Dana Gardner: Hi, this
is Dana
Gardner, Principal Analyst at Interarbor Solutions, and you’re
listening to BriefingsDirect.
Our next intelligent
enterprise discussion explores new opportunities for innovation and
value creation inside of business-to-business (B2B) ecosystems.
 |
| Gardner |
We’ll explore how business and
technology platforms have evolved and why third-party businesses and modern analytics
solutions are joining forces to create new breeds of digital commerce benefits.
To explain more on how business
ecosystems are becoming incubators for value-added services for both business buyers
and sellers, we are joined by Sean Thompson, Senior
Vice President and Global Head of Business Development and Ecosystem at SAP Ariba.
Welcome to BriefingsDirect, Sean.
Sean Thompson: Good
morning, Dana. Thank you very much for having me.
Gardner: Why
is now the right time to highlight collaboration inside of business ecosystems?
Thompson: It’s a
fascinating time to be alive when you look at the largest companies on this
planet, the five most valuable companies: Apple, Amazon, Google, Microsoft, and Facebook --
they all share something in common, and that is that they have built and hosted
very rich ecosystems.
Ecosystems enrich the economy
These
platforms represent wonderful economics for the companies themselves. But the members
of the ecosystems also enjoy a very profitable place to do business. This
includes the end-users profiting from the network effect that Facebook provides
in terms of keeping in touch with friends, etc., as well as the advertisers who
get value from the specific targeting of Facebook users based on end-user interests
and values.
 |
| Thompson |
So, it’s an interesting time
to look at where these companies have taken us in the overall economy. It’s
also an indication for other parts of the technology world that ecosystems in
the cloud era are becoming more important. In the cloud era, you have multitenancy
where you have the hosts of these applications, like SAP Ariba, using multitenant
platforms. No longer are these applications delivered on-premise.
Now, it’s a cloud application enjoyed
by more than 3.5 million organizations around the world. It’s hosted by SAP Ariba
in the cloud. As a result, you have a wonderful ecosystem that evolved around a
particular audience to which you can provide new value. For us, at SAP Ariba,
the opportunity is to have an open mindset, much like the companies that I mentioned.
It is a very interesting time
because business ecosystems now matter more than ever in the technology world,
and it’s mainly due to cloud computing.
Gardner: These
platforms create escalating value. Everybody involved is a winner, and the more
they play, the more winnings there are for all. The participation grows the pie,
builds a virtuous adoption cycle.
Is that how you view business ecosystems, as an ongoing value-added creation mechanism? How do you define a business ecosystem, and how is that different from five years ago?
Thompson: I say
this to folks that I work with everyday -- not only inside of SAP Ariba, but
also to members of our partner community, our ecosystem – “We are privileged in
that not every company can talk about an ecosystem, mainly because you have to
have relevance in order for such an ecosystem to develop.”
I wrote
an article recently wherein I was reminded of growing up in Montana.
I’m a big fly fisherman. I grew up with a fly rod in my hand. It didn’t dawn on
me until later in my professional life that I used to talk about ecosystems as
a kid. We used to talk about the various bug hatches that would happen and how that
would make the trout go crazy.
Power of relevance
Apple
created the PC era, but Microsoft decided to license the PC operating system (OS)
to many and thus became relevant to all the third-party app developers. The Mac
was closed. The strategy that Apple had in the beginning was to control this
closed environment. That led to a wonderful user experience. But it didn’t lead
to a place where third-party developers could build applications and get them
sold.
Windows and a Windows-compatible
PC environment created a profitable place that had relevance. More PC
manufacturers used Windows as a standard, third-party app developers could
build and sell the applications through a much broader distribution network,
and that then was Microsoft’s relevance in the early days of the PC.
Other ecosystems have to have
relevance, too. There have to be the right conditions for third parties to be
attracted, and ultimately -- in the business world -- it’s all about, if you
will, profit. Can I enjoy a profitable existence by joining the ecosystem?
You have to have the right conditions for third parties to be attracted. In the business world, it's all about profit. Can I enjoy a profitable existence by joining the ecosystem?
Salesforce.com also had
relevance in its early days when it distributed its customer resource
management (CRM) app widely and efficiently. They pioneered the notion of only
needing a username, a password, and credit card to distribute and consume a CRM
app. Once that Sales Force Automation app was widely distributed, all of a
sudden you had an ecosystem that began to pay attention because of the
relevancy that Salesforce had. It was able to turn the relevancy of the app
into an ecosystem that was based on a platform, and they introduced Force.com
and the AppExchange for the third parties to extend the value of the applications
and the platform.
It’s very similar to what we
have here at SAP Ariba. The relevance in the ecosystem is supported by market
relevance from the network. So it’s a fascinating time.
