The way businesses evaluate and buy software is beginning to evolve, and the vendors positioned to win in this new wave are those that embrace a mantra of customer-centricity, agility and “openness.” They create customer value by building an ecosystem of not just their own proprietary application suites and underlying technology but an integrated ecosystem of other tools.
For decades now, organizations assessing potential technology solutions have restricted themselves to mutually exclusive, collectively exhaustive (MECE) categorizations oriented toward functional heads and process owners — process-centric applications and suites that meet strict criteria for being called “S2P,” “P2P” or “SVM” (or whatever your chosen acronym is). This ‘lingua franca’ of technology evaluation, however, is becoming increasingly insufficient. This is because what businesses need in this volatile, unpredictable, complex world is something that is less well-defined and “off-the-shelf,” but more flexible and able to meet this complexity with evolving “orchestration” capabilities that:
- Accommodate existing applications and external data/intelligence sources alike
- Empower business users and IT to dynamically reconfigure and extend their workflows and make them more intelligent through embedded analytics and on-demand digital services (e.g., via app marketplaces)
- Provide underlying data governance and platform integration to securely orchestrate this broader ecosystem without “application anarchy” and “shadow IT”
For procurement leaders and their peers in supply chain, finance and IT, this means a procurement technology architecture that emphasizes “and” rather than “or” — that is, the ability to combine multiple types of solution into offerings greater than the sum of their parts rather than having lose-lose battles between an ERP-only CIO and a best-of-breed-centered CPO. We find that top-performing procurement groups are consistently those that are best aligned with enterprise-level goals and stakeholders but are also aligned in adopting enterprise software that runs adjacent to or in parallel with traditional ERP and S2P application suites to meet unique needs for various industries, geographies, cross-functional processes (e.g., managing contracts or ESG performance), spend categories and supporting intelligence.
This ecosystem strategy for managing “best-in-class architectures” is unfortunately still nascent, but recent activity has thankfully signaled the start of a greater shift by the large technology vendors themselves (and not just progressive buyers). This is especially true of those large vendors that have grown through best-of-breed application acquisition and have needed to shift their strategies from building out features and functions within their core application monolith suites to building out harmonized technology platforms that support an integrated technology ecosystem. The coming wave is perhaps best illustrated by the vendor that acquired the largest share of the procurement technology market by pioneering the very concept of “spend management” and an S2P suite: SAP with its acquisitions of SAP Ariba, Fieldglass (for contingent labor spend management) and Concur (for “expense management”).
Let’s just focus on the SAP Ariba portion of this discussion. SAP acquired Ariba over a decade ago to manage S2P, especially for indirect spend management, to augment the basic integrated direct spend management functionality within SAP’s ERP system (ECC and now SAP S/4 HANA). Although SAP let SAP Ariba generally chart its own path in “spend management,” CPOs and CIOs alike began demanding more integration within procurement, to finance (e.g., the “P” for payments, and invoice processing, in “S2P”), to legal (for contract management), supply chain (for more complex supplier collaboration, inbound SCM collaboration, and supply risk and compliance that transcended just the SAP Ariba products.
In the first half of 2022, SAP has made a series of moves that signal a changing direction for Ariba. Through new acquisitions, alliances and organic development, SAP is focused on architecting an open, future-oriented technology ecosystem that embraces the realities of complexity, while still providing a powerful on-ramp to those who are at an emerging level of organizational maturity through its ecosystem of technology partners and service partners alike.
This progressive strategy, however, is frankly more difficult to understand — and correctly capture in comparative assessments — than a standard S2P suite assessment. In all honesty, even our world-class SolutionMap methodology falls short of what’s needed to truly understand the context of how an organization should assess a solution like SAP Ariba. The game of technology evaluation is changing, with heterogeneous application integration becoming a factor just as much as apples-to-apples comparisons of similar solutions.
To parse the broader vision at work here and provide a frank assessment of how SAP stacks up today against that vision, this Spend Matters PRO brief offers a contextual placement of SAP Ariba in the S2P market today, along with a granular examination of the state of the current Ariba product set. It concludes with a commentary on how customers and prospects can ask the difficult, holistic questions needed to understand whether SAP’s procurement offerings are right for them — and whether SAP can master its own complexity on the way to realizing its larger Ariba vision.
