SAP and Ariba Synergy

SAP acquired spend management and business commerce solution provider Ariba in 2012 for strategic reasons, and has since been investing in Ariba with a longer-term view—especially with regards to power of the business commerce network (SAP is even an Ariba user itself). We recently looked at the happenings at the recent Ariba Live 2014 user conference, and here we’ll focus on how SAP and Ariba have been meshing together to mutual benefit.
The Ariba Business Network is a huge big data pool that could be used by SAP to discern data patters for some industry requirements, e.g., traceability. Hooking up the SAP HANA in-memory platform for real-time computing and the Ariba Network should not only provide significant performance improvements, but should also provide a platform for Ariba to deliver industry-specific analytics and insights to its network of suppliers and buyers that could radically change buyer/seller dynamics. SAP announced plans this week to move the Ariba Network to HANA by the end of 2014. The transition to HANA has started with Ariba Spend Visibility. The release of the Ariba Network, including the migration of Ariba Spend Visibility to SAP HANA, was pushed to 4.7 million users in 2,200 customer realms with zero downtime.
Ariba and SAP—Loosely Coupled For Now
Though it was acquired by SAP almost two years ago, Ariba is still a fairly autonomous division, and about half of its customers are non-SAP users. This percent will likely decline somewhat now that SAP and Ariba’s sales and field marketing teams have joined forces and are being compensated for joint sales. That being said, Ariba and SAP both expressed their commitment to a key tenet—keeping the Ariba Network open to connect to all back-end systems. Where the two organizations’ integration is much more apparent is in the realm of R&D. With the exception of a few former top Ariba executives, most of the Ariba’s product managers, developers, and marketers remain, committed and gung ho as ever.
What SAP brings to Ariba has been investment, industry, and direct materials spend experience, and underlying technology, which has accelerated some new product delivery for Ariba (which would not have been possible on its own with its limited bandwidth). Indeed, Ariba has had very prolific product delivery of late and it looks like this will continue into the foreseeable future. The company’s range of R&D investments is truly impressive, including functional and user experience (UX) enhancements, new mobile capabilities, integration with key SAP ERP solutions, globalization, and localization capabilities. SAP has already helped (and plans to help in the future) with the SAP HANA platform, the Fiori consumer-like UX, supply chain solutions such as SAP Supply Network Collaboration (SNC), and mobility technology.
With Ariba Spend Visibility now powered by SAP HANA, companies can analyze more spend data more quickly than ever before. With SAP HANA, data loads 20 times faster and is immediately accessible once a sourcing project, contract, or invoice is initiated. Companies can perform more complex analyses based on an expanded set of variables, including cost centers, purchase price variances, and micro regions, and receive results in real time. Other contributions by SAP have been SAP Cloud for Travel & Expenses (making Ariba competitive against Concur) and SAP Supplier Infonet, a risk management predictive analytics solution. The latter solution predicts the risk of disruptions, bankruptcies, and other impactful events in the supply chain, something that IBM Emptoris has had for some time.
More predictive risk management for buyers as well as sales predictive analytics for sellers are slated in the future using HANA, SAP Supplier Infonet, and Lumira data visualization by SAP. There will also be integration with the SuccessFactors human capital management (HCM) solutions and the most recently acquired Fieldglass for handling service contractors and contingent workforce. The SAP Supplier Relationship Management (SAP SRM) is reportedly being sunset and those customers have a choice of switching to Ariba modules. Alternatively, SAP promises support for at least the next 7 years, and these customers are able to hook SAP SRM up to the Ariba Network, because that is where innovation will mostly take place.
For its part, in addition to its customer success, Ariba has brought its cloud DNA to SAP. Contrary to SuccessFactors, which has been a cloud company from the word go (and with no burden of legacy on-premise install base), Ariba has had an experience of how to successfully transform into cloud from on-premise. SAP and Ariba could, in other words, relate to each other with regards to sensitivity of their existing customers and handling their migrations. Thus, the mature and proven Ariba Cloud Platform will be carefully expanded by the SAP HANA Cloud Platform in a piecemeal fashion, rather than via a total replacement.
With Ariba Spend Visibility already being on HANA, one prediction is that perhaps 90 percent of Ariba’s functional scope will be on HANA in three years with the best case scenario. Ariba wants to prioritize on delivering new functionality rather than to simply port to HANA for the sake of porting. Thus, the re-platforming and/or leveraging of HANA across the full array of Ariba solutions will be careful, as Ariba wants to make sure that all of the valuable 15-plus years of financial transactions data (aggregated and not) does not get lost or corrupted in the process of porting.  
While Ariba continues to grow healthily (some 80 percent growth this past year), it can foresee the following net new revenue opportunities: new geographies, tackling direct materials categories, public sector, risk management, etc. After all, 60 percent or so of the total global spend touches SAP ERP systems, which is an enormous opportunity for Ariba to tap even further.