Gardner: What exactly
is the relevance with the SAP Ariba platform? You’re in an auspicious place -- between
buyers and sellers at the massive scale that the cloud allows. And increasingly
the currency now is data, analytics, and insights.
Global ERP efficiency
Thompson: It’s
very simple. I first got to know Ariba professionally back in the 1990s. I was
at Deloitte,
where I was one of those classic re-engineering consultants in the mid-90s.
Then during the Y2K era,
companies were getting rid of the old mainframes because they thought the code
would fail when the calendar turned over to the year 2000. That was a wonderful
perfect storm in the industry and led to the first major wave of consuming
enterprise resource planning (ERP) technology and software.
Ariba was born out of that
same era, with an eye toward procurement and helping the procurement
organization within companies better manage spend.
ERP was about making spend more
efficient, too, and making the organization more efficient overall. It was not
just about reducing waste inherent within the silos of an organization. It was also
about the waste in how companies spent money, managed suppliers, and managed
spend against contracts that they had with those suppliers.
And so, Ariba -- not unlike Salesforce
and other business applications that became relevant -- was the first to focus
on the buyer, in particular the buyer
within the procurement organization. The focus was on using a software
application to help companies make better decisions around who they are
sourcing from, their supply chain, and driving end-users to buy based on contracts
that can be negotiated. It became an end-to-end way of thinking about your
source-to-settle process. That was very much an application-led approach that SAP
Ariba has had for the better part of 20 years.
When SAP
bought Ariba in 2012, it included Ariba naturally within the
portfolio of the largest ERP provider, SAP. But instead of thinking of it as a
separate application, now Ariba is within SAP, enabling what we call the
intelligent enterprise. The focus remains on making the
enterprise more intelligent.
Pioneers in the cloud
SAP Ariba
was also one of the first to pioneer moving from an on-premises world into the cloud.
And by doing so, Ariba created a business network. It was very early in
pioneering the concept of a network where -- by delighting the buyer and the procurement
organization – that organization also brought in their suppliers with them.
Ariba early on had the concept
of, “Let’s create a network where it’s not just one-to-one between a buyer and a
supplier. Rather let’s think about it as a network -- as a marketplace -- where
suppliers can make connections with many buyers.”
And so, very early on, SAP
Ariba created a business network. That network today is made up 3.5 million buyers
and sellers doing $2.2 trillion annually in commerce through the Ariba Network.
Now, as you pointed out, the
currency is all about data. Because we are in the cloud, a network, and multitenant,
our data model is structured in such a way that is far better than in an on-premises
world. We now live within a cloud environment with a consistent data structure.
Everybody is operating within the same environment, with the same code base. So
now the data we have within SAP Ariba -- within that digital commerce data set
-- becomes incredibly valuable to third parties. They can think about how they
can enhance that value.
Because we are in a cloud, a network, and multitenant, our data model is structured in a way that's far better than in an on-premises world. We now live in a cloud environment with a consistent data structure.
We are going beyond the traditional
old applications -- what we used to call independent software vendors (ISVs). We’re
now bringing in service providers and data services providers. It’s very
interesting to see the variety of different business models joining today’s
ecosystems.
Gardner: Another
catalyst to the power and value of the network and the platform is that many of
these third parties are digital organizations. They’re sharing their value and
adding value as pure services so that the integration pain points have been slashed.
It’s much easier for a collaborative solution to come together.
Can you provide any other
examples, Sean, of how third parties enter into a platform-network ecosystem
and add value through digital transformation and innovation?
Relationships rule
Thompson: Yes.
When you look back at my career, 25 years ago, I met SAP for the first time when
I was with Deloitte. And Deloitte is still a very strong partner of SAP, a very
strong player within the technology industry as a systems integrator (SI) and consulting
organization.
We have enjoyed relationships
with Deloitte, Accenture,
IBM, Capgemini,
and many other organizations. Today they play a role -- as they did in the past
-- of delivering value to the end customer by providing expertise, human
capital, and intellectual property that is inherent in their many methodologies
-- change management methodologies, business process change methodologies. And
there’s still a valuable role for these professional services organizations, consultants,
and SIs today.
But their role has evolved, and
it’s a fascinating evolution. It’s no longer customizing on-premises software.
Back in the day, when I was at Deloitte, we made a lot of money by helping
companies adopt an application like an SAP or an Oracle ERP and customizing it.
But you ended up customizing for one and building a single-family home, if you
will, that was isolated. You ended up forking the code, if you will, so that
you had a very difficult time upgrading because you customized the code so much
that you then fell behind.
Now, on cloud, the SI is no
longer customizing on-premises, it’s now configuring cloud environments. That
configuring of cloud environments allows for not only the customer to never be
left behind -- a wonderful value for the industry in general -- but it also
allows the SI to play a new role.
