Treasury Today Country Profiles in association with Citi

Does SAP have its head in the clouds?

The world of ERP and B2B integration is moving further into the cloud in response to the increasing number of corporates that shift their businesses processes online.

It is a development underlined by the recent acquisition by SAP of the cloud-based B2B provider Ariba. In late May the German solutions provider bought Ariba for a hefty $4.3 billion in an effort to branch out further into the software-as-a-service provider (SaaS) market.

In the same week its chief rival, Oracle, announced that it was snapping up Vitrue, a social marketing firm that operates in the cloud.

“The B2B market is in the throes of an acquisition and consolidation phase, with SAP probably being the most aggressive in the last eight months,” says Dennis Gaughan, Managing Vice President of Application Strategy and Governance at Gartner. “SAP is the largest ERP vendor and a huge percentage of their clients integrate their ERP systems to external sources – often through a B2B gateway onto the internet.”

But SAP and Oracle are only responding to the changing dynamics in the ERP market. There is now a stronger move to cloud-based integration with B2B systems, as corporates continue to shift their business process management out of the back office and onto the internet.

According to the market intelligence provider IDC, “cloud services will be an oversized contributor to IT industry growth [in the future], with rates over five times those of traditional IT products.” Indeed, global revenue for public cloud services alone amounted to more than $16 billion in 2009, and is forecast to top $55.5 billion by 2014.

By integrating their ERP and B2B systems in the cloud, corporates hope to gain further standardisation of business processes; reductions in the time it takes to integrate acquisitions; improve supplier chain efficiencies; and lower operational costs.

The B2B market, for its part, has responded effectively to the transition. “Many companies have pushed their ERP/B2B projects into the cloud and GXS, for example, has worked on over 120 projects in recent years,” says Mark Morley, Industry Marketing at GXS. “By placing the integration into the cloud and making use of B2B managed services, these companies have been able to redeploy their resources onto other more important projects.”

Ariba is not the first cloud-based company to be bought up by SAP. The German firm also acquired SuccessFactors, an online personal management application manufacturer, for $3.4 billion in December 2011.

“The larger software vendors are recognising that more of the commerce activity is moving into a multi-enterprise model where it’s not just about integrating ERP systems through a Vendor Access Network but there are actually shared processes and applications in the network,” says Gaughan. “That’s why you see a company like SAP making big bets in this area because they see network centric apps delivered in the cloud as the next big opportunity.”