Blog

SAP-Ariba Deal Goes Beyond the Cloud

  • author image

With last week’s announcement that SAP is acquiring Ariba (ARBA) for $4.3B, or $45.00 per share in cash, representing a 20 percent premium over the May 21 closing price, few people can suggest that SAP isn’t serious about becoming a major player in the burgeoning cloud marketplace. But, I’m wondering whether winning a major share of the cloud market is a sufficient goal to fully recast SAP’s position in the rapidly evolving competitive landscape.

After a series of fits and starts moving into Software as a Service (SaaS), SAP has made a series of “big bets” to demonstrate its determination to become a major cloud player.

Its SuccessFactors acquisition not only catapulted SAP into the SaaS Human Capital Management (HCM) business, it also gave SAP a proven cloud executive team led by Lars Dalgaard, founder and CEO of SuccessFactors to drive the company’s cloud initiatives.

Although Ariba has repositioned itself as a cloud-based solution provider, SAP has chosen not to fold it into the cloud portfolio led by Dalgaard. There are multiple reasons for this decision, but I think an important factor is that Ariba is more of a business service provider than it is a cloud solution vendor.

Ariba’s e-procurement and supply-chain services connect users to their trading partners via a business commerce network of more than 730,000 companies that handles over $319 billion in transactions a year.

SAP estimates that nearly two-thirds of the world’s transaction revenues touch an SAP system across over 190,000 customers. That customer base will be multiplied and enhanced by the Ariba acquisition and its vast network of users.

In order to bring these two worlds together, SAP faces a series of technological and organizational challenges. Technologically, it must merge the two networks together on a common cloud infrastructure and integrate the Ariba and SAP code bases into a single SaaS architecture. These technical tasks will take years to accomplish, if they are completed at all. Truth is that every major tech company has struggled to fully integrate the products and backend processes of their acquired assets into a unified corporate product portfolio and operating model.

But SAP faces an even greater organizational challenge to using the Ariba acquisition to reposition itself in the market as a business service provider rather than just a software vendor. Moving in this direction not only requires a different set of internal skills but could also create a new set of concerns among SAP’s channel partners who might see this type of move as a threat to their businesses. Yet, IBM’s vast Global Services capabilities is a clear example of how a product vendor can extend its reach and strengthen its competitive position with a new set of services.

Today’s rising demand for cloud solutions is being driven in part by corporate executives seeking to offload, or “out-task,” a growing portion of their non-core business processes to proven third-party service providers.

SAP sits at an interesting crossroads as it determines how far it should be pulled into the business services marketplace by its Ariba and other cloud-oriented acquisitions.

Jeff Kaplan is the managing director of THINKstrategies and founder of the Cloud Computing Showplace. He can be reached at [email protected]

Comments

By TUSHAR KULKARNI

Dear Sir

SAP has acquired Ariba but how they are going to take care of services to their customers? Which consulting service providers are giving currently? Will they take that in their hand or will service providers be giving as it is? Are there different consulting service providers for different areas? Will their business hamper?

Post Your Comment




Leave another comment.

In order to post a comment, you must complete the fields indicated above.

Post Your Comment Close

Thank you for your comment.

Thank you for submitting your comment, your opinion is an important part of SandHill.com

Your comment has been submitted for review and will be posted to this article as soon as it is approved.

Back to Article

News You Can Use

Register for LicensingLive! 2014

Click here for news on the Data Analytics Outsourcing market,  the 3G/4G M2M devices market as well as other news releases

 

 

 

 

 

 

 

 

Topics Related to this Article