Over the past few months, Ariba (and SAP) have actively shared a number of procurement technology and infrastructure roadmap elements with clients, prospects, and partners. This includes focusing on, among other areas, the continued delivery and development on many (but not all) common products, platforms and application environments (e.g., cloud vs. on-premise) between the two companies. At LIVE last week, Ariba shared several specific areas of investment and development in the their network and application offerings, including leveraging SAP’s in-memory database, HANA, to power its own spend analytics application.
Many other announcements surrounding LIVE represent incremental improvements leveraging existing Ariba platforms and infrastructure. This includes expanding regulatory compliance and country coverage for invoices and documents exchanged over the Ariba network and enhanced document validation rules for invoices leveraging Ariba network infrastructure. It also includes something somewhat akin to what Cortera (a next generation D&B competitor and provider of credit/risk scores) has done with its shared network and intelligence by offering recommendations of similar customers/buyers to those a company might already be doing business with.
Similarly, Ariba is now using its Discovery tool to recommend suggested suppliers. According to Ariba, this “Suppliers You May Like” capability “helps guide buyers to qualified suppliers based on a host of inputs, including buyer requirements, supplier capabilities and performance ratings, and how often other buyers on the network have awarded business to them.” This back-to-the-future moment for Ariba reminds me – albeit in a less engineering-centric manner – of what FreeMarkets had originally tried to do over a decade ago for direct materials using parametric part data, attribute information and MRP data to match engineering, demand and procurement specifications with supplier capability profiles and capacity (a failed experiment at the time).
There are many use cases for this new capability, including what are sometimes referred to as spot-buy and tail-spend sourcing scenarios. For Ariba P2P users, these are cases where an item (or series of items) may or may not be in a catalog (or on a punch out site), but regardless, the dollar volume is significant enough to warrant at least some competitive bidding rather than simply awarding a requisition to a supplier through an eProcurement purchase. Ariba also announced at LIVE that their new Spot Buy capabilities were integrated with their P2P and Discovery applications to enable front-line buyers to more easily drive competition in the context of a requisition (or to flip a “buy” over to a sourcing or category management resource) to blast an RFP out to additional suppliers on the network.
Such activity is certainly not a replacement for strategic sourcing. But as the Hackett Group shared at LIVE, “roughly one-quarter of overall indirect spend is sourced tactically, however on an activity basis, over half of sourcing is tactical.” Simply, such activities are likely to benefit significantly from added competition even if it is only a single round competitive bid without feedback given to the market. For companies looking to make the business case for this type of “tactical sourcing” with Ariba P2P, Discovery, and the new Spot Buy integrated capability, Hackett data shows that the procurement ROI for tactical sourcing (defined by annual cost reduction as a percentage of sourced spend) is greater than 3.5X, compared with an ROI of 3.5X for traditional strategic sourcing activity. In other words, there’s untapped low-hanging sourcing fruit in them thar tactical sourcing/spot buy hills!
We’ll continue to explore the latest from SAP/Ariba including the latest from Ariba Spend Visibility (and related cleansing/classification services) and integration with SAP Spend Performance Management. We’ll also look at the impact of the HANA in-memory database on spend analysis analytics performance.
In the meantime, the SAP/Ariba roadmap and planning is a topic we’ve covered extensively on Spend Matters PRO. We invite our subscribers to access the following research briefs:
- “Applications Unlimited” Oracle vs. “We Know Best” SAP/Ariba (Part 1)
- “Apps Unlimited” Oracle vs. “We Know Best” SAP/Ariba (Part 2)
- Ariba and SAP…Exploring the Network Elephant in the Cloudy Room
- The Future of the Ariba Network with SAP (Part 1)
- The Future of the Ariba Network with SAP (Part 2)
- The Future of the Ariba Network with SAP (Part 3)
- SAP and Ariba: Customer and Prospect Implications – E-Invoicing (Part 2)
- SAP and Ariba: Customer and Prospect Implications – E-Invoicing (Part 1)
- SAP and Ariba: Customer and Prospect Implications – Sourcing, Spend Analysis, Supplier Management and Contract Management
- SAP and Ariba Procurement Customers: Hints at a Directional Solution Focus and Recommendations to Take Advantage of Acquisition and Post-Merger Uncertainty