Ariba and SAP: Exploring the Network Elephant in the Cloudy Room

Today on Spend Matters PRO we took a close look at what we describe as the "network elephant in the cloudy room." Our detailed research brief takes a close look at the history, evolution and future of supplier-funded network business models -- and decisions SAP will have to make with the Ariba network asset.

As we note on PRO, now that we've dispensed with much of the cursory coverage of the SAP and Ariba acquisition announcement, we thought it time to take out the elephant gun and take aim right at the pachyderm (that's "very large animal with tough skin" for the non-vocabulary nerds) staring us down. If you're curious about what the giant metaphorical creature is that's not sure whether it is in "truth" or "dare" mode with us, you shouldn't be: it's Ariba's supplier-funded, network-based business model.

The fact Ariba has many suppliers paying thousands -- sometimes tens of thousands or more, per year -- to transact with multiple trading partners has helped offset the cost of Ariba's P2P application for buyers, allowing it to compete on price as well as product. Yet many procurement professionals believe that suppliers will factor any additional transaction costs they may incur into their pricing ...where this is all going is simple. SAP and Ariba will need to de-commoditize supplier network connectivity to preserve pricing power to drive, maintain and grow the high margin network/cloud connectivity business. The combination of an expanded network value proposition focused on ... (continued on Spend Matters PRO -- subscribers only)

- Jason Busch

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First Voice

  1. Network war:

    I think this will be a disrupitve process for SAP/ARIBA customers. Ariba cannot stop its supplier model as it will lose revenue and it wil have a hard time continuing to charge supplier being a SAP company unless it comes with a more flexible model like SAP’s current partners. I am curious on how SAP will orchestrate this in a way that is low impact to current customers and simple enough to understand t attract new ones.

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