“Spend management,” a catchphrase for optimizing operating costs, has never been as crucial to the commercial real estate space as it is during these tempestuous economic times. Sunnyvale, Calif.-based Ariba, Inc, which specializes in supply-chain innovations driven by its software, on-demand products and services, hasn’t been widely known for catering to that space until recently.
But in May, the company signed the world's largest commercial real estate services firm, CB Richard Ellis Group, which will use Ariba’s suite of on-demand products to support its clients’ facilities-management services around the world. Hari Candadai, director of solutions marketing for Ariba, talks about the growing need for refinements in cost-control technology in the industry.
NREI: Given the state of the economy, how large of a priority has “spend management” become to the real estate ownership world?
CANDADAI: With the prices of so many things out of their control, companies of all types and sizes are doing everything they can to reduce costs and maintain their competitive advantage. Let’s face it, there’s not much anyone can do about the price of oil. But by carefully analyzing spending across categories, building owners can identify areas where potential savings can offset these costs. They may find, for instance, that they are using several suppliers to provide building security, when by consolidating their “spend,” they might secure more favorable pricing. Or they may find that their facility managers aren’t leveraging contracts that have already been negotiated with preferred suppliers.
NREI: Why do you lean toward offering on-demand products now?
CANDADAI: Historically, our software was provided primarily as installed applications that were deployed behind a customer’s firewall. But in 2006, we began to see a shift in the way companies were purchasing and using software – namely they didn’t want to do large-scale implementations or pay annual license fees. They just wanted something that could be implemented quickly and deliver immediate results. So we shifted our business model and re-engineered our products to on-demand delivery, where the applications are hosted by Ariba or a third party, and customers can access the solutions via the Internet.
We found that customers also wanted applications that could address their pain points. And one of the biggest ones was their need to understand just what they were spending and with whom so they could identify areas for savings. We knew going in that software alone couldn’t do this. So we now offer an integrated portfolio that includes enterprise-class software, global services and expertise and a global-supplier network.
NREI: Who are some of your other commercial real estate clients?
CANDADAI: CBRE is the first real estate services firm to deploy our full suite of spend-management solutions. But others are following their lead, including Places for People, a UK-based property development and management firm that is using our on-demand Procure-to-Pay solution to gain better visibility into its spending.
NREI: Can smaller-budget facility managers and other businesses that lack the wholesale buying power of their larger peers benefit from these products?
CANDADAI: Absolutely. That’s the beauty of the on-demand delivery model. Companies, regardless of their size, can get the technology, expertise and services they need as they need it without investing in expensive hardware or resources to manage it or paying hefty annual license fees. Companies can purchase solutions from us to get started for as little as $150 per user per month or $6,000 a year. And as their needs evolve, our solutions easily scale to meet them.
NREI: Briefly tells us a little about specific spend-management products -- Ariba Spend Visibility, Ariba Sourcing, Ariba Procure-to-Pay and Ariba Contract Management -- and how they drive savings.
CANDADAI: Well, spend-management is a journey, not a process. And companies start at different points. These solutions you mention allow enterprises to take a step-by-step approach to managing their spending through products and services that work together. In many companies, “spend” data is spread across multiple systems, making it difficult to access and analyze. The Ariba Spend Visibility product leverages a knowledge-classification base and an integrated database of over 44 million suppliers to consolidate this data and to classify and enrich the “spend.” That enables decision-makers to identify opportunities for savings across categories, business units and geographies.
Once they realize where savings can be had, they can use Ariba Sourcing to negotiate with suppliers and drive these savings to the bottom line. Then, using Ariba Contract Management solutions, they can collaboratively create and manage contracts across categories and functions such as real estate, sales, finance, marketing, legal, procurement and IT and drive compliance with agreements on an enterprise-wide basis. They all work together to help companies manage their spend-management quickly and efficiently.