SAP is making a major move to expand its cloud presence -- a $4.3 billion move. SAP announced a deal to acquire Ariba, a cloud-based business
The acquisition merges Ariba's buyer-seller collaboration network with SAP's customer base and business process expertise, with the goal of creating new models for business-to-business collaboration in the cloud.
"The cloud has profoundly changed the way people interact. The impact will be even greater as enterprises connect and collaborate in new ways with their global networks of customers and partners," said SAP Co-CEOs Bill McDermott and Jim Hagemann Snabe. "Cloud-based collaboration is redefining business network innovation, and we are catching this wave in the early stage of its evolution."
A Cloud-Based Future
SAP is betting that adding Ariba to its mix will create "the business network of the future," while also delivering immediate value to its customers and providing another solid engine for driving SAP's growth in the cloud. Time will tell how well SAP integrates Ariba's technology.
One thing is certain: the move positions SAP in a fast-growing segment as buyers and sellers across the globe connect in new ways through the cloud. SAP's entry into the inter-enterprise business network space expands its growth opportunities and accelerates its momentum in the cloud.
SAP last week announced a roadmap for its cloud apps business that focuses on managing customers, suppliers, employees and financials. The Ariba acquisition will also boost SAP's cloud applications portfolio, which includes SAP Business ByDesign and SAP Business One. Ariba generated $444 million in annual revenues in 2011 on 38.5 percent growth. Ariba's business network recorded 62 percent organic growth in the same period.
The Oracle Threat
Meanwhile, SAP points to industry stats to bolster its reasons for the multibillion-dollar acquisition. SAP's homework shows the current size of the cloud-based enterprise network and procurement segment is $5 billion in annual revenue. Ariba leads the field, connecting and automating more than $319 billion in commerce transactions, collaborations, and intelligence among more than 730,000 companies.
We caught up with Charles King, principal analyst at Pund-IT, to get his take on the acquisition. He told us SAP automatically becomes a sizable entity in helping online commerce sites transact business. But there's another layer to the story.
"What is interesting about the deal from a strategic perspective for SAP is that a lot of Ariba's customers support their apps with Oracle database. So this could provide SAP a foot in the door for making a pitch to take a look at its own database solutions and to possibly displace Oracle over time," King said.