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Pioneering SaaS In Business Process Optimization: Ariba’s Kevin Costello (Part 1)

Posted on Wednesday, Jun 2nd 2010

SM: Kevin, let’s start with some historical perspective of Ariba. You joined the company after it went public, correct?

KC: Ariba was a company that was one of the founding members of the dot-com explosion that occurred in the mid to late 1990s. It was focused on helping organizations optimize a business process. The process Ariba worked on was the procurement process. They had a technology product that helped to manage procurement. It rapidly became a widely known product, and a significant amount of interest was placed in the company because of that.

At one time Aribas’s market cap was over $40 billion and its unadjusted share price was close to $1,000. It was clearly one of the top thee or four tech companies in its heyday. As with all of the other dot-com companies at the time, the market turned and Ariba turned with it.

SM: What was the revenue when your market cap was $40 billion? That should have been around mid 2000.

KC: Around that time, yes. The reported revenue in September of 2008 was $8.4 million, and $16.3M at the six month point in 1999.
SM: And that revenue was generated by selling procurement software to enterprises?

KC: Yes.

SM: When you came on board after the crash, what was the situation?

KC: I came on board in 2002 right after that downturn. Ariba was a lot like the other dot-com organizations affected by the market collapse. Valuations had collapsed, and it was time to figure out what was next. Ariba did some things that were interesting. First, we continued to build out the software product. It was a product that was CD based and had been intended to be used behind the firewall.

We made a strategic direction when I came in to change the way that we thought about how our customers would be successful. We knew that technology was not enough and that our customers would have to get a high degree of use out of that technology. We built a significant services organization to implement the technology was well as teach customers how to drive efficiency in the procurement practice.

That is really what the core of Ariba is. It is all about driving efficiency in the practice of procurement within an organization. We used that approach to stabilize the business. We put a good foundation under it to allow it to be built.

SM: Who was the customer base at that time?

KC: Mostly Fortune 500 [companies]. We had customers in all different industries. We then started adding services to help organizations implement the technology and optimize their process. Our technology was used to save money, so we went out and made a couple of acquisitions. We bought a large sourcing company that helped people buy things more cheaply. We also bought a company that did data analytics required to run the procurement process. That allowed us to expand our relationship with the Fortune 500 companies.

This segment is part 1 in the series : Pioneering SaaS In Business Process Optimization: Ariba's Kevin Costello
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