Will SAP Become More Acquisitive? New Strategy for Procurement and the Supply Chain (Part 4)

In this fourth post tackling SAP's newly articulated inorganic growth strategy, I'll present the most obvious candidate in the Spend Management sector: Ariba. SAP's acquirement of Ariba makes sense on a whole host of fronts, from the financial -- Ariba is one of the larger remaining independent software vendors (ISVs as the analysts often call then) -- to the strategic. On the strategic front, Ariba brings a range of solution-enhancing benefits to SAP, including a SaaS-based P2P platform suitable for the middle market and even larger organizations with a relatively simple back-end environment (and limited integration requirements for third-party applications).

Spend Matters has previously covered this topic, suggesting that the "SAP / Ariba deal makes a lot of sense from a solution perspective (I won't get into the financial component of such a transaction in this post). I know SAP is notoriously slow on the deal trigger relative to its US-based competitor, but if they had to make an acquisition happen, I'm sure they could push it through the corporate Bundestag just as fast as Nancy Pelosi can fly halfway around the world -- or to visit her constituents -- on a taxpayer-funded G5." I also pointed out in the above-linked post that SRM 7.0's success has not been all that SAP has made it out to be. In addition, there "is more than just a bail-out-the-e-Procurement-ship rationale for the deal ... SAP has largely ceded the downstream electronic invoice presentment and payment (EIPP) and supply finance markets to dozens of other competitors, including Ariba. Ariba would not only give them a solution in this area, it would allow them to deliver a full suite of network-based capabilities ... Along similar lines, Ariba would give SAP an answer in the supplier enablement, content search and catalog/content management arenas -- three distinct areas where SAP customers continue to turn to third parties (e.g., Perfect Commerce, Vinimaya, jCatalog, etc.) despite the ability of their own MDM application."

Moreover, Ariba would also bring SAP a set of talent that it's been incapable of hiring or growing on its own to oversee a broader procurement line of solutions, rather than individual, loosely connected product areas. The risk-adverse culture of Ariba, too, is a logical fit with SAP, which is not known for daring, progressive moves. The one area where an SAP acquisition of Ariba could truly equate to the elusive 1+1=3 from a M&A perspective -- an equation many seek but very few achieve (1+1 = 1.5 is a more frequent adage) -- is the ability to leverage SAP's entrenched channel, SI and BPO partner relationships. This is precisely where Ariba has struggled the most in recent years and where a change of control would be a signal to the market of its changing partnering stance and approach unlike any other.

Jason Busch

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