SAP and eBay – Opportunity Knocks, But Who’s Really There?

At yesterday’s SAP Sapphire conference, SAP announced a seemingly fascinating partnership with eBay. Ariba users will be able not only to search the supplier directory and hosted catalog content within Ariba Spot Buy on the Ariba/SAP Network, but will also be able to search for items on eBay’s marketplace and then add those items to an SAP shopping cart – very similar to punching out to any other type of website. Fred Samson, VP for Mobility and Innovation, came on stage and after a somewhat awkward manshake with Bill McDermott, CEO of Ariba, went through the scenario.

It was hard to tell what was real throughout because some of the screens had the eBay logo blurred out, but basically, the scenario had to do with reducing maverick spending by allowing requisitioners to find the items they were looking for – but with controls. First, Fred showed an administration screen that allows different user groups, departments, or regions to have specified dollar limits placed on various spend categories within what looked like the eBay product classification taxonomy.

SAP 1

Then Fred tried to find a Burberry iPad case on the standard Ariba catalog interface.

SAP 2

When he couldn’t find it, he relaxed the filtering tolerances on the administrative portal and then was able to see the items.

SAP 3

You can also see how certain items exceeding the tolerance limits for approvals are flagged as such, similar to non-compliant hotels, cars, and airfare that you might see on a corporate travel planning site.

SAP 4

The item was selected and returned back to the Ariba shopping cart (it’s not clear whether cXML was used here).

SAP 5

And now you have two items from two different marketplaces (vanilla Ariba Network and also eBay) coming into one “shopping experience.”

SAP 6

SAP 7

It’s not clear if the eBay site is really acting like a mega supplier and syndicating catalog content into the Ariba marketplace (and the interface is made to look very eBay-like), or if it is a double punchout of sorts. Regardless, I don’t think you’ll hear SAP/Ariba using an “Amazon like” experience in their talk track anymore, but more on that in a moment.

So, what’s really happening here with this announcement? What is the value to Ariba/SAP, to eBay, and to the practitioner? Here’s my take on the nominal value of this deal to the players.

Nominal Value to Ariba:

  • Ability to create a more compelling and relevant marketplace for buyers who can’t find stuff easily on the Ariba network, whether through the personalized catalogs created for the eProcurement “corporate e-mall” or through a broader spot buy search.
  • Ability to join eBay as an intermediary in the commerce and make some money. If you think the double-digit basis points charged to suppliers by Ariba is a lot, consider the roughly 10-percent charge by eBay. If you want to get an estimate of eBay’s fees, check out this calculator (there’s a good one for Amazon too). Ariba wants to get in on this game.
  • Learning from eBay about to how create a richer set of merchant services and associated APIs in the network (e.g., mapping Ariba taxonomies to the eBay taxonomies to allow an Ariba initiated search as shown here).
  • Veiled pre-emptive strike at Amazon, whom Ariba is finally seeing as a threat..
  • “Cool factor” and consumerization – via mobile of course.

Nominal Value to eBay:

  • Ability to find an e-commerce channel into enterprise B2B beyond forward auctions and its large sell-side business that’s derivative to its marketplaces businesses and also in its own right via eBay Enterprise.
  • Opportunity to upgrade its knowledge about how to perform secure, complex, and global B2B e-commerce. It only recently added “Add to Cart” functionality and has been having many issues as it tries to integrate its functionality globally. Also, the recent data breach at eBay has not been pretty. You can read about this on your own, but if you really want to get into eBay’s issues from a merchant standpoint, you should hear it from the merchants directly and check out some of the comments on the blogs at this great B2C eCommerce site (almost like the Spend Matters of B2C – albeit different).
  •  Veiled pre-emptive strike at Amazon.

Nominal Value to Practitioners:

  • Ability for Ariba customers to help their requisitioners find stuff while staying “in context” of controls of eProcurement – and also helping to reduce maverick spend and improve the quality of the requistioner experience.

Sounds great, right? End of story?

Well, if you read this piece from one of Ariba’s friendly “analysts” (in other words, freelance marketing copywriters whom I wrote about in an earlier rant), it would seem so.

