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SAP makes collaboration play with $4bn Ariba swoop

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23rd May 2012
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No-one can accuse SAP of not putting its money where its mouth is when it comes to its Cloud Computing ambitions. After shelling out $3.4 billion for SuccessFactors earlier in the year, the German giant has now agreed to pay $4.3 billion for collaborative commerce firm Ariba – a 20% mark–up on the closing price yesterday.

SAP’s claiming that Ariba is second-largest Cloud vendor by revenue – a bold statement which has to raise the prospect of a potential Oracle counter-bid on this deal.
Ariba's global trading network connects and automates more than $319 billion in commercial transactions, collaborations, and intelligence among more than 730,000 companies. "Cloud-based collaboration is redefining business network innovation, and we are catching this wave in the early stage of its evolution," SAP co-Chief Executive Officers Bill McDermott and Jim Hagemann Snabe.
Ariba reported $444 million in revenue last year, an increase of 39 percent from a year earlier. Ariba held its initial public offering in June 1999 and was one of the dot com darlings until the shares plummeted around 90% in 2001.
Assuming all goes well with the deal, Ariba CEO Bob Calderoni will join the SAP Global Managing Board and Ariba's management will stay on board to run the firm as Ariba, an SAP company.
Serious move
Coming on the back of the SuccessFactors deal, this latest move shows that SAP is serious about having skin in the Cloud game, reckons TechMarketView’s Angela Easger. “Both moves are attempts to accelerate and bring critical mass – and credibility – to SAP’s still emerging Cloud business and provide an expanded user base to sell additional product to,” she notes.
“Ariba works for SAP in several ways. It boosts its cloud business of course in terms of product scope and the number of users (when combined with the SuccessFactors customer roster SAP will have one of the largest cloud customer bases), but will also provide an outlet for further sales of SAP’s business applications.
“We can see scope for mobile sales too. Ariba’s real time trading platform would also be a good showcase for SAP’s in-memory technology. It takes SAP into a growing area and we expect it will also provide another point of intersection between on-premise and cloud based solutions which will move SAP’s hybrid strategy forward.”
But Eager wonders why Ariba will seemingly operate as its own entity under the SAP umbrella rather than as part of Lars Dalgaard’s new Cloud empire within the firm. “The point of the division was to unite SAP’s cloud offerings, but this planned acquisition appears to sit outside it,” she observes.
Eager can also see the prospect of an Oracle counter-move. “Ariba would be an equally attractive purchase for Oracle (and many Ariba customers are also Oracle customers) and a swoop would also dent SAP’s Cloud ambitions,” she observes.
Carter Lusher, chief IT analyst at Ovum, suggests that the acquisition represents a "talent grab" about the business issues of Cloud Computing but hat the acquisition has other motivations as well.
"These include marketplace factors like acquiring customers and revenue stream and moving into adjacent markets in addition to building block factors like sales team headcount, technology R&D talent, and filling a product gap," he explains.
“This is a logical step for SAP as it needs to accelerate its move into the cloud. This acquisition is consistent with SAP’s overall M&A strategy and complements the SuccessFactors acquisition in December – providing greater depth of products, executives, and tech talent for the cloud. For Ariba, it’s unlikely the talent, technology and product will be cut. Instead, I expect SAP will invest heavily in Ariba’s R&D. While there is no immediate impact on SAP’s competitors, there could be a need for concern should SAP successfully accelerates its move into the Cloud."

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