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SAP Ariba adds IBM Watson technology to procurement processes

SAP Ariba and IBM are partnering to combine SAP Leonardo and IBM Watson technology to create cognitive procurement applications. The deal looks good to some, but lacks details.

SAP Ariba and IBM raised a few eyebrows in May when they announced a technology and business partnership intended to bring intelligence into procurement applications. For the most part, industry analysts think it's a good idea in theory, but wonder whether the two technology powerhouses can make the partnership work.

SAP Ariba and IBM are combining the forces of SAP Leonardo and IBM Watson technology to integrate intelligence into procurement processes like source-to-settle, according to the companies. The intended goal is to enable applications that can take transactional and business data from the SAP Ariba network and integrate it with insights from unstructured data sources, thereby improving decision-making in processes like supplier management, contracts and sourcing.

The most tangible manifestation of the partnership is a Cognitive Procurement hub, where developers can use and explore SAP Leonardo and IBM Watson technology to develop procurement applications that integrate technologies like artificial intelligence (AI), the internet of things (IoT), machine learning and blockchain.

The companies also announced that IBM intends to sunset its procurement platform, IBM Emptoris, with both companies working to migrate Emptoris customers to the Ariba platform.

"The main components are that we are going to develop the next-generation applications together to redefine the set of processes," said SAP Ariba president Alex Atzberger. "The future of applications is about adding cognitive and intelligence capabilities, and this is what IBM Watson is really good at, and what Leonardo is good at, so we're bringing these pieces together to define these future solutions."

Three waves of intelligence integration

The SAP Ariba-IBM partnership indicates how intelligence is being integrated into enterprise business processes, according to Mickey North Rizza, IDC program vice president for enterprise applications.

This integration is happening in three waves, Rizza said. The first wave is accelerated response, which injects real-time response mechanisms into operational data, automating data capture and analysis for outcomes like personalized alerts for an operation that requires attention. The second wave is integrating intelligence into business processes like source-to-settle; for example, automating many of the routine tasks in the process that take up a buyer's time. The third wave will encompass the entire enterprise ERP system, as intelligence goes beyond processes like source-to-settle and is built into processes like source-to-invoice or lead-to-cash.

The partnership helps SAP Ariba develop the kinds of applications that fit into the second wave, where much of the processes for sourcing or contracts can be automated though intelligence in the system.

"We're seeing the morphing of all these functional apps and business processes will become shorter because you're adding more information on the front end, and the technology's going to pick up on it," Rizza said. "[The human element will still be there], but the technology will have a bigger component, and the human interaction will be different; for example, analyzing the information. So you'll get rid of a lot of the transactional stuff and make that a part of the smart side."

Rizza believes that IBM Watson technology is "way ahead" of any other IoT platform, making it attractive as another vehicle for SAP Ariba to get intelligence into the network.

"It will be interesting to watch how this all comes into play," she said. "What I think is really interesting is that you have SAP Leonardo going on, as well as the Watson tie, so my guess is there will be a lot of collaboration."

More of a sales channel than a technology move?

The deal makes more sense from the sales and marketing side than the technology side, according to Josh Greenbaum, analyst and principal at Enterprise Applications Consulting.

"All these Watson deals are really about a sales channel more than anything else," Greenbaum said. "When you really dig down under the covers, other than the weather data that Watson has through the acquisition of The Weather Company, there isn't anything that they do that isn't done in SAP Leonardo, Salesforce Einstein or any other next-generation intelligence IoT platform; they're all driving toward the same commodity set of services."

Greenbaum explained that AI capabilities in the IBM Watson technology can be a significant benefit for SAP Ariba on the supply chain planning side and the procurement side because it can take advantage of the vast amount of data on business relationships and transactions in the Ariba Network. However, it may be tricky for companies to combine the forces of SAP Leonardo and IBM Watson technology.

