SAP on Tuesday is expected to showcase how it will tie together its business applications with the cloud-based business network it gained through the acquisition of Ariba during the Sapphire and Tech Ed conferences in Madrid.
The Ariba deal, which closed last month, was announced in May, and took some time to wrap up as regulators scrutinized the deal. But now SAP is in possession of what it calls "the eBay of business networks," said Sanjay Poonen, president and corporate officer, technology and innovation products, in an interview prior to the conferences.
Ariba's software connects hundreds of thousands of companies interested in buying and selling products and services. It makes money by charging fees on each transaction, much like a credit card company.
Ariba is currently on track to generate about $500 million in revenue but there's the potential for much more, according to Poonen. "The more and more people you get on that network, it's almost a flywheel effect," he said. "You don't need each transaction to be a large amount, you just need a lot of transactions."
To this end, SAP is hoping to draw many more small and medium-sized businesses, of which there are many millions, into the Ariba fold, Poonen said.
Ariba will be open to other ERP (enterprise resource planning) platforms besides SAP's, Poonen said. "Oracle customers are welcome and we're delighted that they're part of the network. We'll continue to make [Ariba] best of breed regardless of whatever ERP system [customers] use."
However, integration between Ariba's network and SAP will be the most robust, Poonen said.
On this front, SAP announced a set of Rapid Deployment Solutions, which comprise a focused set of software and services, for tying the Ariba network to various modules within SAP Business Suite. Additional RDS packages for Ariba are coming next year, SAP said.
SAP is also planning to weave its much-hyped HANA in-memory database technology into Ariba within the first half of 2013, giving Ariba an infusion of analytic firepower.
Ariba already has some analytic capabilities but HANA will dramatically speed up the process, allowing customers to conduct real-time analysis of "transactional, relationship and member-contributed content on the Ariba Network to make more informed buying, sales and financial decisions," SAP said in a statement.
The vendor may also be planning to shake up Ariba's revenue model, although it hasn't made any details public yet.
"SAP and Ariba will terminate the current network fee structure that charges a percentage of transactional value to suppliers by 2015 and replace it with flat connectivity charges (either annual subscriptions for basic connectivity or per-document pricing)," said Jason Busch, managing director of the consulting firm Azul Partners, in a recent post on the Spend Matters blog.
"Within this timeframe, SAP will also introduce a range of new capabilities on the network for buyers and suppliers where supplier-generated fees are likely to continue to form a significant portion of network revenues going forward (but without the supplier and buyer heartburn that Ariba's transaction-value based price increases generated in the past)," Busch added.
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