Companies confused by recent shifts in the SAP sourcing and procurement market should focus on choosing a network that provides the greatest access to their suppliers and consider other factors related to pricing, analysts say.
For SAP customers, that may or may not mean using the Ariba Network that SAP acquired last year.
"The question is who best will help me connect with my suppliers," said Duncan Jones, an analyst with Cambridge, Mass.-based Forrester Research Inc. who covers procurement.
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The market has seen significant changes in recent months, with SAP's acquisition of Ariba, Inc., a provider of a cloud-based network of buyers and sellers. That prompted Microsoft to go with Hubwoo as the procurement network provider integrated with its Dynamics AX ERP portfolio, according to Pat Fitzhenry, director of global ISV partners at Microsoft.
"We did have a similar relationship with Ariba that we signed a little over a year ago. That agreement was terminated when they were acquired by SAP," Fitzhenry said. "SAP is our biggest competitor. For us to continue in a partnership with a product that is now owned by SAP, that's simply something we wouldn’t do."
While SAP touts Ariba for its customers -- and Microsoft does the same with Hubwoo -- the important thing for SAP customers is to stay focused on the number and value of the suppliers in their vertical industry, according to Jones.
There are other choices besides Ariba for SAP customers, whether it's Hubwoo, Capgemini's IBX Network, or any number of networks, some of which may cater to individual countries, geographic regions or vertical industries, he said.
"On the buyer front, you want something that's going to be easy to implement into your supplier base," Jones said. "So, if you're operating in a particular vertical, and there's one that's prevalent in your vertical, your suppliers are going to be using that network."
Many of today's largest networks originally specialized in specific vertical industries or supplier categories, according to Jones.
"Hubwoo is like that -- it came out of the merger of a couple of vertical networks," Jones said.
One of Ariba's advantages is that it's inexpensive to use, because costs are shared by the suppliers and buyers that use the network, according to Jason Busch, a partner at Spend Matters, LLC, a Chicago-based consulting firm that specializes in the procurement market.
"Ariba can be inexpensive -- at least based on volume, users, etc. -- relative to just about all of its competitors, including upstarts such as Tradeshift (e-invoicing/supplier network platform) and Coupa (eProcurement and many related modules), especially if it knows there is competition for a deal," Busch wrote on the Spend Matters blog. "In fact, we can’t point to a single case where Ariba has lost a P2P [purchase-to-pay] deal on price (or at least price alone)."
Still, the fact that Ariba charges suppliers at all is something many buyers will want to consider, Jones added.
"Ariba's scale may attract your suppliers to join its network, but its fees may put them off," Jones said. "If you're not big enough to force your suppliers to use your chosen network, then you may prefer one that is free to suppliers or has a better process for managing the onboarding process."
Other competitors, like Hubwoo and Coupa, only charge buyers to use their network, according to those companies.
When to consider specialty vendors
Apart from the larger players, there are a number of "best of breed" vendors that companies may want to consider for more targeted functionality, according to Bill McBeath, chief research officer of ChainLink Research, based in Newton, Mass.
One of these is CombineNet, a maker of software that optimizes complex sets of bid and vendor combinations to find the optimal price while meeting other criteria, such as making sure any one vendor doesn't get more than 20% of the business. CombineNet has also spread into other areas like contract management.
"Some of those best of breeds, they really are better than the full suite, otherwise they wouldn't survive," McBeath said.
Often, the choice between large vendors and those providing niche functions doesn’t have to be an either-or situation. For example, a significant portion of CombineNet's customers also use Ariba, according to McBeath. In that situation, the company uses Ariba or another platform for general supplier discovery or a request for a proposal and CombineNet for the "heavy lifting" analysis of bids, he added.
"It's very, very common with these best of breeds that they plug in. They have to integrate well easily into Ariba and SAP -- even Oracle, for example," McBeath said. "They can't survive without being able to integrate relatively easily."