Customer and Product Implications
Relationships involving two partners are always better than those involving three. Previously, SAP's supplier network offering (you can read about it via links through the previous posts on the Crossgate acquisition, above) involved three partners: Crossgate, Hubwoo and SAP. Now (or at least by November) it will just involve two. SAP's relationship with Hubwoo will undoubtedly remain -- even though the company is independent of SAP, the two are linked at the hip in many sales, marketing and product initiatives -- but with Crossgate, SAP controls the integration hooks between systems, arguably the more strategic of the two areas for a vendor coming from a core financials and business applications backbone (in fact, one could argue SAP should position a strategy of network flexibility and openness like a Basware rather than the closed Ariba network, working with Hubwoo and perhaps many others). In terms of Crossgate, think of it as a more flexible and business process rich version of that old EDI stuff.
Over on Forrester's blogs, my curmudgeonly 6'6" colleague Duncan Jones dishes a few additional thoughts on the customer implications of the deal, noting that "if you don't mind increasing your dependence on this powerful tech giant, you can now buy a wholly-SAP solution instead of a partner product. For instance, buyers that sign flexible enterprise deals will be able to treat Crossgate like other SAP packages, whereas previously they had to manage it separately." Of course to Duncan, who lives to drive vendors down on costs in negotiations, this represents another negotiating lever to pull in a bundled deal as overall renewal, upgrade and maintenance cycles come due. Moreover, it's "one connectivity throat to choke," so to speak.
The closer relationship and offering may also allow for new types of supplier management use cases and business scenarios down the road for companies, especially when other SAP capabilities become more tightly integrated with the Crossgate connectivity tools. Consider, for example, the ability to mine metadata from vendor transactional connectivity (everything from payment terms to on-time performance to underlying commodity/unit price variance and trending data) that goes through Crossgate and automatically dumps all this information -- along with, perhaps, third-party vendor intelligence or network data around risk, compliance, regulated materials usage, etc. -- into an SAP BI platform and warehouse. And imagine that emerging technologies like in-memory capability (AKA, HANA at SAP) let you do this in real-time.
Such insights could not only help us report on business activities and pinpoint areas to address in everyday supplier management from an AP perspective (e.g., a notification showing the need to recapture a trade credit or duplicate payment), but also more strategic insights that could help us focus on new ways of lowering total cost and reducing the business risk of vendor relationships at the pace of business -- not of a monthly or quarterly close (of the last spend refresh, for that matter). For example, rather than just leverage a network to drive down the cost of PO, invoice and data exchange -- or the above mentioned more advanced AP scenarios -- for suppliers of all sizes, why not use it as a means to understand the real-time pulse across direct, indirect and services spend to become better aware of emerging working capital needs/funding requirements and ways of capitalizing on the situation?
Or what about using the combination of network-based insights to better understand indirect demand patterns in our own organization across all of our suppliers and to take action accordingly to change behavior? Regarding this last point, the sad fact is that our own procurement systems are often so fragmented and dispersed across all of our spending areas (direct, indirect, services) even in the best of situations, that a network-based model to capture information (including supplier invoice-level details) is likely to yield far better results than batch uploads from dozens or hundreds of different internal systems. The potential impact of such scenarios is greatly magnified when you consider the role that partners -- and partner-provided information -- can play in a one-to-many or many-to-many network environment.
Today, vendors like GXS, Sterling/IBM and Ariba may currently have the lead in connecting the space that exists in between two companies in terms of current transactional market-share -- either through legacy EDI models or newer web-based ones -- but with Crossgate and other internal technologies, SAP has a potentially next generation capability around getting systems on either side of the equation to talk together to enable entirely new insights that far transcend just a cursory P2P handshake to consummate a buying/selling transaction.