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Afternoon Coffee: SAP’s chief steps down; FAA didn’t properly review 737 MAX jet, regulators say; SpaceX, 7 competitors get contract

SAP announced that its CEO, Bill McDermott, is stepping down after more than nine years running the business software company, and Spend Matters' Pierre Mitchell weighs in with what it means for SAP. In other news, a committee looking at the 737 MAX issues says that the FAA didn't properly vet the aircraft and that Boeing should upgrade its processes. Also, the Air Force looks to space in awarding a different kind of contract. Afternoon Coffee brings you the latest in procurement and supply chain news.

Coupa financial results: Delving into another strong quarter [PRO]

procurement

Earlier this week, Coupa reported its Q2 results for fiscal 2020, achieving revenue of over $95 million (a near 55% increase year-over-year, primarily from organic growth). The quarterly revenue performance beat analysts’ estimates, and non-GAAP EPS was also above expectations, although cash flow from operating activities declined quarter-over-quarter. Regardless, investors cheered the results, helping Coupa hit a price/sales ratio of nearly 28X in early morning trading on Thursday — and a roughly $9 billion market cap (representing over 125% appreciation in the stock price in 2019 alone).

That’s valuation perfection by just about any measure when compared to peers.

But what is happening within Coupa (and the broader market) under the surface that is driving these numbers? This Spend Matters Nexus brief provides insight on broader (and related) market trends while peeling back a few layers of the onion on what’s driving Coupa’s success, including how it is benefiting from various competitive dynamics in the market (e.g., SAP Ariba’s broader integration hurdles), as well as some of the challenges Coupa must confront to fully capitalize on its acquisitions.

Jason Busch serves as Managing Director of Spend Matters Nexus, a membership, research and advisory organization serving technology acquirers (private equity, corporate development, etc.) and CEOs in the procurement and finance solutions marketplace (including contract management, B2B marketplaces/connectivity, indirect procurement, services procurement, direct procurement, commodity management, payment, trade financing, GRC/third-party management and related adjacent sectors).

SAP Intelligent Spend Group analysis: 10 observations of the new Ariba-Fieldglass-Concur business unit [PRO]

Last week, SAP released its financial results for the second quarter 2019. In the announcement, presentation and earnings call, SAP broke out revenue for its new Intelligent Spend Group (in previous quarters, it broke out revenue for the similar “Business Network” segment). This business unit consists of SAP Ariba, SAP Fieldglass and SAP Concur. According to SAP, quarterly performance for the group represented approximately $880 million (USD) in revenue based on actual reporting in euros of €786 million. At constant currency levels, revenue was up 17% year-over-year, or 22% factoring in currency changes.

This Spend Matters PRO brief begins by highlighting some of the additional detail provided on the earnings call and then provides 10 observations on the current state of the business unit based on customer, channel and other checks conducted by the Spend Matters analyst team. Spend Matters PRO subscribers also have access to previous coverage of SAP Intelligent Spend Group. Recent briefs include:

* SAP Intelligent Spend Group is future for Ariba, Fieldglass, Concur (Part 1): Customer Analysis, Solution Integration, Roadmap [PRO]
* SAP Intelligent Spend Group is future for Ariba, Fieldglass, Concur (Part 2): Hard Questions on Integration [PRO]
* SAP Intelligent Spend Group is future for Ariba, Fieldglass, Concur (Part 3): How can the SAP spend platform ‘Run Simple’? [PRO]
* With Barry Padgett leaving SAP, what’s next for new Intelligent Spend Group? [PRO]

SAP Intelligent Spend Group is future for Ariba, Fieldglass, Concur (Part 3): How can the SAP spend platform ‘Run Simple’? [PRO]

supplier network

The integration of SAP Ariba, SAP Fieldglass and SAP Concur into a single operating entity within SAP, the “Intelligent Spend Group,” will be far more straightforward from a commercial and go-to-market perspective than a technology architecture and platform vantage point. This Spend Matters research brief, the third in our series analyzing integration considerations for the Intelligent Spend Group, explores network and platform considerations and offers key takeaways for the company and SAP customers. Part 1 centered on specific integration models that SAP is likely to take (e.g., the SAP Cloud Integration Gateway) and what these approaches would mean for customers of multiple solutions. Part 2 asked the hard questions surrounding core integration considerations.

SAP Intelligent Spend Group is future for Ariba, Fieldglass, Concur (Part 2): Hard Questions on Integration [PRO]

integration

In late April, SAP announced its “Intelligent Spend Group,” a combination of SAP Ariba, SAP Fieldglass and SAP Concur. As the new operating unit eventually becomes “one” from a product perspective as well, it is important to realize the level of complexity that SAP will confront along the way. For example, SAP Ariba product managers have to deal with their individual platforms/ecosystems (SAP Ariba, Fieldglass, and Concur), but also with integrating to the Ariba Network, relevant SAP applications (e.g., Integrated Business Planning), with partner apps in each of those ecosystems, and the move toward an SAP-centric application stack and platform stack.