"It's a double-edged sword for SAP because the proofs of concept in these machine learning, AI and IoT worlds start with the tools that have the greatest presence. So if you're a Watson user, you'll go with Watson, and if you've got Leonardo, you'll start with Leonardo," he said. "The danger for SAP is that what starts in Watson stays in Watson, and if they're pushing too close to Watson, they'll lose the opportunity of having Leonardo [play] a significant role."

Not much meat yet, but potential is there

Jon Reed, co-founder of Diginomica, agrees that the deal is a "clear win for SAP Ariba from a customer referral standpoint," but said that there's not much meat on the bone yet on the product side, although there is lots of potential.

"Customers won't find much to work with yet; however, going forward, I can see some benefits, both in terms of fancier predictive capabilities, but also contractual analysis, and even error fixing," Reed said. "Watson, for example, can be linked up to Alexa, so there are possibilities for voice-enabled procurement inquiries into Watson that will take you further into interactive inquiries than Alexa or other voice assistants can."

SAP Ariba's vision of cognitive procurement driven by intelligence provided by Leonardo or Watson can be very useful, and it can transform procurement from a cost center to a business driver, Reed explained.

"Most procurement departments are still stuck in the dark ages, and even if they've transitioned from paper, they are still using the same old mentality of beating suppliers down on costs via auctions," Reed said. "There's little regard to how procurement could be a data service and source of intelligence that could help the business grow. That's a difficult, long-haul change, but I think this partnership fits into that, and that would be a welcome change for suppliers and anyone who deals with procurement."

IBM Emptoris migration to SAP Ariba benefits both

The deal that IBM made to transition its Emptoris customers to SAP Ariba is unusual in structure, but should be positive for both organizations, according to Andrew Bartolini, chief research officer at Ardent Partners.

"For SAP Ariba, if you go back to the early days of the e-sourcing world, it was an Ariba-Emptoris dogfight in many ways," Bartolini said. "Now, Ariba is part of SAP, and [it] acquires a one-time major nemesis, and along with that, acquires a very solid customer base comprised of large enterprises that are sophisticated users of strategic sourcing applications."

The Emptoris procurement products never really found a home in IBM, Bartolini said, and it should benefit IBM's customers to be able to move to the superior SAP Ariba platform.

It is too early to tell whether the Leonardo-Watson technology partnership will be successful, Bartolini said, because specific goals and details about how many resources have been committed were not disclosed.

It is too early to tell whether the Leonardo-Watson technology partnership will be successful, Bartolini said, because specific goals and details about how many resources have been committed were not disclosed.

"You have two technology powerhouses that, if they are committed to something like this, can do some very innovative things, but the level of commitment is not clear, so let's see what they announce over the next 12 months," Bartolini said. "Having seen technology partnerships do extraordinarily well and having seen them get announced, but never get started, I'll reserve judgment on it. They're both compelling technologies. I haven't spent a lot of time analyzing Leonardo, but Watson is a critical part of IBM going forward."

The deal to transfer Emptoris customers to SAP Ariba appears to be a good move, according to Greenbaum, but there are questions left unanswered about IBM's strategy.

"It's a good strategy overall to consolidate these platforms. The question is, who's going to blink first? And, at this point, from an IBM standpoint, it's just easier to blink and let this transfer over to Ariba," Greenbaum said.

"Ariba procurement is doing exceptionally well; they've got a significant network, and they're building some really exceptional capabilities, so it's a strong platform. But IBM is walking away from a lot of strategic businesses and pushing Watson, which is, as far as I can tell, not filling the gap."

Next Steps

SAP Ariba president Alex Atzberger talks about SAP's embrace of the cloud and how the Ariba Network integrates with the SAP Business Network

Can you integrate Ariba's sourcing and procurement functions with SAP ERP Central Component?

Read how IBM and Salesforce bring Watson and Einstein together

See why IBM is pushing its partners to embrace cognitive computing with Watson

Dig Deeper on SAP Ariba