Ariba acquisition could propel SAP's cloud ERP strategy

Ariba acquisition could propel SAP's cloud ERP strategy

Published: 5/24/2012 6:58:38 PM

SAP's continued dominance in the enterprise resource planning (ERP) software market has come under question of late with competitors like Oracle and Microsoft getting out to a bit of a headstart in the cloud. SAP has been making moves to reclaim any lost ground, however, with a series of aggressive investments. The company made headlines once again this week as it tries to take its cloud ERP software strategy onward and upward by acquiring ecommerce innovator Ariba.

Billed as the leading cloud-based business commerce network on the market, Ariba presents a number of attractive possibilities to SAP. This notion was not lost on company officials, as SAP paid a 20 percent premium on Ariba's closing stock price to pen a $4.3 billion deal.

"The addition of Ariba will create the business network of the future, deliver immediate value to our customer and provide another solid engine for driving SAP's growth in the cloud," SAP chief executives Bill McDermott and Jim Hagemann Snabe said in a joint statement.

Specifically, SAP is hoping to deploy Ariba assets in a way that will help create a "closed-loop" system that keeps everything from sourcing to final payment streamlined in one interface. But despite the terminology, this concept is actually central to providing the type of open, B2B collaboration companies demand by bringing all vital information and communication onto the same network.

"In our personal lives, networks are playing an increasingly important role in how we connect, share and shop - bringing more insight and efficiency into everything we do," Ariba CEO Bob Calderoni explained. "Businesses are looking for the same type of connectedness, insight and efficiencies in the processes and collaboration with customers, suppliers and partners beyond the walls of their companies."

By adding new dimension to its cloud strategy, SAP could be providing its customers a number of indirect benefits down the road as well. In an interview with TechTarget, Forrester Research analyst Duncan Jones suggested that the market will essentially force SAP to innovate as it will no longer have the luxury of relying so heavily on software licensing fees. As a cloud service provider, it will have to demonstrate a clear value to its customers month after month if it hopes to retain their business.

It will be interesting to see how customers respond to the new menu of possibilities, but it's already clear that SAP is no longer content to rest on previous victories and will look to serve the emerging demands of a constantly connected workforce.

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