoniak, the Piper analyst. "Once a few players start establishing partnerships, everyone else scrambles to go out and get their partners, too."
He expects a lot more relationships among software companies and consultants going forward. But he also wonders whether all these multiple partners will start fooling around on each other.
"I'd be curious to see how many of these partnerships are exclusive," Ekoniak said. "I would assume very few of them will be."
In other words, look for more partnerships to come in B2B. Just don't expect them to be one-on-one.