Will SAP Scale the Customer Side of the Network Effect With Business One + Ariba Integration?

“If you build it, they will come” has been a frequent refrain since the early days of supplier (and business) networks, going back to Commerce One MarketSite. Unfortunately, it’s simply not true. Getting suppliers to register and transact through a network is all but impossible unless there is a critical mass of buyers or one customer in particular requires their participation. However, Intuit, Microsoft (and now SAP) are hoping to change this. In the case of the former two, it involves partnerships to wire-in suppliers directly into a network ecosystem through tight general ledger/financials integration with Tradeshift and Hubwoo, respectively (see related posts at the end of this article for links to our coverage on Spend Matters and Spend Matters PRO of these partnerships).

At Sapphire this week, SAP announced that version 9.0 of Business One (SAP’s small and middle market ERP/financials suite) will feature “greater collaboration through Ariba.” Specifically, “the application is now integrated with the Ariba Network,” which will enable Business One users to “connect to the Ariba Network to manage more connections, with more buyers, across even more processes in a fully automated manner – all with direct integration to their SAP systems.”

In other words, Business One users— suppliers to larger buying organizations on the Ariba network that are already using Ariba P2P or SAP SRM procurement tools integrated with the Ariba network—will essentially now be “pre-onboarded” into the network, simplifying connectivity steps. We think this is a logical evolution of the SAP / Ariba network strategy. Yet until Ariba / SAP change their dollar volume-based fee structure for connectivity, adoption could potentially be constrained by the economics of smaller suppliers realizing they can send an invoice for free via email or use a competitive network to Ariba (with similar capability) with no or low-costs associated with transactional connectivity.

The Spend Matters final word: The idea is right to drive sell-side SMB adoption into the Ariba network through this direct integration into Business One. The business model, unfortunately, is not and will get in the way of adoption levels that could otherwise cause a runaway B2B network effect, which SAP is hoping to achieve. By sticking to Ariba's legacy supplier-fee driven network business model for basic connectivity, SAP is diminishing the value proposition of what a network effect should bring. This is not to mention the opportunity to charge more for value-added services through a network such as discounting, currency/cross border transaction management, logistics, etc.

Stay tuned for extensive coverage from Sapphire starting tomorrow on Spend Matters and Spend Matters PRO (e.g., see: SAP Sapphire: Moving to Frictionless AND Sticky Commerce). And check out deeper coverage on the topic of sell-side financials/general ledger integration on Spend Matters PRO (subscription required):

Hubwoo and Microsoft Partner: Relationship Dynamics and Ecosystem

Hubwoo and Microsoft Partner: Customer, VAR and Competitor Analysis/Recommendations

TradeShift’s Supplier Enablement Strategy for E-Invoicing – Should Ariba and OB10 Be Worried? (Part 3)

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