As for new geographies for tax-compliant e-invoicing, Ariba is currently not ready for China, Japan, Russia, and many other markets, where SAP can help with its direct presence and localization experience. Brazil and Mexico are among the countries with the most complex tax requirements for e-invoicing. By recently extending e-invoicing support to these countries, the Ariba Network provides the infrastructure needed to receive and validate e-invoices that meet these stringent regulations, along with an e-invoice archive and audit trail for additional business controls, so that global organizations can expand their e-invoice initiatives to these fast growing Latin American markets.
Other Noteworthy New Products
In addition to the announced AribaPay’s very first customer, with Ariba Sourcing and Ariba Discovery now integrated in the brand new Ariba Spot Quote product, companies can create and execute one-time purchases for goods or services that are not handled by their supplier base in a fully automated manner. Requests for quote (RFQ) can be automatically generated from a backend ERP system and sourcing events created within Ariba. Suppliers are then invited either as part of the request for quote (RFQ) or from matching through Ariba Discovery—all without any human intervention.
Spot buys are challenging for most companies because they require quick turnaround, and buyers generally lack efficient or effective methods to source them. Yet, about 40 percent of items get procured in a non-catalog and non-contract manner. Quotes are used for non-catalog items, whereby a prospective buyer provides specs/desired date/cost. Spot buys are often used for buying excess or returned items. Leveraging solutions like Ariba Spot Quote, organizations can reduce the time it takes to find the right suppliers from weeks to days or even hours and drive cost reductions of between two and five percent on average.
Project-based invoices, common for construction, engineering, repairs, and facilities management, are among the most critical expenses to manage, and most difficult to control. With Ariba Services Invoicing, companies can extend the smart invoicing process already mastered by Ariba (where e-invoices undergo an automated validation process upon supplier submission so that only accurate and approved invoices reach accounts payable) to these complex spend categories. Buyers can review and approve service entry sheets—which detail the services performed before, not after, invoice submission. Suppliers can then “flip” approved service entry sheets into invoices to create the perfect payable. They can match electronic invoices to catalogs, purchase orders, and contracts that ensure a payable without human intervention. This helps them reduce rogue and maverick spend, enforce contracted pricing on invoices, and maximize spend with key reliable strategic suppliers to lower costs.
What’s Coming Next?
Ariba and SAP definitely have their hands full with already delivered and planned future products. The “big picture” idea is to become a single source of supplier information, and then even expand into easy syndication, including across SAP and other systems, to manage supplier information across the entire supply chain. Omnichannel commerce is on the plate too, and it will be interesting to see whether there will be any synergy between the Ariba Network and hybris Software within SAP, at least in the retail sector. There are no details at this stage about what SAP and Ariba plan to do with regards to lead management, nurturing, and market automation in the Ariba Network.
Needless to say, sourcing direct materials can be quite tricky, and the time has come for Ariba to help there too. In many industries, product lifecycle management (PLM) solutions can play a major role here, since sourcing is about getting the right things at the right time and the right price. Ariba and the like are capable of taking care of time and price but don’t do much about the right (or even perfect) things. Getting the right things requires companies to exchange requirements, design, manufacturing process, materials compliance, and other data with suppliers in an interactive manner. PLM software is suitable here because it not only takes care of departmental, enterprise-wide collaborations, but also in the expanded enterprise, supply chain setting. There wasn’t much PLM talk at the Ariba LIVE 2014 conference, either about integrating Ariba to SAP PLM or other PLM offerings, but we should probably expect that down the track, as Ariba expands into more categories and direct materials.
SAP and Ariba are not the only game in town, at least not with IBM’s Smarter Commerce (market, sell, buy, and service) offering, which former Sterling Commerce and Emptoris (Ariba’s longstanding #1 foe) are now part of, around. Coupa Software is a close partner with IBM for e-procurement needs, and Coupa’s consumer-like cloud UX is likely behind Ariba’s recent focus on its own UX improvements. SciQuest is also a well-rounded spend management provider based on its slew of recent acquisitions, on top of its strength in sourcing optimization and direct materials.
On the business network side, there will always be some regional and/or industry niche providers that can do more or better than Ariba Network. TradeShift and Nipendo are coming with some seemingly better value prop offerings, trying to peel away some Ariba users, while E2open, SPS Commerce, OB10, Hubwoo, etc. all have their own strongholds and capabilities.
While Ariba cannot ignore those challengers’ value props and freebee taunts, as long as Ariba’s customers perceive enough value from finding great partners and conducting e-business in the Ariba Network, the vendor should be fine. The future product developments and competitors’ moves will make this place an exciting venue for market observers.
Related Reading:

Nipendo’s Milestone Challenges E-invoicing Establishment (Jan 2014)
IBM Emptoris v10, Smarter Commerce, and Strategic Sourcing (Nov 2013)
SciQuest Combines with CombineNet to Master Complex Sourcing (Sept 2013)
An Insider’s View of Spend Management Software Vendor Coupa (July 2013)
PROACTIS Source-to-contract and Purchase-to-pay Solutions Ruling the UK Public Sector (Oct 2012)

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