That role is now a hybrid of
both consulting and of helping companies to understand how to adopt and change their
multicloud processes to become more efficient. The SIs are also becoming [cloud
service providers] themselves because – what they used to do in customizing
on-premises -- they’re now building extensions to clouds and among clouds.
They can create extensions of
a solution like SAP Ariba for certain industries, like oil and gas, for
example. You will see SAP continue to evolve its relationships with these
service providers so that those services companies begin to look more like
hybrid business models -- where they enjoy some intellectual property and extensions
to cloud environments, as well as monetizing their methodologies as they have
in the past.
This is a fascinating evolution
that’s profitable for those companies because they go from a transactional
business model -- where they have to sell one client at a time and one
implementation at a time -- to monetizing based on a subscription model, much
like we in the ISV world have done.
There are many other examples
of new and interesting ways within the SAP Ariba ecosystem and network of buyers
and suppliers where third-party ecosystem participants gather additional data
about suppliers -- and sometimes about buyers. For example, in helping both
suppliers and buyers manage
their risk better in terms of financial risk, for supply
chain disruption, and if you want to ensure there isn’t slave
labor in your supply chain, or if there is sufficient
diversity in your supply chain.
The supplier risk category for
us is very important. It requires an ecosystem of provider data that enriches
the supplier profile. And that can then become an enhancement to the overall
value of the business network.
We are now able to reach out
and offer ways in which third parties can contribute their intellectual
property -- be it a methodology, data, analytics, or financial services. And
that’s why it’s a really exciting time to be in the environment we are today.
Gardner: This
network effect certainly relates to solution sets like financial services and
risk management. You mentioned also that it pertains to such vertical
industries like oil and gas, pharmaceutical, life sciences, and finance. Does it
also extend to geographies and a localization-solution benefit? Does it also
pertain to going downstream for small- to medium-sized businesses (SMBs) that
might not have been able to afford or accommodate this high-level
collaboration?
Reach around the world
Thompson:
Absolutely, and it’s a great question. I remember the first wave of ERP and it
marked a major consumption of technology to improve business. And that led to a
tremendous amount of productivity gains that we’ve enjoyed through the growth
of the world economy. Business productivity through technology investment has
led to a tremendous amount of growth in the economy.
Now, you ask, “Does this
extend?” And that’s what’s so fascinating about cloud and when you combine
cloud with the concept of ecosystem -- because everybody enjoys a benefit from
that.
As an example, you mentioned
localization. Within SAP Ariba, we are all about intelligent business commerce,
and how can we make business commerce more efficient all
around the world. That’s what we are about.
In some countries, business
commerce involves the good old-fashioned invoicing, orders, and taxation tasks.
At Ariba, we don’t want to solve all of that so-called last mile of the tax
data and process needed in for invoices in, say, Mexico.
And that's what's so fascinating about cloud and when you combine cloud with the concept of ecosystem -- because everybody enjoys a benefit.
By having one relationship
with a large provider of that data and being able to distribute that data to
the end users -- which are companies in places like Mexico and Korea that need
a solution – means they are going to be compliant with the local authorities
and regulations thanks to up-to-date tax data.
That’s an example of an
extremely efficient way for us to distribute to the globe based on cloud and an
ecosystem from within which Thomson Reuters provides that localized and accurate
tax data.
Support for all sizes
You also asked about SMBs. Prior
to being at SAP Ariba, I was part of an SMB support organization with the
portfolio of Business ByDesign
and Business One, which
are smaller ERP applications designed for SMBs. And one of them, Business
ByDesign, is a cloud-based offering.
In the past, the things that
large companies were able to do were often too expensive for SMBs. That’s
because they required on-premises data centers, with servers, software
consultants, and all of the things that large enterprises could afford to drive
innovation in the pre-cloud world. This was all just too expensive for SMBs.
Now the distribution model is
represented by cloud and the multitenant nature of these solutions that allow
for configuration -- as opposed to costly and brittle customization. They now
have an easy upgrade path and all the wonderful benefits of the cloud model.
And when you combine that with a business solutions ecosystem then you can
fully support SMBs.
For example, within SAP Ariba,
we have an SMB consulting organization focused on helping midsize companies
adopt solutions in an agile way, so that it’s not a big bang. It’s not an
expensive consulting service, instead it’s prescriptive in terms of how you
should begin small and grow in terms of adopting cloud solutions.
Such an SMB mindset has
enabled us to take the same SAP Ariba advantage of no code, to just
preconfigure it, and start small. As we like to say at SAP Ariba, it’s a
T-shirt size implementation: small, medium, and large.
That’s an example of how the SMB
business segment really benefits from this era of cloud and ecosystem that drives
efficiency for all of us.
