You've seen the initial coverage on Spend Matters:
Now, what more of a perfect opportunity to feature our deep-dive analysis of yesterday's announcement during Spend Matters PRO's debut week?
Sourcing – Ariba and SAP customers and prospects should continue to evaluate sourcing tools independently. Given the limited integration touch-points in the sourcing area between spend analysis and contract management, organizations should not be worried about the integration of various best-of-breed tools even if they plan to standardize on an SAP/Ariba suite and network vision at some point in time.
For general advanced sourcing capabilities, we still recommend CombineNet, Trade Extensions, Emptoris/IBM, BravoSolution and Iasta over Ariba and SAP. For direct spend sourcing capabilities, Co-Exprise, MFG.com, FullStep, Pool4Tool and others offer unique capabilities in their own right (of the three, for direct spend we believe Co-Exprise has the most unique mash-up of PLM, secure file-sharing/collaboration, sourcing and spend analysis in the market). Organizations may also wish to consider GEP, Zycus, and range of other e-sourcing providers.
The major difference in sourcing decisions between Ariba and SAP relative to best-of-breed vendors will nearly always come down to enabling the following elements: A more fluid RFI/RFP process and flexible data collection, ability to scale to tens of thousands of line items, ability to support supplier creativity/alternative specifications/alternative proposals, capability to fully explore – not just weight – all price and non-price factors in a tender, creation and application of constraints (e.g., split of business) and the ability to run scenarios based on constraints and present a menu of outcomes for stakeholders to consider And let's not forget how usability also can play a key role in selection and adoption (and increasingly, supplier search, discovery and management as well).
Why do these elements matter? For companies that need the ability to explore different commodity scenarios (e.g., who buys, from whom, how much, when, from what geographies/plants, on what terms?), discover unforeseen potential advantages/disadvantages of specific suppliers, understand the cost of tradeoffs (e.g., split of business to reduce the chance of a supply disruption in specific geographies) and truly drive a more collaborative sourcing process, a specialty solution may be a better fit.
- Ariba and SAP customers should not confuse a network vision of supplier search with the need for specific functionality today
- Both Ariba and SAP can provide 60-70% of features used in sourcing solutions today and may be sufficient for basic strategic sourcing use cases
- Other vendors remain in a league of their own and we encourage Ariba and SAP customers and prospects to explore whether or not advanced sourcing/optimization capability is important based on their internal skill sets, spend profile and willingness to embrace alternative sourcing and negotiation approaches; if so, alternatives should be given top priority until SAP and Ariba catch up in advanced sourcing areas
- We believe SAP/Ariba will likely build-out additional capability in this area in the coming 12 months or pursue a tuck-in acquisition to enable more advanced sourcing capability
Spend Analysis – Ariba and SAP customers currently using spend analysis tools from their respective providers should not rush out to evaluate other solutions unless there is a compelling reason. On a foundational level, both SAP and Ariba spend analysis capabilities (and other spend visibility tools) enable the ability to collect and analyze data across multiple operating units, systems, instances, and versions – beyond just ERP. They also incorporated data cleansing and analysis, common commodity classification and structure and item level visibility (especially in the case of direct materials). Both SAP and Ariba support a range of basic use cases.
But spend analysis is changing, and SAP is one of the architects of this change. They’ve put an in-memory approach to combining large and distributed datasets at the core of their emerging strategy. Prospective customers of Ariba and SAP spend analysis tools should consider delaying a decision until they are comfortable and capable of deploying the release of SAP Spend Performance Management on HANA, which is happening this month.
While the general availability of SAP HANA-based applications is proceeding at a conservative pace, Spend Matters believes that an in-memory approach to combining different datasets, reclassifying data on the fly, moving beyond the notion of periodic (quarterly, monthly, etc.) refreshes to more real-time based data analysis is the path that the sector will take. For this reason, our bias is to recommend the SAP spend analysis product direction over Ariba with the caveat that there is a wide-range of competing solutions in the market that bring their own unique value propositions. In short:
- We give the edge to SAP on current product execution and vision (as of late May, 2012) over Ariba
- Potential customers should ask SAP for Spend Performance Management reference customers on HANA (or otherwise, should negotiate an economically advantageous deal to be among the early adopters in the Q3 timeframe)
- Potential Ariba and SAP spend analysis customers should also consider solutions from Spend Radar, Emptoris/IBM, BravoSolution, Iasta, Oracle/Endeca, Rosslyn Analytics, Zycus, PRGX/Etesius, Ivalua, FullStep, b-Pack and others. Spend Matters sees BIQ/Opera as the power user’s tool of choice for drilling into spend opportunities across datasets. Many of these solutions, however, are quite unique in approach and absolute capability and should be evaluated in detail independently
Supplier Information Management – Ariba and SAP have solutions capable of addressing supplier management needs – especially in areas of onboarding. SAP’s tool in its latest on-demand iteration (Wave 9) is quite good – in fact, what is holding it back is primarily lack of imagination among client and implementation teams, not any solution shortcomings. Ariba has decent supplier management functionalities but we judge their solution to be below SAP’s level.
