Last year’s Ariba LIVE 2013 conference (the first one after they were acquired by SAP in 2012) was oriented towards reassuring customers that there would be no disruptive, radical changes. Ariba’s CEO at the time, Bob Calderoni, said, “Beyond the [SAP] name on our logo, very little has changed.” With customers now more used to the idea of an SAP-owned Ariba, and with a pressing need for some clarity on SAP’s cloud strategy, this year’s Ariba LIVE 2014 conference laid out the vision for the integration of Ariba into SAP, as a central element of SAP’s overall cloud offering.
Consolidating SAP’s Cloud Investments
In the last decade, many1 have wondered out loud whether the ‘SaaS revolution’ would be the undoing of SAP. So far, SAP has proven to be up to the challenge. Their strategy and execution of a series of key acquisitions2 — including Business Objects, Sybase, CrossGate, SuccessFactors, Ariba, and SmartOps, along with dozens of others — has allowed them to incorporate best-of-breed capabilities and provided an accelerated, albeit incremental, path to the cloud. Until now, their strategy has been to take the integration of these cloud companies at a deliberate pace and allow these acquisitions to develop in a somewhat ‘loosely coupled’ manner, rather than trying to force fit them into one entity too quickly. The recent Ariba LIVE conference3 made clearer that SAP’s cloud strategy is shifting into a different phase with tighter integration between the various elements, a common underlying platform (SAP announced they will unify all of their cloud assets on HANA4), and a single common hosting environment.
It could be argued that Ariba is the first among equals of SAP’s cloud acquisitions. Last year SAP promoted Ariba’s CMO, Tim Minahan, to be the CMO of SAP Cloud. Tim said the various cloud groups within SAP have been meeting and discussing all aspects of the integration, such as how they release software and how they host it, as well as technical architecture integration. Ariba has already gone through the transition from an on-premise architecture to a cloud architecture — although they really offer a hybrid model, not 100% cloud, since Ariba still has many on-premise customers as well. Ariba learned many valuable lessons during this transition, some of which can be applied to SAP’s similar but much larger scale on-premise-to-cloud transition, such as the critical need to bring along the customer base and show them how they can get value out of the transition.
Ariba and all of SAP’s public cloud-based apps are being moved onto HANA as the underlying database. Today less than 10% of Ariba is based on HANA. Within 3 years, they expect over 90% of Ariba will have been moved onto HANA. This common platform should help enable a more consistent user interface and allow the sharing of master data. An example of the integration that will be possible: the planning for contingent labor can be started in SuccessFactors, then requirements moved into Ariba for the actual sourcing and procurement, and then actual hires moved back into SuccessFactors for onboarding and performance tracking.
Speed and Architectural Simplicity
Ariba said the spend analytics functions they already moved onto HANA are showing a 50X or more increase in speed. Orders-of-magnitude increases in speed like that change the way people use the system. It encourages iterative analysis and the ability to do a lot more ‘what if’ and try different solutions. Beyond the eye-popping speed increase, moving onto HANA makes for a simpler architecture, removing the need to have separate transactional and analytic/data warehouse systems, along with eliminating the time-consuming tasks of designing analytic cubes, and the delays inherent in a batch upload model. The elimination of the periodic batch upload means that analytics are operating on real-time data all the time.
Ariba will expand their globalization by adding better handling of multilingual characters, support for R2L (right-to-left) languages, total landed cost at all levels including by line item, integration with third party tax calculator providers, and e-invoicing in more countries including Russia, Brazil, China, and Mexico. They are expanding the number of countries where they have full legal compliance for invoicing from 35 countries today, to 50 countries by the end of this year, and over 75 by the end of 2015, covering 70% of world commerce. For that they are leveraging SAP’s global presence, where they have people on the ground that work closely with governments and understand the local legal requirements.
SAP will also be expanding the number of data centers they have globally for hosting their cloud business. They already have data centers in North America, Europe, and China, and have further data centers planned for Russia and Brazil at a later TBD date. This, plus the globalization investments described above, will make it easier and more practical for international firms to standardize on Ariba across all of their global operations.
Ariba’s Network has been one of their most valuable assets and a core driver of their success. They have big plans for its future. For starters, over the next year or so they will add the ability to do spot quotes on the network, collaborative field tickets (‘Service Entry Sheets’ that record planned and unplanned services performed by a supplier), supply chain functionality (like sharing forecasts and scheduling in retail), integration of SNC (SAP’s Supplier Network Collaboration) including integration of Supplier On-Boarding, Single Sign-on, and Message Integration, and integration of SuccessFactors’ learning management system that can be configured by buyers so their suppliers for particular products or services are automatically taken through a specific set of training or orientation steps during onboarding.
Federated Registration, Project Alexandria, and the Product Stewardship Network
In the longer term, Ariba’s vision is to create a network-based Vendor Registry that can synchronize with and push supplier data back into ERP systems (including non-SAP systems), making the network the single vendor master for supplier data. Ariba described this as “federated supplier registration services.”
