SAP buys Ariba and its online marketplace for $4.3B

SAP co-CEO Jim Hagemann Snabe.

SAP co-CEO Jim Hagemann Snabe.

Enterprise software giant SAP(s sap) is buying Ariba in a $4.3 billion move that will give it control of what is probably the world’s largest online-marketplace for goods and services.
Businesses around the world use Ariba’s e-commerce and procurement services to buy and sell all sorts of products and services. The Sunnyvale, Calif. company has partnered with all the big enterprise software companies including SAP and its arch-rival Oracle(s orcl) so that businesses using Oracle or SAP supply chain or ERP software for their own production also use Ariba to connect with prospective buyers. In a similar move late last year, IBM(s ibm) bought Emptoris for its supply chain and commerce know-how.
“Ariba connects the supply side and demand side for end-to-end commerce. It also gives SAP another story in cloud though this is less important,” said analyst Ray Wang, CEO of Constellation Research.
Dana Gardner, principal with Interarbor Solutions, agreed that this is a good fit for SAP “which is all about what happens to the end of the enterprise and Ariba which is between enterprises.”
The strength of Ariba, said Gardner, is that it fields an “ecumenical” cloud that works with all the big ERP players except for Workday. The thing to watch is whether SAP will align Ariba more tightly to its own ERP customers and products as opposed to those running competitive products. SAP Market Cap Chart

SAP Market Cap data by YCharts

Ariba gives SAP a market and more cloud cred

This is an interesting buy for SAP, which has a huge global customer base for its traditional on-premises ERP products and is building out more cloud-based services with its acquisition last year of SuccessFactors. Ariba itself is global presence, especially after its acquisition early this year of Quadrem, a Dutch supply chain company with strong presence in Asia and South America. Having said that, there is some overlap between Ariba and SAP, which has some of its own procurement and e-commerce software.
According to the SAP statement announcing the move:

The Ariba network is the largest and most global trading network, connecting and automating more than $319 billion in commerce transactions, collaborations, and intelligence among more than 730,000 companies. SAP’s global customer base of more than 190,000 companies includes the largest buyers and sellers in the world, offering great potential to increase the number of participants, as well as the volume and types of transactions conducted through this network.

No one can say we weren’t warned about SAP’s aspirations. Last fall, co-CEO Jim Hagemann Snabe said outright that the German software giant was in the hunt for acquisitions to help it enter new categories. He’s being true to his word.