The Ariba Legacy- Built-to-Last

By: Keith Krach, former Chairman and CEO

We just celebrated the 20th anniversary of Ariba’s founding last year, and 18 years ago today we took the company public. I don’t often sit back and reflect on the good old days, because I really believe today is better than yesterday and not as good as tomorrow, but this wild adventure is worthy of taking a moment. Maybe a pearl or two of the Ariba wisdom will help to change the world yet again for fellow dreamers and entrepreneurs out there. This little article is for you, and the Ariba family who will always remain part of mine.

We had a meteoric rise. At the time, we were the fastest growing software company ever, with our revenue doubling quarter over quarter for the first 12 quarters, going public after only 2 3/4 years from our founding. We were the model of equity efficiency. We only burned through $4M of the $25M we raised in two rounds of financing by the time we went public. After an intense three-week roadshow where we were 40x oversubscribed. Thanks to our warrior CFO, Ed Kinsey, every institution wanted an allocation. We took Ariba public on NASDAQ and our stock price quadrupled on the first day of trading. Our Morgan Stanley Dream Team — Mary Meeker, Andy Kearns, Paul Chamberlain and Chuck Phillips — even wrote a poem about the roadshow adventures.

[Ariba IPO roadshow pitch deck]

Even back then with all the excitement and glory, we knew deep down that going public was just a financing event. Our real aim was to create a legacy that our grandchildren will be proud of. For us, that kind of legacy came from the intersection of three key aims:

  • Building a High Performance Team — develop entrepreneurs and leaders who would shape the next generation of Silicon Valley companies
  • Creating a Category — spawn an industry measured in the trillions of dollars
  • Establishing a Network — create a viral effect, making digital commerce the new norm

Building a High Performance Team

The team with the best people wins. Period. Our Ariba journey began in the office of the newly opened Benchmark Capital with seven founders, but more importantly seven friends. Rob DeSantis (VP, Sales), Paul Hegarty (VP, Engineering), Ed Kinsey (CFO), Bobby Lent (VP, Marketing), Boris Putanec (VP, Product), Paul Touw (VP, Strategy) and I had a shared vision as the founders that was critical for the model we envisioned: never use the word “founder,” and instead treat every member of the Ariba family as part of our founding team. This defined our culture and created a work ethos that was unstoppable.

[Check out the 5-year anniversary video]

The formula was simple: hire the best people, get everyone working together as a team, and set a crystal clear direction. We had many team rules that in retrospect were as much the key to our success as our product. Team Rule #5 was perhaps the most important: “Hire the best people, especially if they are better than us.” This made it noble to put the company first and personal ego last. Our team, now affectionately referred to as the Ariba Gang, went on to starting and running some of Silicon Valley’s ground-breaking companies and inventing technology that has made a worldwide impact. Many of us still look back at our Ariba days as the most magical time, a “Business Camelot.” It was special because the people made it so and believed it to be so.

Just a few examples from the incredible Ariba genealogy: Craig Federighi, Senior VP of Software, Apple; Marcus Ryu, CEO & Founder, Guidewire; Dan Fishback, CEO & Founder, DemandTec; Cindy Elkins, CIO, Genentech; Paul Melchiorre, CRO, Anaplan; Jim Steele, President, Salesforce & Yext; Scott Barmmer, SVP International, DocuSign; Elaine Kitagawa, CFO, Lynda; Bob Calderoni, Chairman, Citrix; Marc Carlson, Chief Customer Officer, DocuSign; Tayloe Stansbury, CTO, Intuit; David Middler, CLO, Cloudera; Brian Franks, VP Global Operations, LinkedIn; Eileen Martinson, CEO, Sparta Systems; Ryan Cox, VP Strategy, DocuSign; David Rudnitsky, EVP, Salesforce & Yext; Kevin Costello, Chairman, FinancialForce; Mark Dao, SVP Engineering, Mulesoft; Rob Solomon, CEO, Software Platform Consulting; Jim Frankola, CFO, Cloudera; Greg Dickinson, CEO & Founder, Hiperos; Michael Schmitt, CMO, Adaptive Insights; Bob Elliott, SVP, Hootsuite; and David McCormick, Assistant Secretary, US Treasury.

