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Companies around the world are re-examining their supplier relationships in the wake of ongoing economic uncertainty and increasingly complex supply chains. They are assessing whether the software they use to source, manage and pay suppliers can help them meet management mandates to cut supply chain costs, process invoices faster and more efficiently, and gain more insight into first-tier and sub-tier suppliers. Organizations want to bridge the gaps between their inward-facing ERP business processes and their outward-facing supply chain management (SCM) processes to drive more information sharing and collaboration.
This reignition of customer interest in procurement is one key reason why SAP bought Ariba for $4.5 billion in 2012. As Tim Tolhurst, chief purchasing officer at life- and materials-sciences firm DSM, put it in his speech at the AribaLIVE Rome user conference in April: "I feel like procurement has gone from the graveyard to the front yard."
As with SAP's previous multi-billion-dollar purchases -- BusinessObjects, Sybase and SuccessFactors -- in its first year under SAP's roof, Ariba functioned very much as a separate operation. That's understandable given that Ariba and SAP had been strong competitors with overlapping applications. In fact, SAP itself is a prime example of a hybrid procurement operation running a mix of Ariba and SAP Supplier Relationship Management, or SRM. As SAP's recent executive reshuffle made clear, the vendor is keen to present itself to customers as a unified entity, with all of its applications based on or moving to HANA and headed to -- or already in -- the cloud.
As a combined operation, SAP and Ariba compete against a varied field of players, notably ERP rival Oracle, which has procurement functions available in its on-premises E-Business Suite, JD Edwards, and PeopleSoft application suites, as well as in its Fusion Applications. Another major rival is IBM, which has made several acquisitions to build out its Smart Commerce initiative, including procurement player Emptoris. ERP players including Microsoft and Workday are expanding their procurement offerings in combination with partners.
What each one gains from the other
[P]rocurement has gone from the graveyard to the front yard.
Tim Tolhurst, chief purchasing officer, DSM
Owning Ariba allows SAP to field a broader set of applications for source-to-pay business processes across on-premises, cloud and hybrid deployments. SAP also has the Ariba Network, an online business commerce marketplace that connects buyers and sellers and represents a vast treasure house of business data. As SAP continues to deepen the integrations between Ariba and its other business applications, users should be able to more easily combine, share and query the information held in their own and their partners' SAP ERP, CRM, e-commerce, and SCM software. The goal is to respond more quickly, flexibly and accurately to internal and external change.
From the Ariba side, the business is in the early stages of realizing the potential benefits of being part of SAP. Ariba plans to have the majority of its applications running on SAP HANA in the next 12 to 18 months. For now, only users of Ariba Spend Visibility are taking advantage of SAP's in-memory technology to rapidly analyze large amounts of spend data. As with other SAP product migrations to HANA, substantially speeding up analysis has been the primary initial benefit, in this case enabling firms to increase the volume and complexity of their spend-information queries.
Ariba has lagged behind some of its competitors in mobility, but this fall it expects to debut mobile applications based on the role-based user interface design principles of SAP's Fiori. One particular goal is to appeal to ad-hoc users of Ariba applications with Facebook-like features, such as timelines for requisitions and the ability to "nudge" individuals to make procurement decisions, such as purchase approvals.
Ariba's being part of SAP helps it to widen its global and industry focus. Largely a North American and European player, Ariba is now making use of SAP's expanding data center operations, as well as SAP's expertise in product localizations, compliance and risk management. Pre-SAP, Ariba had a horizontal industry approach, but now is drawing on SAP's vertical knowledge, with the U.S. public sector being an Ariba target market for 2014, along with an expanding presence in oil and gas, utilities, financial services, retail, and wholesale and distribution.
Integration boosts analytics, application synergies
For Ariba, SAP also represents access to a wealth of analytics software, with work under way to apply SAP Lumira business intelligence to Ariba data. SAP has also integrated its alerting and predictive analytics software Supplier InfoNet with the Ariba Network so a firm can gain deeper insight into the current and likely future performance of its suppliers -- and the suppliers of those suppliers. The HANA-based software makes predictions by querying a combination of supplier information and relevant data about those suppliers drawn from a wide range of third-party sources, such as newswires.
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See another view on the SAP and Ariba roadmap
Understand SAP SCM software
Integration is a key priority for the two vendors, whether that means strengthening linkages between Ariba and SAP Business Suite or building links between Ariba and other recent SAP purchases, such as hybris e-commerce and SuccessFactors human capital management. Now that SAP has closed its acquisition of Fieldglass, a player in vendor management systems, the aim is to combine SuccessFactors, Fieldglass and Ariba to enable companies to source and manage their entire employee base of full-time or temporary workers. Cloud integration became a separate product area for Ariba in fall 2013, and the company has been talking with customers about their pain points in integrating Ariba cloud applications with back-end ERP and product lifecycle management software, whether SAP or third-party.
Finally, Ariba is working on Alexandria, a project to build a single, unified repository of supplier data across SAP and Ariba software, including the fruits of previous purchases, such as Crossgate (bought by SAP) and b-process and Quadrem (acquired by Ariba). Such work is indicative of a shift within SAP toward enabling customers to choose where across their business applications they first apply standardization to yield a single version of truth. Previously, the de facto approach would focus on the financials information held in a company's ERP system, but now, an SAP customer can standardize its data at the customer-facing level (hybris), at the employee level (SuccessFactors), and soon at the supplier level (Ariba).
Ariba and SAP have made many near-term commitments to expand Ariba's global and industry presence in mobility, analytics and integration. This year and 2015 will be important ones for assessing how close the ties really are between the two and whether they can keep those delivery promises to their customers.
What's certain, however, is that SAP is no longer holding Ariba at arm's length. They are now more brothers in arms in the source-to-pay arena, which should mean more clarity on products and roadmaps.
About the author:
China Martens is an independent business applications analyst and freelance writer. Email her at firstname.lastname@example.org or follow her on Twitter at @chinamartens.
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