With SAP deal, Ariba’s 13-year headstart pays off

Investors with long-ish memories will recall that Ariba, the business-to-business ecommerce network that SAP has just agreed to buy, was a dotcom IPO star of 1999: its stock surged 291 per cent on its debut, giving it a market capitalisation of $3.7bn – only just short of the $4.3bn that the German enterprise software company has agreed to pay for it 13 years later. Those were the days, Facebook investors may ruefully reflect.

Ariba had much further to go in the short period before the dotcom bubble deflated in 2000 – at one point it was worth a heady $30bn. But its longevity, before finally being snapped up by one of the companies it successfully challenged, demonstrates the durability of its underlying offering. Ariba’s early potential was obviously hugely overrated at the peak of the internet boom, but it grew into that original valuation.

Cloud-based software-as-a-service (SaaS) is quite the thing, with companies like Salesforce.com and Netsuite angling to provide solutions that simplify customer and supplier relations and allow enterprises, large and small, to concentrate on their core business. At a Netsuite customer conference I attended in San Francisco last week, SAP was one of the competitors that Netsuite claimed was lagging behind. By buying its way into the cloud, the German company has made a bid to close the gap that Ariba and other web-based B2B companies started to open up 13 years ago.