Transaction highlights the shifting balance of power from on premise based ERP
The sleeping giant is finally aroused. SAP’s acquisition of Ariba is a significant admission by the accounting software giant that new technologies are shifting the balance of purchasing power away from on-premise applications. Despite its December 2011 acquisition of SuccessFactors, SAP is light years behind in cloud applications – perhaps fatally. Corporate CIO’s and CFO’s are increasingly fatigued by their costly reliance on enterprise applications that take years to implement and offer disappointing return on investment metrics. SAP has craved new tools to bolster its position in the cloud-based services market, and more specifically the collaboration realm of supply chain commerce technology. For impatient finance managers, Ariba fits this bill nicely.
As part of its long term cloud commerce initiative, SAP took a small step in the right direction by acquiring Crossgate in September, 2011. At the time of the Crossgate acquisition, many noted that SAP was becoming increasingly competitive with Ariba, especially in the EU. With today’s announcement, SAP proved its commitment to aggressively acquire its way to a comprehensive enterprise commerce offering.
On the analyst conference call today, the combined companies spoke of their plan to consolidate all cloud-related supplier assets of SAP under Ariba. SAP’s team believes the combination gives SAP the potential to deliver a truly “end-to-end solution” that enables companies to achieve a closed-loop from source-to-pay, regardless of whether they deploy in the cloud, on-premise or both. In addition, SAP has announced it will keep Ariba open by continuing to support all customers that use competing ERP’s, a decision that will be critical to maintaining Ariba’s alliances and partnerships with Oracle, Microsoft, and other partners. Although SAP is dominant in the F500 space, Ariba has a much broader customer base due to revenue producing supplier offerings such as the Ariba Supplier Network and its focus in services procurement where SAP has been lagging.
The purchase-to-pay industry has been poised for consolidation for several years. We expect many more acquisitions in this fragmented industry due to the relentless shift to cloud, outsourced services and the impact of mobile technologies.
Next up – Oracle acquires Concur? MicroSoft acquires Sage? Intuit acquires NetSuite?
Stay tuned for more analysis in the days to come.
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