A lot of things are "on demand" these days, from movies to television to even ads. Now, businesses such as Ariba Inc. are embracing the technique to attract new customers.

	Martha Rial, Post-Gazette The former Freemarkets building, Downtown, was redecorated with an Ariba sign after Ariba acquired FreeMarkets for $493 million last year. Click photo for larger image. Graphic: Ariba's woes

The Sunnyvale, Calif.-based firm with a major operations center Downtown recently unveiled plans to lure smaller businesses into its online supply management fold by offering on-demand services that let the firms pick and choose what they want.

"It opens the market to more companies," said Kent Parker, Ariba's executive vice president of the global services organization, the company's Downtown-based consulting and services arm.

The new tack represents the latest growth strategy for the Silicon Valley upstart that bought another high-profile dot.com holdover, Downtown-based FreeMarkets Inc., for $493 million early last year. The merger was the next logical step for both firms that made national names for themselves in the 1990s by helping large companies wrestle deals from suppliers.

Ariba's strength was its so-called "spend management" or purchasing software that helped organize and prioritize equipment and other often mundane supply purchase decisions. FreeMarkets, with its fleet of consultants charged with advising and often overseeing big corporations' purchases, focused on getting companies the most bang for their buck on spending for everything from raw materials to pens and paper cups.

While insiders have said the marriage was an obvious and necessary match -- neither company alone was doing all that well despite a lot of buzz in the business-to-business online world -- it hasn't been painless. Layoffs, attrition and culture clashes that are common to most unions have hit Ariba and the former FreeMarkets.

Locally, the work force has shrunk from about 500 a year ago to nearly 400, primarily because of attrition. A wobbly stock price, continuing losses on operations and less-than-stellar sales haven't made the path any smoother.

Despite the kinks, analysts believe that Ariba has been relatively solid since the merger for a dot.com that survived the shakeout. "They haven't been growing, but they haven't been shrinking either," said analyst Jamie Friedman at New York-based Fulcrum Global Partners.

The new strategy could be the combined companies' elixir -- allowing smaller firms to pick and choose the software they want and avoid steep installation costs by using the software via the Internet. Ariba customers also can tap into scaled-down consulting services to guide them through the purchasing process.

The "on-demand" rage has emerged as an online industry phenomenon in the past 18 months, led by software companies Netsuite and Salesforce.com and Ariba rivals Procuri and Ketera Technologies. Much as cable customers can choose the shows and movies they want and some online users select ads, the new services let business customers select from a range of services and prices.

The shift is as much about survival as it is about broadening the market. Many former and current major customers have become capable, even adept, at establishing online procurement services of their own, negating the need to turn to the Aribas of the world or, at the least, from dramatically increasing their use of such services.

Ariba officials maintain they haven't chucked their old business model but are simply following the grand plan cooked up by Ariba Chief Executive Officer Robert Calderoni and former FreeMarkets chief David McCormick during secret airport meetings leading to the 2004 merger.

The duo's ultimate goal, say insiders, was to "own" the online procurement and purchasing market by offering both software and talent with industry-specific buying expertise. Together, they felt their companies could fight off larger software firms such as SAP and Oracle that were going after their customers.

Still, courting midsize companies -- typically those with annual revenues ranging from $200 million to $2 billion -- is not new. It has been tried and has failed before, in part because of the costs the clients were being asked to bear.

Ariba's repackaging plans are aimed at lowering those costs. In a way, the shift reinvents what FreeMarkets had previously tried when it leased software and support to customers instead of forcing them to buy or license it. Ultimately, the larger licensing deals were more lucrative, so FreeMarkets gave up on the more cost-efficient strategy for customers -- until now.

Industry insiders say this time is likely to be different as companies continually are being forced to find new ways to tighten their belts on everything from computer purchases to pencils and paper clips. Before "on demand," most mid-size companies couldn't afford an expensive investment in procurement and purchasing, said industry observer, Jason Busch, who edits the blog, www.spendmatters.com.

Busch, a consultant who counts Ariba and some of its competitors among his clients, noted that smaller firms were likely to benefit from scaled-down services such as Ariba's, saving money and increasing their bottom line.

Industry watchers agree. While purchasing in smaller firms often has taken the back burner to such money-making divisions as sales and marketing, companies can shave purchasing and supply costs by 5 percent to 7 percent using the new services.

"I'm not saying there will be a revolution" in the way companies do their purchasing, said Mr. Friedman, the Fulcrum analyst. But, he added, the market is ready for this approach.

Both Ariba and its smaller competitors "can certainly compete and win" against the bigger software services players by using "on demand," agreed Mr. Busch.