But, not so fast….

First of all, this seems to be a very hastily erected partnership. There were no details on solution/capability name, no mention of availability, no previous inclination of a forthcoming product/service, no press release, etc.

John Donahoe, the President and CEO of eBay (and also the first CEO of Bain & Co.) appeared at Sapphire in a short and seemingly forced recorded video, in which he wished everyone well and said he looked forward to collaborating with Ariba/SAP by offering “eBay and PayPal’s inventory and global platform.” Huh? Isn’t the SAP Business Network going to provide the end-to-end inventory and value chain processes? Isn’t it also the platform for the B2B Networked economy? Is eBay going to be content in B2C? If not, and both Ariba/SAP and eBay both want to monetize supplier revenues selling into their marketplaces, how will that work?

In fact, there are a million questions you can probably think of about the mechanics of the integrated scenario above. For example, how does a buyer place a PO coming from that purchase requisition out to the eBay seller? In the eBay world, the transaction is intermediated by eBay: you pay first and then the supplier gets paid – less the eBay fees. In the large enterprise, you generally use trade credit and working capital between the two parties, unless you use trade finance in the form of a p-card at the time of purchase (which is like the eBay model) or at the time of payment (via Trade Financing).

So, if these small suppliers are not accepting POs, do you have to settle via p-card or use PayPal “Bill Me Later” financing (via Comenity Bank)? If not, does that mean that those suppliers need to get on the Ariba network to do business? Does that also mean that they have to pay both Ariba and eBay? Now there is some so-called synergy for the supplier!

You get the idea: some assembly required. As a reference point, Ariba announced the AribaPay payment settlement solution partnership with Discover over a year ago and they only just recently announced a live customer – and pricing is still not clear, although it sounds like a percentage of the value of transaction rather than, say, 50 cents a transaction like you might find in the ACH world (but this is a whole other discussion).

Look, I can go through every activity in the P2P process from both buy-side and sell-side perspectives and show a lot of overlapping support from both firms and also the spectrum between “direct connect” commerce and fully intermediated these processes can be.

But, herein lies the very strategic problem in this opportunistic partnership between two titans: The value provided by this clever tail spend solution prototype for spot buying is not going to create enough inertia to join these firms together relative to their other pressing individual priorities. In fact, eBay has a whole lot more to offer to SAP and Ariba via partnership through its non-marketplace solutions/embedded capabilities (e.g., GSI Commerce’s capabilities to build and manage supplier storefronts, Hunch (predictive analysis), Braintree (payments/merchant services), and more. It’s an exceptional list of assets that eBay has amassed in fact. But along with Ariba, would a broader partnership taking advantage of both organizations’ deeper capabilities be enough to counter Amazon.com and AmazonSupply in the battle for B2B connectivity and commerce? We’re not so sure.

I’ll explain this a little more in a future post. It’s a topic that transcends why I wrote this article. It actually gets to some core issues with the enterprise B2B market in a “networked economy” – and the role of the big players in it.

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Comments

  • Kevin Potts:

    Pierre – nice analysis, but if I were a corporate procurement professional, I would take this announcement as a slap in the face. The biggest announcement SAP can produce is that now you can buy on eBay with Ariba? Seriously? What a muddling of brand messages. I am sure the procurement team is excited to tell the buyers: “If you can’t find what you need to buy, we’ll provide you a tool to let you waste your time on the world’s largest flea market. You can probably find it between the beanie babies and Harley Davidson memorabilia.”

  • Pierre:

    Well put Kevin, and I Ariba does seem to have lost its teeth a bit re: advocacy of procurement, but I’m not as concerned in this scenario. The procurement erected catalog in the corporate mall isn’t necessarily well accommodating of business needs on an ongoing basis, so it’s better to have it still go through requisitioning so that it stays within the system and makes the requisitioner justify the purchase and/or makes procurement update the catalog (similar to how travel planning systems work with ‘out of policy’ requests). Of course, this only works when there is a PO prior to purchase, and eBay/SAP have to support such a process rather than essentially the “PayPal ghost card method” and the crude filters overlaid in the marketplace itself.

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