Readers may recall the May 2012 announcement from SAP that it had acquired procurement technology and B2B services provider Ariba for $4.5 Billion. SAP was willing to pay a 20 percent premium over existing market value to incorporate Ariba functionality and services under its umbrella.
Supply Chain Matters recently had an updated briefing from Ariba, now officially termed An SAP Company. In our initial assessment of this acquisition, our view was that this marriage implied a lot of joint work over the coming months, especially in addressing functionality overlaps among current SAP applications supporting both indirect and direct procurement needs. Our first follow-up briefing was therefore focused on the progress achieved thus far in bringing these two companies together in offering combined procurement business process technology and B2B supplier network services. Progress has been made in the indirect procurement process area support, but more work remains in the direct materials support area. Overall, that is what should be expected at this point.
The actual acquisition ultimately closed in the early part of calendar Q4 last year, thus integration efforts really have progressed about four to six months, depending on perspective. In our briefing, the first priority was described as the combining of sales teams, which was characterized as going very well. This area of initial priority should not surprise since Ariba had bounced back from an operating loss in 2011 to becoming somewhat profitable at the time of the acquisition announcement. Sales momentum is therefore a big deal for both parties. Ariba sales teams are now deployed in a SAP procurement product and B2B vendor network specialist category. If they have not done so already, SAP installed based readers can expect an Ariba sales representative to call to explore your current overall indirect procurement, overall spend and network maintenance challenges, while outlining the benefits of Ariba Supplier Network and associated services.
While some select SAP customers are nudging toward more direct procurement process support, more integration in this area will need to occur in the current months. Ariba’s internal teams are aligning to support SAP’s deep industry business unit (IBU) approach in addressing unique business process needs in sourcing, procurement and B2B supplier connectivity areas, which obviously takes some time. Our sense from the description of progress is that Ariba does not wish to oversell at this point, and is willing to take the time to develop a collective longer-term integration roadmap.
In product dimension, 25 groups are working on various areas of technology and application integration in what is described as a “library of options”. Teams are evaluating areas related to consistency in technology platforms, leveraging SAP’s newer technologies such as Crossgate and specific combined application offerings. Customers can also expect Ariba to continue to rely on its current information integration toolkit built on the HubSpan platform, but concentrate more on SAP’s strategic information integration platform components. The entire Ariba partner network is described as being in the early stages of review. Readers can expect Ariba to have a more concentrated focus on small and medium sized businesses to leverage both its Supplier Network and SAP Business One accounts.
Bottom line from our perspective, the assimilation of Ariba within SAP is progressing as expected.
SAP customers can expect a strong emphasis on providing added value in various indirect procurement business process areas in 2013.
Given the scope of integration and assimilation challenges remaining in the direct procurement business process area, which is a core capability need of SAP installed base customers, we do not expect any major announcements until later this year. However, our sense is that both teams are beginning to realize the overall market and competitive potential for more timely integration of the direct procurement and B2B process applications and corresponding SAP technology stack, but are being realistic on the work that remains to be completed.
Bob – veryful info. In month of dec, SAP had said in their SAPPHIRE that they will develop solution to integrate their SAP Products with Ariba Supplier Network in q1 of 2013.
As per it, they have delivered RDS adapter to integrate SAP MM/SRM with Ariba Supplier Network in first week of February 2013 to improve the collaboration with supplier for procurement document exchange such as PO, order acknowledge/confirmation, Advance Ship notice and invoice. For more detail, please visit – http://scn.sap.com/community/srm/blog/2013/02/01/take-your-sap-procurement-business-suite-spend-into-the-ariba-network-with-the-rds-adapter-available
On product front, SAP has said that they are recommending Ariba S2P solution for demand and SAP S2P Solution for on premise
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In product consolidation front, I believe SAP has multiple products to source to pay cycle.
SAP SRM for indirect/direct procurement, sourcing, contract and supplier management (Registration, evaluation & performance -Survey) and SAP sourcing for sourcing, contract and supplier management (Registration, evaluation & performance -Survey), Supplier Life Management for supplier management (Registration, evaluation & performance –Survey) and Supplier collaboration for they have SAP SUS (mainly used for both direct and indirectly procurement) and SNC (mainly used for direct procurement). In case of the supplier collaboration both SAP SUS and SNC are private collaboration tools hence if buying/supplier organization wants to take the advantage then it will be better off to use Ariba Supplier Network for collaboration however it is based on subscription. On analytic front too, SAP has multiple products Supplier Performance Management and BI/BO with SAP SRM Business package. On data enrichment, SAP has data enrichment and classification tool.
Apart from SAP their own products, now they have Ariba products to cater to source to pay domain. Bird view on product front, Ariba products are user friendly, simplified process, easy to extend when compare to SAP’s product. In a nutshell, SAP/Ariba will take more time to consolidate their products.
Mohan,
Thanks for providing additional clarification to the SAP and Ariba combined product roadmap. I believe that you had re-enforced the notion that there still are multiple applications supporting various procurement and B2B supplier collaboration needs, and SAP customers will continue to require clarification as to which path to take, given longer-term application integration roadmaps.
Bob Ferrari