Just the FAQs (and the answers) on SAP’s latest acquisition: SAP Ariba.
Who is Ariba?
Ariba offers an open network and web-based applications to buy, sell, and manage cash among B2B buyers and sellers. It’s now known as “Ariba, an SAP Company.” SAP paid $4.5 billion on Oct. 1, 2012, to acquire Ariba ($45 a share for ARBA holders!).
Ariba says it’s:
>the world’s largest business network with more than 730,000 companies transacting over $340 billion annually among 5 million users
>the second largest cloud apps vendor>will deliver $500 million in revenues this year
What’s Ariba’s pitch?
Ariba’s view: “Simplified connectivity, dramatic improvements in process efficiency, enhanced visibility and status into key orders, deliveries, invoices, payments and other vital business commerce activities.” Simplicity will be the key word going forward. You’ll hear Ariba (and now SAP) execs extoll the similarities between consumer-driven commerce (i.e. Amazon, eBay) and Ariba’s commerce network.
This is how TEC Analyst P.J. Jakovljevic put it, when discussing Ariba’s potential: “This is what cloud commerce is all about—leveraging the power of a network to make business commerce as easy as personal commerce.”
Where does Ariba fit in SAP’s evolving cloud strategy?
The four areas of the SAP cloud application story are: money, people, customer, and suppliers. (Business ByDesign is kind of its own category.) Just as SuccessFactors is the core of the “people” segment, Ariba will constitute the core of the “suppliers” category. In addition, as part of SAP’s enterprise cloud strategy (i.e., applications, platform, infrastructure), Ariba will serve as a new “business network” category, connecting suppliers, customers and partners.
What are Ariba’s products?
Ariba sells separate “business commerce” products for buyers and sellers on the Ariba network. Here’s a sampling:
>Buyers—Spending Visibility, Sourcing, Contract Management, Procure-to-Pay, T&E + Supplier Management
>Sellers—“Discovery Service” (to find new buyers), Contract Management for Sales, Order and Catalog solutions
Is there anything special for existing SAP customers?
Ariba offers five pre-built adapters to: ECC Financials (Fin) + Materials Management (MM); ECC Fin only; ECC MM only; ECC + Supplier Relationship Management (SRM); and SRM only.
Also there’s Ariba’s Collaborative Commerce product. According to Ariba, it’s a NetWeaver Compliant Adapter that “connects SAP to the Ariba Commerce Cloud for real-time collaboration with virtually all of your suppliers for B2B commerce, with no need to modify or upgrade your SAP environment.” (Sounds a bit too easy, doesn’t it?)
Why did SAP pay $4.5 billion for Ariba?
Ahhh, good question. SAP is in the midst of a transformation from “that German ERP vendor” to a becoming a one-stop shop for database, enterprise software, analytical apps, cloud software and services, and mobile device and apps management. The scenario SAP foresees is that the Ariba network will become a “one-stop shop for all supplier relations.” And seeing that approximately 60 percent of the world’s transactions run through an SAP system today, it’s easy for SAP executives to become giddy over the potential for big-time growth and the exponential power of adding more and more customers to the network.
(Note: If all that makes you think of some Lord-of-the-Rings type of analogy—i.e., “One Business Network to Rule Them All!”—then know you are not alone.)
How much growth does SAP want?
You’ll recall SAP’s “stretch” goals: By 2015 it wants 1 billion users “touching” SAP systems and $28 billion in annual revenues. By adding Ariba’s 5 million users to SuccessFactors’ 15 million users, SAP can now claim a cloud user base that is four times larger than that of Salesforce.com’s. (Of course, that cost approximately $8 billion to assemble, but who’s counting?)
Where is this growth going to come from?
A 2012 IDC Manufacturing Insights survey found that the number-one supply chain priority in the coming year was reducing overall supply chain costs, cited by 80 percent of respondents. What’s the No. 1 activity to do that? “Reducing procurement costs,” with some 35 percent of respondents citing it as the top opportunity.
In addition, Ariba EVP of network strategy and global marketingTim Minahan claims that 80 percent of POs, invoices and other transactions still take place offline—spreadsheets and paper that lead to lots of inefficiency and potential errors. Those cumulative data points demonstrate a need for a more efficient way to connect buyers and sellers as they transact business. Whether Ariba and SAP can connect those dots remains to be seen.
Can we see a road map?
Surely! The overall message from SAP so far is this: For customers looking for procurement or spend management software on-premise, SAP is your vendor; for customers looking for cloud software in those areas, Ariba’s suite will be the defacto package. But as Minahan points out, there are functionality gaps where Ariba can fill in—for instance, Ariba offers a catalog management product, and SAP does not. As to integration: SAP NetWeaver Process Integration (PI) will be the core integration approach for connecting SAP solutions to the Ariba network, according to SAP.
Here’s how the SAP on-premise procurement products line up next to the OnDemand lines.
What about if I bought SAP Sourcing OnDemand or Ariba’s on-premise software?
SAP’s short (but vague) written response to this question is that all customers will be supported on current investments per their maintenance agreements.
What’s not decided yet?
A lot. But that’s OK, it’s still early. The plan from SAP and Ariba is to keep the Ariba network open—meaning, no matter what back-end systems your company is running the network will connect. Of course you’ll be hearing a lot more “optimized for SAP” rhetoric, and SAP will be offering more adapters (beyond just procurement functions) and standard integration to more and more SAP software in the future. This, SAP says, will be based on customer demand. As to Crossgate and SAP Supplier InfoNet, that level of integration and connectivity is still TBD.
The overall message from SAP and Ariba during a recent ASUG webinar was: “We’re not looking at rationalizing. We’re looking to connect all these solutions…to add more value to the network.”
What’s it going to cost SAP and Ariba customers?
Before we get into that, here’s a quote from supply chain analyst Bob Ferrari, from a blog post on SupplyChainMatters.com: “Pricing will be an area of definite concern for combined customers. Ariba’s network fees have been on the increase and have motivated some previous customers to seek other alternatives, including either business process outsourcing or use of another vendor’s technology. SAP also has a history for taking a healthy share of partner revenues, leaving little room for price discounting.”
So what does SAP say this is going to cost current SAP ERP and SRM customers who want to make new Ariba connections and extend their environments? “A separate subscription agreement is required for using Ariba solutions and transacting via the Ariba network,” says SAP’s Emily Rakowski. (SpendMatters.com’s Jason Busch speculates on further changes to Ariba’s pricing structure.)
As to whether prices will go up for existing Ariba customers, Minahan says “there’s currently no plans to change those.” He says SAP and Ariba will make things simpler—“simpler bundles and more standard integration.”
We can look to SuccessFactors integration costs as a trail marker for how this may play out—see this post by Jarret Pazahanick on SCN: The Real Truth about SAP and SuccessFactors Integration. In addition, the IDG News Service’s Chris Kanaracus recently provided some insight on SAP’s policies and pricing for linking cloud apps.
We haven’t mentioned HANA once yet. Is there a Ariba and HANA connection?
You bet! There have been overtones and teasers offered by SAP and Ariba executives on how HANA will bolster the Ariba network with future products such as real-time predictive analytics on supplier relations, procurement and other integrated B2B functionalities.