SAP’s Ariba Acquisition: Right Move?

Cloud collaboration and data analytics means a company can determine with blazing-fast speed *why* they screwed up your shipping order.

When SAP announced the purchase of cloud-networking vendor Ariba for $4.3 billion, it was widely perceived as an aggressive lunge by the enterprise IT firm for a bigger chunk of the cloud market.

Ariba’s network involves thousands of companies and facilitates billions of dollars in commerce transactions and collaborations. SAP will bind its data-analytics applications to the network’s relationship and transaction information, allowing trading partners to gain more real-time insights into their interactions—and that’s just the beginning of SAP’s plans for the property.

The sheer size of the deal made it an instant talking point among analysts and pundits. But was SAP’s money well spent?

According to some analysts: no.

“I’m not convinced that this acquisition makes strategic sense,” Andrew Bartels, an analyst with Forrester, wrote in a May 23 corporate blog posting. “Reason one: the tremendous duplication of products between the two firms, and thus the problems of product rationalization and internal competition.”

He added that SAP’s strategic sourcing, spend analysis, SRPM, and CLM products are available in both Software-as-a-Service (SaaS) and on-premises flavors—just like Ariba’s offerings: “The only unique products that Ariba brings are its eInvoicing product (SAP has been reselling OpenText) and its SaaS version of eProcurement and services procurement.”

The second reason, he wrote, is Ariba’s “idiosyncratic pricing model” and its supposed inability to “generate the kinds of revenues that SAP is expecting.” The duplications among the respective companies’ product portfolios will also make monetization a challenge.

All that being said (and it’s actually quite a lot; his blog posting tackles the deal’s synergies—or lack thereof—in pretty extensive detail), he does see some upside for the deal, including the potential for SAP to increase the percentage of its revenues derived from SaaS subscriptions. “The combination of Ariba and SAP,” he added, “has the potential to add new products and services that they can sell to both buyers (e.g., supply chain planning and coordination) and suppliers (e.g., CRM and eCommerce services).”

Other analysts viewed the acquisition in a much more positive light. “I’d say apart from the high price, it’s actually a good acquisition for SAP,” Roger Kay, principal analyst for Endpoint Technologies Associates, wrote in an email. “Ariba is a solid business in its own right and gives SAP access to cloud computing technologies that it couldn’t replicate internally.”

Even if the two companies’ abilities and offerings aren’t totally in-sync, he added, “Ariba can be operated as a successful separate entity. But those cloud assets don’t come cheap these days.”

Whatever the analyst opinions, the market will ultimately decide whether SAP made a smart move.

 

Image: Semisatch/Shutterstock.com

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