Bob Calderoni and Kevin Costello to Leave SAP – A New Chapter for Ariba Inside SAP

Spend Matters has learned from multiple sources that Bob Calderoni (formerly CEO of Ariba and currently President of SAP Cloud) and Kevin Costello (current President of Ariba within SAP) will be stepping down from their respective positions. Their current or future roles inside or out of SAP have not been announced, but sources suggest they will both remain active as “advisors,” which can mean varying levels of involvement while they wait for their SAP stock to vest.

This transition is taking place only a few months after the one-year anniversary of the deal closure and suggests a short earn-out period for the two Ariba executives following the turnaround of Ariba and subsequent sale to SAP.

In the coming days, we will be offering on Spend Matters Plus/PRO further analysis on the transition and what new operating leadership within SAP might mean for Ariba customers. But we think the news will eventually bring with it new thinking on how best to shape and implement current and future Ariba assets, including the Ariba Network.

In the meantime, the news of Bob’s and Kevin’s departures should not be read as a negative in terms of Ariba performance inside SAP. Our sources suggest that despite customer concerns regarding product flexibility and network pricing structure, 2013 was a very strong year for the Ariba business as part of SAP, which is testament to the continued performance of the Ariba leadership team. Still, there are many “moving parts” organizationally at SAP, and such departures will always create some churn as the power vacuums are filled and deck chairs re-shuffled.

Going back further, Bob and Kevin were instrumental in implementing a remarkable turnaround strategy. As we wrote in an earlier piece, A Retrospective Essay — Looking Back on Ariba’s Transformation, at the time of the acquisition in 2012:

“… It’s clear Ariba did a tremendous number of things right in building a company that will soon become part of SAP if the proposed deal closes. For one, Ariba pulled a truly unique maneuver in leveraging and then getting out of the professional services business. Kevin Costello was originally brought in from an imploding Arthur Andersen to focus Ariba on driving professional services revenue, a move that in large part stabilized — if not saved — the company in the wake of the B2B implosion (even if it did create channel conflict and concerns until recently). Moreover, the FreeMarkets deal helped contribute to a broader services and expert-driven procurement vision, even if the execution never quite happened as some envisioned.

But just as cleverly as Ariba made the push to services to save the company, they made the push away as well to execute on what would become a clearer vision that would ultimately drive strong shareholder returns. Selling the shared services sourcing group to Accenture (see the highlights of our coverage of that deal here and here) at what appeared to be a very reasonable if not low valuation was a stroke of genius in cleaning up the company to maximize the SaaS/network valuation — not to mention helping to extend a partnership arm to others in the services ecosystem rather than hoarding consulting/sourcing revenue for itself.

All of these clever moves in retrospect were small compared with the move to SaaS. Ariba turned the corner on SaaS — we’re talking the business model here, not specifically the architecture, cloud deployment philosophy, etc. — at precisely the right time. Moreover, Ariba got the business model right (from a revenue and valuation perspective) by forcing the lock-in of SaaS P2P customer to the network, which would drive its appeal and valuation to investors — and ultimately SAP. Say what you will whether this business model is the right one or not for buyers and suppliers (I have issues with it), but investors ended up gobbling it up. And this was prescient, as was driving network revenue by signing the Quadrem deal (even if the integration of the organizations created some tension internally) and the acquisition of B-Process in France. Both deals were also extremely prescient exercises in the arbitrage of revenues, which tremendously benefited shareholders in the end, especially the former…

…  Ariba is exiting on a high point — probably the highest place they could exit for a number of reasons. For this, I truly take my hat off and applaud a team for navigating exceptionally turbulent waters, arbitraging assets (and knowing when to write certain assets off) and evolving a business models while at the same time uncannily timing the market — on multiple occasions. What a juggling act, and what a combination of moves that all worked and came together, in the end.”

Ariba has always been the eProcurement chameleon, changing its colors (and even temporarily discarding appendages like the FreeMarkets business) to suit the changing business environment. It will be interesting to see to what degree such nimbleness will be retained now that it’s part of a much larger organization. For example, as large customers demand things like technical interoperability / openness, data privacy, analytics, and service-based architectures (e.g., that can support hybrid cloud based application deployments while switching out various architectural components), Ariba’s existing technology stack and nimble business strategy will need to be squared against SAP’s mixed technology stack and more methodical software engineering DNA.

We’ll dive into these considerations in future Plus/PRO posts, so stay tuned! In the meantime, if you are looking for further reading on the topic, below is a select compendium of Spend Matters coverage of the acquisition and combination:

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