Related to that, Ariba talked about Project Alexandria,5 in which they will aggregate a single source of internal and external supplier information across multiple dimensions — not just profile information but also things like capabilities, credit ratings, payment profiles, and certifications. They want to give buyers a set of tools from any SAP application that deals with suppliers or vendors, to easily search for suppliers based on all these dimensions, as well as tools to manage supplier performance and risk. Where standards are available, SAP will use them. Where they are not, they will facilitate the creation of standards.
The first step in Project Alexandria is integration of information from SAP’s Product Stewardship Network (PSN) into the Ariba Business Network. SAP built PSN about two years ago to enable buyers and sellers to exchange sustainability information without suppliers having to do it repeatedly for every customer request. Currently PSN supports Environmental Compliance (substances and chemicals), Conflict Minerals reporting, and Product Category Sustainability Assessments (resources footprint). SAP will make this information available on the Ariba Network, starting first in retail, then moving to other industries. This will help relieve sustainability reporting fatigue for suppliers who can receive over 1,000 inquiries a month. As the database coverage expands, it will ultimately help enable the currently burdensome task of multi-tier reporting, and reduce or eliminate the retyping of declaration data.
Increasing Value to Sellers
Ariba is also looking into how to provide more value to sellers on the Network, for example providing a much richer profile, better tools for managing leads, and predictive sales which would analyze data and trends (e.g. commodity price changes) across the network and elsewhere and alert the seller of opportunities. It will be interesting to see where and how fast Ariba pursues more complete sell-side functionality and whether Ariba starts to compete with CRM solutions.
Leveraging the Power of the Network’s Data
Ariba plans to move their Business Network onto HANA this year. That provides the analytic foundation to implement the impressive vision laid out at Ariba LIVE — to tap into the potential value of the enormous flow of data across the network: over 100 million transactions (POs and invoices) per year, comprising over half a trillion dollars of commerce annually, and 15 years of historical transactional and community-related data and content. Ariba stressed that the analysis and use of this data will be done in a secure and anonymized way. Applying analytics against this network-wide data will allow further value-added services to be provided to sellers and buyers, such as benchmarking of individual firms against the market averages for price and performance metrics, alerting buyers and sellers about pricing trends, and affinity analysis for buyers to recommend suppliers based on decisions and selections that other similar companies have made. Ariba plans to leverage their understanding of the context of the data — the correlation between RFQs, contracts, orders, and payments, as well as the industry context, enabling a deeper range of intelligence to be extracted.
They also talked about bringing industry-specific functionality into the network, such as end-to-end supply chain traceability for pharma or food, complex services for automotive, and demand management and forecast sharing for retail. Dr. Chakib Boudary, SAP’s Chief Strategy Officer, said they are committed to maintaining the openness of the network, integrating into other systems, not just SAP.He also said they will continue to integrate with other networks and services, such as the integration with Discover’s network announced last year, creating the AribaPay capability.
Life is Good
A real highlight of the conference for me and many other attendees was the keynote by Bert Jacobs, CEO of “Life is Good.” I am usually not very fond of ‘motivational speakers’ (I find many of them disingenuous), but Bert was very down to earth, seemed like the real deal, and his talk touched me and others (he got a standing ovation). You can see a video of his Ariba Live talk here. If you are interested in contributing to their charity, go to www.ligplaymakers.org.
Ariba has had tremendous growth recently (they said over 80% last year), a strong sign of how well their recent strategy has been working. But they also realize they need to invest to stay competitive. They are investing in services procurement, an increasingly important area where some competitors have some deeper functionality, but Ariba has vowed to catch up. [As we go to press, SAP just announced the acquisition of Fieldglass. This is another key acquisition for SAP’s portfolio, as Fieldglass is the clear leader in VMS (Vendor Management System) solutions, i.e. contingent labor and services procurement, giving SAP/Ariba a very strong new asset in this area.] Another key area of focus is the user experience (both IT and end user) where Ariba is making some significant investments. For example, they are adopting the ‘Fiori Paradigm’ from SAP which is role-based and leverages Responsive Web Design (providing optimal experience on a wide range of device form factors — desktop, tablet, and phone). Ariba said they are making the user experience “modern, social, and mobile.”
My overall impression is that Ariba and SAP are doing a lot of things right. The market response is a strong testament to that. And customers seem comfortable, and in many cases genuinely enthusiastic, with the Ariba/SAP combination. This is a strong marriage that looks to have a bright future.
1 especially SAP’s competitors — Return to article text above
2 Not all of SAP’s acquisitions have been cloud/SaaS companies, but in recent years most have been. — Return to article text above
3 This was the fifteenth annual Ariba LIVE user conference – riba’s not a kid any more. — Return to article text above
4 HANA = “High-Performance Analytic Appliance,” SAP’s in-memory, RDBMS (Relational Database Management System) running on a dedicated computing appliance. — Return to article text above
5 The project name is a reference to the Ancient Library of Alexandria, which was a repository for a major portion of the world’s knowledge at the time. — Return to article text above
To view other articles from this issue of the brief, click here.