I am proud to share the original Ariba Playbook that we created in 1996 with our Mission, Vision, Values, and all our Team Rules that were the foundation of what we built. I see it still as a tremendously relevant tool for building any business and hope our guide may help to guide the entrepreneurs and leaders of today. Our Playbook pyramid is downward facing because we always wanted to symbolize that our execution should be laser focused — “Lazercution” was the term Rob DeSantis coined, which became our rallying cry.

Creating a Category: B2B eCommerce

[My original sketch of Ariba’s architecture, drawn on a paper tablecloth at our team lunch in September 1996. My treasure — signed and dated by our team for my 40th birthday.]

Everyone in the software business knows that if you are the leader, you get 10x the market valuation of the #2 player. The question when you are starting a company is: how do you become the market leader? Our answer was to create a new category. If you create a category, you are the only one there. If you are the only one there, you are the leader. We flew in stealth mode for the first six months of the company. Before we even developed our first version, we spoke to 60 potential customers.

We had only two questions. The first was, “How are you doing it now?” Everybody’s answer was it’s a mess, takes a long time, full of paper, and our suppliers are fragmented. We then asked, “What would be ideal solution?” Their answer was that it would all be automated with a walk-up user interface so that you could parametrically change the business rules, be integrated into the financial systems, and integrate it to a supplier base through this new thing called “the internet.” They said if you could do that, the quantifiable value proposition would have a huge impact on the bottom line.

[Paul Hegarty’s Revolutionary walk-up UI]

After Bobby Lent said, “We identified a gigantic, unserved, unnamed, painful problem for the Fortune 2000 that literally touched every employee and turned out to be financially strategic for every corporation,” we then created the platform with some of the best technologists and object-oriented programmers in the Valley. Our CTO for 10 years of the journey, Craig Federighi, now runs software at Apple and is considered one of the best in the world.

Establishing a network

We knew that if could create a network effect, we could simultaneously increase our business leverage and erect serious barriers to entry. That is when I charged Paul Touw and Boris Putanec with one epic mission: use their synergistic genius to create the Ariba Network. That’s when I realized you don’t need an army of developers for a breakthrough innovation.

Our strategy was always to thrive in a heterogeneous environment and be a Switzerland by making everyone our friend. Since this was the first enterprise application written on the internet, we realized we could leverage all the suppliers’ new websites. The suppliers turned into allies that found it too expensive and time intensive to compete, instead opting to create long and lasting partnerships that solidified our base and protected our bottom line.

We also realized our biggest competitive advantage was speed. In order to get the viral effect, we needed to do three things in a hurry:

  • Increase the number of nodes — by adding Fortune 500 buyers and hundreds of thousands of suppliers.
  • Reduce the friction between the nodes — by creating an industry standard called cXML based on our Punchout technology innovation, institutionalized by a three-way announcement with IBM and Microsoft.
  • Increase the value of each node — by offering value added services, like Discovery, Spot Buy, AribaPay, etc.

The beauty of the SAP acquisition of Ariba in 2012 is that Bill McDermott, Alex Atzberger and their team have continued to execute on these fundamental principles of building out the Ariba Network. It warms my heart when I hear Alex say, “I’m not a founder of Ariba, but I very much feel that that’s what I want to bring to the business, which is a compelling vision, an absolute focus on inspiring the company to do much more. And also feeling really proud of what SAP Ariba is and can become.”

I am very proud that in 2014, DocuSign and SAP formed a strategic partnership. I will never forget when Bill McDermott said to my wife, Metta, “Do you realize that Ariba now has $1.3 trillion going through the Ariba Network annually, which is more than eBay, Amazon and Alibaba combined.” At that moment, it dawned on me that we had truly succeeded in building something our grandchildren would be proud of.

As I think back on the tremendous Ariba story and all the people who made it possible, what keeps coming back to me is the simple truth that what is of most value is the journey, not the destination. Perhaps most importantly, the greatest legacy of this built-to-last company is the never-ending friendships made along the way.