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SAP to Acquire Ariba for $4.3 Billion

SAP gets huge cloud and extended business process boost with Ariba acquisition

SAP on Tuesday announced its intention to buy Ariba for $4.3 billion, a 19 percent premium on Ariba's market capitalization.

The move comes soon after SAP's SuccessFactors February buy and shows that SAP is quickly and aggressively acquiring its way to a full cloud business services capability. The announcement caps SAP's user conference last week and the cloud and data services news from it, including cloud suite offerings like SAP Business ByDesign and SAP Business One.

It will become a question in the market if SAP will favor it's own ERP technologies and installed base, or continue Ariba's strategy of inclusive and open alliances and partnerships.

Ariba has been growing rapidly through organic and acquisitions expansions, and has a global reach for its procurement, goods/services trading, spend management, supplier discovery and other extended enterprise business processes and services offerings. [Disclosure: Ariba is a sponsor of BriefingsDirect podcasts.]

Ariba has been open and partnered with all major ERP suppliers -- including SAP, Salesforce, IBM and Oracle, but not Workday. And Ariba recently announced a partnership with Microsoft Dynamics. It will become a question in the market if SAP will favor it's own ERP technologies and installed base, or continue Ariba's strategy of inclusive and open alliances and partnerships.

I personally think SAP should keep Ariba open to grow the cloud business services market, and treat all IT business services suppliers on equal footing, and therefore best support the most enterprises and suppliers. SAP should keep its ERP products and tactics separate from Ariba, and allow users to adopt a cloud-first approach, regardless of their on-premises or private cloud technologies.

Looks like a plan

It looks at this point like that is the plan. The combined companies plan to consolidate all cloud-related supplier assets of SAP under Ariba. The existing management team will continue to lead Ariba, which will operate as an independent business under the name “Ariba, an SAP company.” The SAP Executive Board intends to nominate Ariba CEO Bob Calderoni to the SAP Global Managing Board.

Clearly, SAP is focused on global cloud growth opportunities, but is wisely defining cloud as a place to do business and extend socially amplified discovery and collaboration efficiencies. Business returns on cloud services may well come more from enabling new business processes across organizational boundaries, than in retrofitting older software as services. SAP will also be able to make more alliances with the next generation of ISVs through an Ariba community approach.

Ariba is describing the combination with SAP as creating "the Amazon.com and Facebook for businesses all in one." That certainly is the potential. SAP is, and this has not always been the case with Walldorf, skating to where the hockey puck is going to be in buying Ariba.

Clearly, SAP is focused on global cloud growth opportunities, but is wisely defining cloud as a place to do business and extend socially amplified discovery and collaboration efficiencies.

SAP and Ariba can "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," said the companies. Ariba network should also benefit from SAP’s flagship in-memory platform SAP HANA for improved data processing and analytics benefits.

With $444 million in total revenue, Ariba had 38.5 percent annual growth in 2011. Its business network recorded 62 percent organic growth in 2011. SAP’s global customer base of more than 190,000 companies includes the largest buyers and sellers in the world.

The acquisition is expected to close in Q3. Ariba's board unanimously approved the deal.

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At Interarbor Solutions, we create the analysis and in-depth podcasts on enterprise software and cloud trends that help fuel the social media revolution. As a veteran IT analyst, Dana Gardner moderates discussions and interviews get to the meat of the hottest technology topics. We define and forecast the business productivity effects of enterprise infrastructure, SOA and cloud advances. Our social media vehicles become conversational platforms, powerfully distributed via the BriefingsDirect Network of online media partners like ZDNet and IT-Director.com. As founder and principal analyst at Interarbor Solutions, Dana Gardner created BriefingsDirect to give online readers and listeners in-depth and direct access to the brightest thought leaders on IT. Our twice-monthly BriefingsDirect Analyst Insights Edition podcasts examine the latest IT news with a panel of analysts and guests. Our sponsored discussions provide a unique, deep-dive focus on specific industry problems and the latest solutions. This podcast equivalent of an analyst briefing session -- made available as a podcast/transcript/blog to any interested viewer and search engine seeker -- breaks the mold on closed knowledge. These informational podcasts jump-start conversational evangelism, drive traffic to lead generation campaigns, and produce strong SEO returns. Interarbor Solutions provides fresh and creative thinking on IT, SOA, cloud and social media strategies based on the power of thoughtful content, made freely and easily available to proactive seekers of insights and information. As a result, marketers and branding professionals can communicate inexpensively with self-qualifiying readers/listeners in discreet market segments. BriefingsDirect podcasts hosted by Dana Gardner: Full turnkey planning, moderatiing, producing, hosting, and distribution via blogs and IT media partners of essential IT knowledge and understanding.

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