Procurement fits nicely within a cloud model; it simplifies the continuous interaction between suppliers and customers, which is required for successful procurement operations.
This is good for organizations that might be reluctant to make huge up-front investments in on-premise solutions, IT infrastructures, and so on. Instead, choosing cloud- and subscription-based solutions results in very little up-front costs, no maintenance costs, and a pay-as-you-use model.
SAP Ariba offers a comprehensive array of tools and solutions to cover core procurement activities and to resolve challenges pertaining to the principal-agent problem, demand planning, suppliers, purchase agreements, consumption of goods, invoicing, and analysis. Ariba began as a focused solutions provider for internet-based procurement in 1996 and offered many on-premise solutions, but since the mid-2000s and SAP’s acquisition of the product, SAP Ariba has evolved to offer various cloud-based solutions.
Challenges of On-Premise Procurement Solutions
On-premise software can address much of the procurement process from behind a customer’s firewall, but it typically lacks capabilities for real-time, in-system interaction between the customer and supplier. Phone calls and emails are still required for supplier interaction at the system level.
Many organizations are wary of opening up their integrated ERP systems, usually placed behind firewalls for protection, even to suppliers on a limited, controlled basis. While granting access could make interactions with the supplier more efficient, the protocols for access are often so unwieldy and unique to the organization that interacting with an organization could become complex and expensive for the supplier. In the end, collaboration at this level can add to the costs of procurement, rather than lowering costs.
In traditional, on-premise software implementations, all the servers, installation, configuration, customization, and administration are maintained by the customer. Connecting a supplier to this type of environment for document exchange is equally cumbersome using electronic data interchange (EDI), as establishing EDI linkages requires individual, point-to-point mapping of the transmission for each supplier. Several iterations may be required to set up a single linkage.
Benefits of Cloud-Based Solutions
For cloud computing and services, an Internet connection and a subscription are all that is required. With the arrival of cloud computing, integration with corporate environments and supplier interaction have been simplified. In addition, the expensive infrastructure supporting a company-specific instance of software is no longer needed.
Procurement also benefits from the network effect: The more suppliers you can access and understand, the more competition there is for your business; it helps you find better suppliers, build more relationships, and access lower pricing. The more activity and potential customers that suppliers see in a particular network, the more likely they are to join the network, leading to a virtuous cycle.
Point-to-point networks were often the only option for on-premise solutions. You would laboriously set up each relationship and linkage by supplier, broadcast requirements to individual connections, and conduct purchasing transactions with the winning supplier. Networks and online marketplaces are a key argument for cloud solutions in procurement, as you’ll receive the benefits of supplier interaction and competition while avoiding the lengthy setup and maintenance requirements of an EDI or other on-premise approach.
IT Support is also less of a burden in a cloud solution. If something fails to transmit, a supplier needs to register, or an auction needs focused support, the software vendor can support and resolve any issues not on the internal IT department.
Like many processes, there are various complexities that interfere with procurement operations. Fortunately, SAP Ariba addresses each of the following:
- Principal-agent problem: Also known as the agency problem, the principal-agent problem refers to a conflict of interest that can occur when an agent acts on behalf of an organization. SAP Ariba provides a rigorous set of controls, processes, and workflows in all the solution areas to avoid the principal-agent problem.
- Demand planning: SAP Ariba Supply Chain Collaboration for Buyers and the extensive reporting capabilities available in SAP Ariba in general allow buyers to proactively understand their own procurement needs and subsequently create procurement strategies to address them.
- Suppliers: SAP Ariba Discovery allows you to identify new suppliers among Ariba Network’s suppliers, which in turn enriches the sourcing events and activities provided in SAP Ariba Sourcing. Also, using SAP Ariba Supplier Lifecycle and Performance, your organization can iteratively improve supplier interactions and management processes.
- Purchase agreements: SAP Ariba Contracts provides a platform for creating and managing contracts, connecting the various procurement solutions available in SAP Ariba and in the digital core of SAP S/4HANA.
- Computation of goods: SAP Ariba Buying and SAP Ariba Catalog provide a platform for expert and casual users alike to find and consume the items and services vetted and negotiated by the organization’s procurement department.
- Invoicing: SAP Ariba Invoice Management and SAP Pay provide a seamless solution for managing the entry and intake of invoices, ensuring correct invoices up front, and enabling you to leverage further discounts and payment efficiencies during the payment portion of the procurement process.
- Analysis: SAP Ariba Spend Analysis helps procurement and finance departments better understand their procurement operations to make continuous improvements.
Solutions for procurement have evolved dramatically. Procurement process areas are moving to cloud-based solutions, and real-time analysis is possible in the transaction system via in-memory database solutions such as SAP HANA. Business networks, mobile, big data, blockchain, artificial intelligence, and the Internet of Things (IoT) are also core themes and trends for procurement. With SAP Ariba solutions for cloud procurement, SAP covers both on-premise and cloud-based implementations with complete end-to-end solution portfolios.
Overview of the SAP Ariba Book
To help guide you through your SAP Ariba implementation and configuration, we published an updated, all-in-one guide of our SAP Ariba book.
Begin with an introduction to the SAP Ariba portfolio. You’ll explore the various solutions available and understand the shift from on-premise procurement solutions to a cloud-based model.
Get an overview of supplier collaboration via the Ariba Network. This includes information on the processes for onboarding. Dive into details on SAP Ariba Supplier Lifecycle and Performance (which replaced SAP Ariba Supplier Information and Performance Management) and Supplier Risk Management.
You’ll learn about SAP Ariba Sourcing, with which you can develop a sourcing strategy and negotiate, source, and manage the resulting contracts and supplier data. Then move on to SAP Ariba Contracts to learn how to efficiently manage procurement and sales contracts, license agreements, internal agreements, and various other kinds of contracts.
Once you become familiar with SAP Ariba’s guided buying capability, you’ll explore products for operational procurement, invoice management, and spend analysis. Then you’ll be ready for the integration chapter, which describes integration possibilities with SAP ERP, SAP S/4HANA, and a multitude of third-party ERP environments. Conclude your journey with the expert authors’ predictions for the future of procurement solutions.
Who Is This Book For?
This book will be of interest to anyone working with SAP Ariba or considering rolling
out procurement solutions in a cloud environment. Business users, procurement
managers, and consultants are the primary beneficiaries.
About the Author
Rachith Srinivas has spent more than 15 years in technology with more than 12 years in SAP America, joining SAP’s Professional Services organization in 2007, serving eventually as a platinum consultant in the SAP SRM practice. Since 2007, Rachith has been implementing and leading complex SAP procurement projects globally and has worked as a trusted advisor in this space on many strategic SAP accounts.
Matthew Cauthen has spent over half of his more than 15-year career working at SAP America, joining SAP’s Professional Services organization in 2011 as a materials management and supplier relationship management (SRM) consultant. He has extensive experience in implementing and supporting SAP procurement projects with a focus on SAP Ariba procurement applications, SAP S/4HANA, and systems integration.
How to Purchase
If you’re interested in purchasing SAP Ariba, follow this link and choose the format that works best for you: e-book, print edition, or bundle (both e-book and print).
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