Gardner: Given
that the value of any business network and ecosystem increases with the number
of participants – including buyers, sellers, and third-party service providers
-- what should they be thinking to get in the best position to take advantage
of these new trends, Sean? What should you be thinking in order to begin leveraging
and exploiting this overall ecosystem approach and its benefits?
Thompson: I’m
about to get on an airplane to go to South Korea. In some of these geographies
where we do business, the majority of businesses are SMBs.
And I am still shocked that some
of these companies have not prioritized technology adoption. I’m still
surprised that there are a lot of industries, and a lot of companies in different
segments, that are still very much analog. They are doing business the way they’ve
been doing business for many years, and they have been resistant to change because
their cottage industry has allowed them to maintain, if you will, Excel
spreadsheet approaches to business and process.
I spent a decade of my life at
Microsoft,
and when we looked at the different ways Excel was used we were fascinated by
the fact that Excel in many ways was used as a business system. Oftentimes,
that was very precarious because you can’t manage a business on Excel. But I still
see that within companies today.
The number one thing that every
business owner needs to understand is that we are in an exponential time of
transformation. What was linear in terms of how we expect transformation is now
in an exponential phase. Disruption of industries is happening in real time and
rapidly. If you’re not prioritizing and investing in technology -- and not
thinking of your business as a technology business -- then you will get left
behind.
Never underestimate the impact
that technology can have to drive topline growth. But technology also preserves
the option value for your company in the future because disruption is happening.
It’s exponential and cloud is driving that.
Get professional advice
You also
have to appreciate the value of getting good advice. There are good companies
that are looking to help. We have many of those within our ecosystem, such as providers
of assistance like the large SIs as well as midsize companies focused on
helping SMBs.
As I mentioned before, I grew
up fly fishing. But anybody that comes to me and says, “Hey, I’d love to go
learn how to fly fish.” I say, “Start with hiring a professional guide. Spend a
day on a river with a professional guide because they will show you how to do
things.” I honestly think that that same advice applies to the professional
guide who can help you understand how to consume cloud software services.
And that professional guide
fee is not going to be as much as it was in the past. So I would say get
professional help to start.
Gardner: I’d
like to close out with a look to the future. It seems that for third-party
organizations that want to find a home in an ecosystem that there’s never been
a better time for them to innovate, and find new business models, new ways of
collaborating.
You mentioned risk management
and financial improvements and efficiency. What are some of the other areas for
new business models within ecosystems? Where are we going to see some new and
innovative business models cropping up, especially within the SAP Ariba network
ecosystem?
Thompson: You
mentioned it earlier in the conversation. The future is about data. The future
is about insights that we gather from the data.
We're still early in a very interesting future. We're still understanding how to gather insights from data. At SAP Ariba we have a treasure trove of data from $2.1 trillion in commerce among 3.5 million members in the Ariba Network.
I’ve played on the edge of
where we are in terms of artificial intelligence (AI) within that natural
language processing. But we’re still fiddling in many respects. We still fiddle
in the business software arena, talking about chatbots, talking about natural
user interfaces.
We’re still early in a very
interesting future. We’re still very early in understanding how to gather
insights from data. At SAP Ariba we have a treasure trove of data from $2.1
trillion in commerce among 3.5 million members in the Ariba Network.
The future is data driven
There
are so many data insights available on contracts and supplier profiles alone.
So the future is about being able to harvest insights from that data. It’s now very
exciting to be able to leverage the right infrastructure like the S/4 HANA
data platform.
But we have a lot of work to
do still to clean data and ensure the structure, privacy, and security of the data.
The future certainly is bright. It will be magical in how we will be able to be
proactive in making recommendations based on understanding all the data.
Buyers will be proactively
alerted that something is going on in the supply chain. We will be able to predict
and be a prescriptive in the way the business operates. So it is a fascinating future
that we have ahead of us. It’s very exciting to be a part of it.
Gardner: I’m afraid
we’ll have to leave it there. You’ve been listening to a sponsored
BriefingsDirect discussion on new opportunities for innovation and value
creation among business ecosystem participants. And we’ve learned how business
ecosystems are incubating new levels of buyer and seller value-added services.
So a big thank you to our
guest, Sean Thompson, Senior Vice President and Global Head of Business
Development and Ecosystem at SAP Ariba. Thank you, sir.
Thompson:
Thanks, Dana.
Gardner: And
thank you as well to our audience for joining this BriefingsDirect digital
business innovation discussion. I’m Dana Gardner, Principal Analyst at
Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored
BriefingsDirect discussions. Thanks again for listening, and do come back next
time.
Transcript
of a discussion on how ecosystems built from business networks like the SAP Ariba
Network incubate innovative third-party collaboration solutions that benefit
both buyers and sellers. Copyright Interarbor Solutions, LLC, 2005-2018. All
rights reserved.
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