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SAP to Acquire Ariba, Expand Cloud Presence - First Impressions

Written By: Predrag Jakovljevic
Published On: May 23 2012

SAP and Ariba apparently have good poker faces, since during their recent user events, AribaLIVE 2012 and SAPPHIRE NOW 2012, there was no inkling of this development. At first glance, this is a good fit, as a plethora of large SAP customers use both Ariba Network and Ariba’s procurement, sourcing, contract management, e-invoicing, etc. software (in fact, in the early 2000s, the name Ariba was taboo at SAP’s Waldorf HQ, and Ariba was a competitor that SAP loved to hate).

The arms race is accelerating in the enterprise applications space. Now that Ariba and Emptoris (acquired by IBM) are no longer available as independent spend management providers, what is left for Oracle and Infor to bolster their respective supply network and spend management capabilities?

My guess is that SAP's Crossgate acquisition (and Hubwoo alliance) for supplier networks and global trade management (GTM), as well as the much earlier acquisition of Frictionless Commerce (now SAP Sourcing On-Demand), were not making a dent in Ariba or Emptoris' armor (my colleague Phil Reney compared the scale of Crossgate vs. Ariba to that of Google+ vs. Facebook). That's why SAP and Ariba have had many on–off attempts at the Ariba Network alliance in the past.

Plus, now with SuccessFactors and Ariba in its fold, SAP's cloud revenues will be close to $1B, which is some serious cloud cred, albeit still only 4% of SAP's total revenues (over $20B). More importantly, Ariba brings critical know-how and painstaking experience of how a traditional on-premise software vendor successfully transitions into a true multitenant cloud software provider (SuccessFactors has always been a cloud-only vendor).

For its part, I think that SAP can contribute a lot with its mobility, big data analytics (e.g., supplier-buyer performance, recommendations engines, etc.), and social tools to Ariba Network. Those were all the current and future product developments that Ariba outlined at AribaLIVE 2102. Plus, IBM's intent to use Emptoris and Sterling Commerce for its Smart Commerce retail industry framework will likely be replicated by SAP through Ariba for its retail suite.

On a downside, I am not sure what the future will hold with the recent reseller deal for Ariba Network via Microsoft Dynamics partners and for the Force.com-based Ariba Contracts offering, but SAP would be smart not to kill the possibly golden goose. Time will also tell how SAP's relationships with IBM and Capgemini will unfold in light of these consulting companies' acquisitions of Emptoris and IBX respectively.

Look for more articles on this merger by me as I fully gather my thoughts after having attended both AribaLIVE 2012 and SAPPHIRE NOW 2012. Until then, your comments and thoughts are customarily welcome.

See also:

Horses for SourcesSAP ruptures the procurement universe by scooping up Ariba.
ZDNetSAP gets huge cloud and extended business process boost with Ariba acquisition.
 
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