Procurement Transformation Blog

Procurement Transformation Blog

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

A is for Ariba, SAP’s big move

Very remarkable news last week for those following the market of procurement applications. SAP is taking over Ariba for €4,3 bn. A surprising move that will stir the market. The precise consequences will become clear as soon as the dust settles down and SAP unveils more details about its vision behind this acquisition.

It is a fact that the ERP market is subject to substantial changes. Until recently many companies held the point of view that the adage “SAP, unless” should be at the top of their list of architecture principles. The following reasons helped create this view within many organizations:

  • SAP’s ease of integration with the existing IT platform
  • Solidity of the SAP’s solution
  • Ease of support & maintenance through a single supplier for the primary IT solutions

In the last two or three years this principle started to shift or disappeared altogether. In virtually every industry sector, there is now serious consideration given to SaaS/Cloud solutions. Because solidity of the platform and seamless integration with the financial backend system remained of crucial importance, some parties conceived the idea to launch a Cloud-based platform on SAP software (Hubwoo, IBX, Wallemedien). A big concern for SAP in this is that they are no longer in control of the sales process (with the exception perhaps of Hubwoo). In the traditional model SAP is selling licenses to end users. When these customers decide to choose for a Cloud solution, then SAP is no longer in control of that process or in any case less than they were used to. This could be a reason for the acquisition of Ariba. If so, then perhaps we can expect some similar moves in other functional domains.

What do SAP’s actions mean for other Cloud-based Procurement platforms?

Initially, not many changes are to be expected. Ultimately, it depends on the SAP’s plans for the Ariba platform. It is the largest of its kind and with hundreds of thousands of suppliers connected to it. This in itself is a huge asset. As SAP looks to perfect the integration between its software and the Ariba platform, thus reducing potential customers’ reservations to adoption, providers of other Cloud solutions based on SAP will be affected because this seamless integration with SAP is one of their main Unique Selling Propositions (USP). Furthermore, it would be interesting to hear from SAP what role they have in store for Hubwoo in their strategy. For Cloud solutions with a weaker relationship with SAP the consequences seem limited.

A third party that has a stake in this development concerns the system integrators like Capgemini, IBM, TCS and others. Until now, SAP was firstly and foremost a software supplier that wished to sell licenses to customers. The configuration and implementation of these solutions was largely left to system integrators. This move by SAP to become a Cloud solution provider will change this partly or completely. Configuring and implementing a Cloud-solution for a customer requires by definition less work than a traditional implementation, since it is an already existing platform. Additionally, this work will not easily be outsourced to partners.

SAP’s move does not come as a complete surprise. The market has seen change trending toward Cloud solutions. Capgemini was one of the first to grasp this new reality and decided for this reason to acquire IBX in 2010. But, other alliances emerged, like the take-over of Emptoris by IBM earlier this year. We just have to wait and see what will happen, but counterbalancing moves from parties like Oracle and Microsoft seem inevitable.

These are exciting times for software solution providers, software customers and system integrators.

About the author

Martin Putters
Martin Putters
Martin Putters is Principal Consultant. He has a diversified experience in management consultancy in supply chain management and over 20 years of experience in sourcing and procurement. He has been involved in several procurement transformation projects and ERP- and SRM implementations. In such programs, implemented in environments as diverse as public organizations, utilities, pharmaceutical, food- and chemical industry and the financial sector, he usually combines consulting and project management roles.

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