For example, SAP has its own journey from ECC to SAP S/4HANA in the cloud via S/4HANA Cloud Foundation, S/4HANA Cross Engineering, S/4HANA Enterprise Architecture, and other toolsets. S/4HANA then needs to integrate to the SAP Cloud Platform applications that will themselves need to integrate with each other as they slowly migrate to an underlying SAP Cloud Platform that includes a range of areas described in this second of three briefs in Spend Matters' PRO research series.

It’s not simple to run — unlike SAP’s old slogan of “Run Simple” used to say.

If Ivalua is now a yardstick, how do competitors like Coupa, SAP Ariba, Oracle measure up to it? [PRO]

At Spend Matters, most of our time is spent actually looking at solutions and evaluating and validating detailed RFI responses. So when a procurement organization asks us, for example, “how does SAP Ariba compare to Coupa for source-to-pay,” we can provide a detailed explanation across hundreds of different functional specifications and customer satisfaction benchmarks about how the two precisely compare and differentiate. We get questions on these two providers a lot.

Technology vendors reach a milestone when other providers (as well as practitioner and consultants) start using them as a yardstick to measure and compare capabilities. And now with Ivalua reaching unicorn status and sharing current growth metrics that generally dwarf that of its larger peers — based on organic product growth — we expect to hear more and more procurement organizations ask about Ivalua in the same way they ask about SAP Ariba and Coupa. And of course from a SolutionMap perspective when it comes to technology selection, we can answer that question with hard, objective data on a capability-by-capability basis (now mapped to procurement business requirements).

But off-the-cuff, how does Ivalua and its unified suite compare to others?

I asked my colleagues on the Spend Matters analyst team who know different areas of Ivalua (and its peers) to comment not using the SolutionMap benchmark, but their own opinion.

So without further adieu, let’s read the Spend Matters analyst team’s candid take of how Ivalua’s source-to-pay competitors measure up to it (including positives and negatives comparisons for each). Our analysis explores, on an overall company basis, subjective views about how the following vendors compare to Ivalua: Coupa, Determine (now part of Corcentric), GEP, Jaggaer, SAP Ariba, Oracle, SynerTrade and Zycus.

Do you want the objective, hard comparative data on a functional and product basis to understand how Ivalua stacks up to peers? Check out SolutionMap Insider.

UPDATE: With Barry Padgett leaving SAP, what’s next for new Intelligent Spend Group? [PRO]

Barry Padgett has left SAP only weeks after being named president of the newly created SAP Intelligent Spend Group (ISG), a combination of SAP Ariba, SAP Concur and SAP Fieldglass.

Padgett had previously served as president of SAP Ariba, before being promoted to the new role as leader of the combined group. Spend Matters sources suggest he has accepted a new role as chief revenue officer for Stripe, a payments company, although this is unconfirmed at this time.

SAP’s Intelligent Spend Group told Spend Matters that Mike Eberhard, formerly president of SAP Concur, will take over for Padgett, at least as an interim leadership move. Eberhard had previously planned to “step back” from a daily role at SAP in Q3 to serve as an adviser. While on the surface, the move to promote Eberhard on a temporary basis may seem like a GE “moving around the management chess pieces,” type of maneuver, Eberhard has a unique foundation from which to sit on top of the combined organization at a pivotal time.

Not only has Eberhard had sales leadership experience and significant growing, global commercial responsibilities within Concur in the past decade, he brings leadership depth from other areas of procurement, payables and supplier management solutions earlier in his career. This includes holding previous P&L responsibilities for SAP Ariba, Xign, Peoplesoft and D&B.

Based in part on his diverse set of experiences in the “spend” universe, including P&L leadership within a number of different business cultures that sold to different economic buyers, we are enthusiastic about the selection of Eberhard as at least a temporary leader of the SAP Intelligent Spend Group.

But as Eberhard perhaps channels Constantine the Great, one of the great “uniters” of different factions in Roman history, he will nonetheless face a range of challenges on multiple fronts — internal and external — as SAP plans for simultaneous battles at the same time as it brings together three best-of-breed solutions under one roof, one that ideally represents more than just a united fighting commercial front.

Leadership Required on Simultaneous Fronts

The remainder of this research brief introduces some of the campaigns that SAP’s Intelligent Spend Business group will need to simultaneously embark upon if it is to align what is in the interests of customers and shareholders over the long term. We see three main fronts that SAP must target at the same time.

Before exploring these, we should note that Padgett left the SAP Intelligent Spend Group before having a chance to substantively make a mark on this newly created business unit. His departure at a formative, pivotal moment gives the opportunity to Eberhard (and/or a future leader) to chart a course for the future of a common SAP Ariba, SAP Concur and SAP Fieldglass at a time in which all three former independent operating units face new dynamics.

PRO subscribers can read more about the three fronts that SAP faces.

Read our analysis of SAP Intelligent Spend Group and SAP’s Ariba, Concur, Fieldglass for the last 12 months

Today's news about SAP’s change in leadership at its new division ("Barry Padgett Leaving SAP and new Intelligent Spend Group") had us thinking about Spend Matters’ analysis of the group recently forming and our ongoing coverage of its components: SAP Ariba, SAP Concur and SAP Fieldglass.

