SAP Deal for Ariba Heralds E-Procurement War in the Cloud

Michael Vizard
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SAP's move to spend $4.3 billion to acquire Ariba shines a spotlight on a world of e-procurement that is in the process of being transformed in the cloud computing era.

Like SAP, Ariba built its business primarily selling on-premise applications for managing the procurement process. It's only been in recent years that Ariba has been extending that suite of applications into the cloud with a series of modules that are delivered via the cloud. It's that shift into software-as-as-service (SaaS) applications that most likely got SAP's attention given the company's own ambitions in the cloud.

But the questions that arise from all this is will Ariba customers actually sign up for the SAP vision of the cloud or will they just migrate to other e-procurement applications that are already in the cloud? The folks at SciQuest, a provider of a software-as-a-service (SaaS) application that is delivered via the cloud, are betting heavily on the latter scenario.

What's driving that shift is that while companies have a natural tendency to want to reduce the number of suppliers they have to manage, they are also keenly aware that competition drives down pricing. What most companies don't really have in place today is a way to automate the procurement process that doesn't cost them a lot of time and effort in terms of setting up the application. Making an e-procurement application available as a multi-tenant SaaS application takes that headache off the table, which then makes it easier for a larger number of companies to play one supplier off another in order to drive down costs.

According to Max Leisten, director of product marketing, SciQuest has a lot more to gain than lose with the acquisition of Ariba. At the moment, SciQuest has about 321 customers. Leisten says that SciQuest has been riding the whole shift to supply chain management software in the cloud. But now that SAP via the Ariba acquisition is essentially saying this is the direction that e-procurement is heading, SciQuest sees that merger as validation of its overall strategy.

Of course, much larger entities such as Oracle have yet to be heard from when it comes to e-procurement in the cloud. But one thing that is for certain is that a much bigger e-procurement battle is brewing in the cloud if Ariba is worth $4.3 billion to SAP.

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