Provider news – Free sourcing offer from Ariba, and SAP leap onto a successful cloud

Ariba caused a stir last week when they announced that their StartSourcing platform would be available free to users (with a number of caveats).  Ariba Discovery is included, allowing access to a "global community of over 700,000 selling organizations”. Here’s Jason Busch at Spend Matters US:

The StartSourcing edition of Ariba Sourcing lets organizations have 1-2 seats for free.... You can read about our initial experience with the product (and pricing) here and here. The current free version includes, in Ariba's words, "RFX-Simple, Sourcing Reporting, Supplier Discovery, Site Enablement, Web-based Technical Support, Web-based tutorials, and Access to Ariba Exchange and RFP Hub." Provided on a "limited" basis are "Supplier Profile Management" and "Deployment/Project Management."

The capability is relatively basic, but as Jason says, this is a significant step as Ariba becomes the first major provider to make a product free to users.

What’s in it for Ariba? More users, and user fees, for the Ariba Supplier Network is the likely answer. Their strategy has become increasingly focused on the Network, and their market valuation has responded to that very strongly. They’ve been pricing their sourcing products keenly (according to Jason) in recent competitive processes; it is all about growing the network volumes and revenues particularly from the supplier side. So as a buyer, you should only consider this if you’re happy with supplier-funded models:  some are, some aren’t, and there isn’t time now to go into all the pros and cons.

But with that proviso, it will certainly be worth many organisations considering the offer; and this isn’t good news for other software providers who focus on mid-market customers and / or standard sourcing platforms. It’s less of a worry perhaps for firms providing advanced “market informed sourcing” platforms and similar leading-edge solutions, or those who focus on the largest enterprises. But there’ll be a few emergency strategy meetings going on this week in other firms, and we’ll come back to look at the competitive implications later.

Meanwhile, SAP made an acquisition announcement on Saturday, with a takeover bid  for SuccessFactors Inc, agreed by the target’s Board. SuccessFactors are a US based quoted provider of SaaS technology in the area of Employee Performance Management – appraisals, training, succession planning etc.

SuccessFactors look like a very strong firm; they were the star performer in a recent Gartner “Magic Quadrant” review of their sector, and they appear to be genuine industry leaders. Their revenues at around $330 this year are growing at 50% a year (although it’s hard to understand from the numbers whether they make any significant profit). The bid is pitched at $40 a share, around 50% above current share price, although it was trading at $40 earlier this year. The valuation of $3.4 billion represents 10X historic sales; there’s a nice multiple for SaaS firms to consider, although it doesn’t sound so bad when you look at the revenue growth track.

While there aren’t many direct implications for procurement, it shows SAP putting some money behind a strategy to gain more traction in the “cloud” software market. And that’s no surprise – it’s also more than likely that they’ll go in this direction in the procurement and supply chain arena as well, so why not play the “who might SAP acquire in 2012 in our field” guessing game this Christmas?!

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