Will Ariba and SAP Increasingly Abandon “Upstream” Innovation in 2015?


In 2015, Ariba and SAP will continue to put a lot of stock at the intersection of building a broad P2P (finally inclusive of the final P: “Pay”) capability with increased network power and services. This will include native integration to the capabilities from Fieldglass and Concur (especially to generate a positive ROI on nearly $10 billion of investment in buying these 2 firms) into their general procurement value proposition and solution set. If Ariba and SAP get 50% of their activities in these areas right in the next 24 months, momentum alone will carry the day from a commercial perspective (provided they can preserve the talent and expertise from Fieldglass and Concur).

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But nearly all of these realms of investment and innovation fall in what Ariba itself once coined as the “downstream” procurement area centered on enabling and managing transactions and non-strategic interactions with suppliers. The “upstream” piece of the source-to-pay (including analytics, sourcing, contract management and supplier management) equation has generally not seen similar areas of investment in recent years. Increasingly, especially in the sourcing and contract management areas, Ariba and SAP are not often invited to the RFP table outside of broader suite deals (unless they are the incumbent and HAVE to be invited).

Moreover, the general knowledge of these capabilities inside Ariba and SAP is taking a backseat to the focus on P2P, network, services procurement and other areas. This is too bad in areas like contract management in which Ariba and SAP provide varying levels of authoring/drafting capability, clause scoring/libraries, analytics, negotiation, approvals, repository, administration, compliance monitoring and broader compliance systems integration capabilities. Ariba’s own cloud solutions in the area even bring a competent authoring environment that enables technical and organizational integration and collaboration (e.g., clause libraries, sell-side/legal integration).

While not best of breed anymore in these areas, the older Ariba product lines still bring certain capabilities that often do not get as much credit as they maybe should. And, SAP has not yet sunsetted its own “upstream” on-premise solutions it acquired over the years (e.g., SAP Sourcing/SRM – the old “Frictionless” solution set), even though we believe these are pretty much "dead apps walking" that are supported only because of large vocal customers looking to realize value from previous investments. During 2015, Ariba and SAP together have some important decisions to make regarding such topics. Incremental investment is likely to no longer suffice in these spaces, and from a strategy perspective, Ariba and SAP need to figure out the commitment to innovation (or not) they want to make in the upstream areas.

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