Since early 2018, Spend Matters has given PRO and SolutionMap subscribers deep insights into their solutions, including a comparative analysis of SAP Ariba’s S2P offering and a look at SAP Fieldglass’ Digital Network. Subscribers also have gotten head-to-head comparisons of SAP Ariba with competitors like Coupa, Ivalua, Basware, Tradeshift and GEP. (For companies considering SAP’s procurement solutions, Spend Matters’ SolutionMap Technology Selection Services are also available for procurement organizations that want a one-to-one map between their own business requirements and functional performance).

An Interview with SAP Intelligent Spend Group’s Marcell Vollmer: From CPO to CDO

SAP recently has consolidated its separate business units SAP Ariba, SAP Fieldglass and SAP Concur under its new SAP Intelligent Spend Group division. So it seemed like a good time for me to catch up with an industry insider to shed light on the issues.

Dr. Marcell Vollmer is now the chief digital officer of the Intelligent Spend Group, after filling the CDO role for SAP Ariba since 2017, when I talked to him in a series of Spend Matters interviews about digital transformations and about his stint as the chief procurement officer for SAP.

Recently, he said one area of opportunity that he sees is in procurement, where CDOs should spend more time.

SAP Ariba Sourcing: How Does it Compare Today and What is Coming Tomorrow (Part 2: Playing the Scout Card) [PRO]

Procurement organizations previously embraced complexity in tools to enable both event sourcing and category management processes. Now, the tide has turned. Solutions that are best-in-class from a user-experience perspective, but may lack advanced features (e.g., sourcing optimization, the most capability/depth for RFP/RFI/auction support, full opportunity analysis like should-cost modeling, full project management, comprehensive integrated supplier and risk management, etc.) are increasingly winning the day — sometimes even replacing solutions that offer deeper functional capability.

Simply put, this is what I term the Scout phenomena (but in all fairness to Scout, the provider, is aggressively building out capabilities in areas that it has lagged in for our SolutionMap benchmarking tool).

In the forthcoming new releases of its sourcing product, SAP Ariba has not just co-opted Scout’s playbook. It has built on it. By masking complexity and prioritizing usability not just as a primary, but the top objective, forthcoming “SAP Ariba Sourcing” releases represent a fundamental replatforming that will put casual, business and procurement users at the center of a vastly improved and consumerized UX.

In Part 2 of the Spend Matters PRO research series providing analysis of the SAP Ariba Sourcing solution, we offer insight into the new user experience as well as analysis, commentary and customer recommendations based on SAP Ariba’s planned release schedule featuring the new UI/UX. Part 1 provided insight into SAP’s relative strengths and weaknesses today (based on the Q1 2019 SolutionMap release) and shared what we learned last month at the SAP Ariba Live event on an overall roadmap basis for the sourcing product line.

SAP Ariba users’ reviews are in the new SolutionMap Customer Insights report

Q1 2019 Spend Matters SolutionMap procurement software company rankings

Today, the inaugural Spend Matters SolutionMap Customer Insights report features reviews from SAP Ariba’s customers. We are taking a deeper look into our SolutionMap database, which ranks providers in the marketplace according to their capabilities and their customers’ reviews of the companies. SolutionMap has more than 900 customer reviews, and we’d like to share that insight for a few providers, beginning with SAP Ariba. (SolutionMap Insider subscribers can see the reports, but non-subscribers can see a sample report in this story.) The Customer Insights summary includes ratings to what degree the vendor meets user expectations, three key differentiators for the vendor and a list of quotes about the vendor’s greatest strengths.

SAP Ariba Sourcing: How It Compares Today and What’s Coming Tomorrow (Part 1: Benchmark Performance, Product Roadmap) [PRO]

future

The strategic sourcing or e-sourcing technology market — we simply call it “Sourcing” in SolutionMap — has undergone significant transformation and bifurcation in recent years. On the one hand, disruption has come from simplicity and ease of use (e.g., Bonfire, Keelvar, Market Dojo, Scout RFP, etc.). And on the other hand, it has come from significant advances in functional capabilities in various areas (e.g., Coupa, GEP, Ivalua, Jaggaer, SynerTrade and Wax Digital, among others).

SAP Ariba, one of the stalwarts of the Sourcing world for over two decades (if you count the acquisition of FreeMarkets), remains a frequent competitor on a global basis today. But how does SAP Ariba compare to others in the market on a functional basis based on its current offering? And what is coming for SAP Ariba Sourcing tomorrow?

Part 1 of this Spend Matters PRO analysis provides insight into SAP’s relative strengths and weaknesses today (based on our Q1 2019 SolutionMap release) and shares what we learned from the SAP Ariba Live event this month on an overall roadmap basis. Part 2 will provide additional insight into the new SAP Ariba Sourcing user experience as well as analysis, commentary and customer recommendations based on SAP Ariba’s Sourcing roadmap overall.