SAP’s development path has provided a lot of excitement for some time now – reference our recent SAPPHIRE coverage – bringing in the latest functionalities such as mobility apps, social media collaboration and more. Ariba on the other hand has focused its efforts on developing its crown jewel, the supplier trading network but otherwise rested on its software laurels.
In this area as well, there are excellent third-party supplier management solutions from vendors such as Aravo, Hiperos, CVM/Kroll, AECsoft/SciQuest, GXS/Rollstream, HICX and others that are capable of both addressing supplier management needs as well as handle necessary levels of SAP integration.
Here as well, we recommend the SAP product direction over Ariba with the same caveat that this area also has a wide range of competing solutions that offer value-added services that SAP and Ariba both shy away from. In summary:
- SAP has the upper hand on current product execution and vision around supplier information management
- Potential customers should consider value-add services such as onboarding support, master data management strategy, as well as pursue the limits of the solution rather than sub-implement to last year’s standards
- Potential Ariba and SAP supplier information management customers should also consider solutions from Aravo, Hiperos, CVM/Kroll, AECsoft/SciQuest, GXS RollStream, HICX and others
Contract Management – Ariba and SAP individually have solid, but not market-leading capability in contract management. Contract management tools enhance the efficiency of the overall procurement process by increasing the speed and quality with which the contract process is completed while improving access to contract information and driving more effective and timely purchasing decisions through re-use of information to create contract terms and notifications of when to take critical actions. Ariba and SAP provide varying levels of authoring/drafting capability, clause scoring/libraries, analytics, negotiation, approvals, repository, administration, compliance monitoring, compliance systems integration, etc.
Of the two providers, Ariba is further along in delivering flexible authoring environment that enables technical and organizational integration and collaboration (e.g., clause libraries, tighter sell-side, legal integration). Theoretically, even though only a small subset of Ariba users have deployed it, Ariba can enable active compliance across procurement execution systems beyond just indirect spend (Buyer, P2P, etc.) tied to Ariba Contracts. Such integrated contract compliance and execution use cases are more common with deployments from providers like Upside and Emptoris/IBM with direct linkages into SAP, PeopleSoft and Oracle purchasing execution environments.
Advanced use cases where Ariba and SAP are likely to come up short might also take the form of integrating KPI data into a contracting system based on underlying catalog and non-catalog PO information. Analytics can also play a role in the selection of specialists. Consider active analytics tied to templates in the area of indemnification. A company that is more advanced and can take advantage of a broader contract management system might present five options for indemnification clauses and will then measure and look at how long it takes for users to arrive at a single clause (which can yield fascinating and invaluable insight). For example, a company might realize that it is landing at the middle-tier indemnification option (Option 3) 80% of the time, but only after multiple round-trips with counsel and weeks of cycle time involved. Analytics and insight such as this from a template-driven perspective might suggest changing Option 3 to the default (Option 1) choice.
From a competitive standpoint, our recent customer analyses suggests that while Ariba offers a competitive authoring/drafting, approvals, repository and general administration capability, that specialist providers such as Upside, Emptoris, Intenda and Symfact distance themselves in key areas including clause libraries/scoring, analytics, contract collaboration/negotiation, compliance monitoring, compliance systems integration and the overall user experience. Iasta, BravoSolution, Zycus, Oracle, Ivalua, b-Pack and others offer basic capabilities that may also be sufficient.
- Ariba and SAP each possess a solid set of contract management capabilities likely to suffice for procurement organizations looking to touch the most common use cases including savings implementation acceleration, authoring, clause management and basic compliance; Ariba contract management on Force.com may also prove sufficient as a sell-side contract management value proposition as well for many organizations looking for foundational capability
- When legal is driving the contract management solution decision and/or advanced authoring and compliance use cases are required, organizations should begin to take a closer look at providers like Upside and Emptoris/IBM to understand whether or not a differentiated approach is necessary
- Some organizations will still find advantages that only contract management specialists can deliver like the ability to define fields at the actual database column level to improve performance improvements, enhance configurability and enable more flexible mapping between system objects (e.g., users, clauses, vendors, etc.) based on customized requirements
Check back on Spend Matters for the rest of our coverage if you missed it before, and stay tuned for more deep-dive here on PRO. Our customer and comparative analysis in the areas of eProcurement, e-invoicing, supplier enablement, catalog management and transactional/network connectivity will appear on Spend Matters PRO in the coming days and weeks.
- Jason Busch and Thomas Kase