M&A Watch: Ariba and an Updated Shopping List for SAP in Procurement (Part 2)

In the first installment of this post, I suggested a number of areas where Ariba or others could fill-in material functional and/or competitive holes for SAP in the broader Spend Management sector. I previously suggested that "Ariba would help SAP plug a number of gaps, leaving only a handful unfilled in the broader procurement and sourcing space" while also noting that they have numerous acquisition options to possibly consider. In this post, I'll focus on several solution areas, analyzing Ariba's capability and how it could to add to SAP (as well as other providers for consideration). I'll examine the following functional areas: contract management, supplier information management and supplier performance management

  • Contract Management -- From a contract management standpoint, SAP has been able to enhance a relatively basic solution that it acquired as part of the Frictionless deal years ago. The solutions' saving grace is n-tier configurability around contracts, buying agreements, traunches, parties to a contact, etc. This type of capability is particularly useful in highly complex third-party environments like GPOs, where buying and supplying members operate under different terms. However, the solution itself doesn't hold a candle to leading best of breed vendors when it comes to authoring, alerting, integration, legal, sell-side and related capabilities. Ariba would offer some functional enhancement to SAP in these areas -- limited, not huge -- but if SAP wants to own the contract management world, they should acquire Upside, a provider that is functionally superior to Ariba and alternatives.

  • Supplier Information Management -- SAP has rebadged the Frictionless product to pull double duty as a basic supplier information management module. The module is inexpensive because it needs to be, lacking some of the capabilities of pure-play SIM solutions providers including Aravo, AECSoft, CVM Solutions, Hiperos, Xcitec and others. However, compared with Ariba (and Emptoris for that matter), it is not far off the mark for those who want a tightly integrated SIM experience as part of a broader sourcing / supply management suite.

    Still, if SAP were serious about this area, they would acquire capabilities from a third party rather than rely on a product extension of a legacy product. Incidentally, Aravo would represent an interesting acquisition target in this area for SAP. Aravo could also enhance SAP's supplier on-boarding capabilities for SRM. Spend Matters research suggests supplier information management (including supply risk, supplier diversity, and supplier content enrichment, among other areas) is the fastest growing sector of the overall Spend Management universe, growing at a 35% CAGR between 2010 and 2013. In our view, it would behoove SAP to get more serious about this opportunity.

  • Supplier Performance Management -- It's possible to do SPM with SAP in over half a dozen modules (including scorecarding outside of the procurement core), but it's hard to do it at a best of breed level in any of them. SAP falls short if you define SPM (as Sherry Gordon and I do) as the ability to solve all of the following challenges: supplier survey & assessment development and deployment, systematic collection of assessment results, stakeholder satisfaction surveys, 360 degree evaluations, creating KPI formulas, importing KPIs and performance data from other systems (including non SAP environments), rolling up KPIs to scorecards, sharing scores and results with suppliers, trend analysis, alerts regarding performance issues, measuring against contracts and SLAs, tracking corrective actions & improvement plans and capabilities to support site visits or audit support. Ariba, in SAP's defense, has somewhat limited capabilities in these areas as well (though has stronger support than SAP for integrated SPM into an entire source-to-pay single suite). Acquisition opportunities here with more robust technology for SAP would include Biznet, BravoSolution, Emptoris and Ivalua. However, most potential acquisition targets would bring other capabilities into the mix as well. Moreover, the SPM market is still relatively small as a stand alone area.

Stay tuned for the final installment of this post, where I'll tackle the functional areas of supply risk management and services procurement and how SAP's capabilities stack up there -- and whether Ariba (or other acquisition targets) could enhance what they have today.

- Jason Busch

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