SAP Acquiring E-Commerce Vendor Ariba for $4.3 billion

SAP is buying cloud-based e-commerce vendor Ariba for US$4.3 billion, the companies announced Tuesday.

Ariba's platform focuses on business-to-business commerce transactions. It makes a natural fit with SAP's "broad customer base and deep business process expertise," SAP said in a statement.

The deal has been unanimously approved by Ariba's board and is expected to close in the third calendar quarter of this year, subject to stockholder and regulatory approvals.

When complete, the Ariba transaction will substantially grow SAP's footprint in cloud software, which got a previous boost from its recent $3.4 billion acquisition of SuccessFactors, a company focused on human resources applications.

At its Sapphire conference last week, SAP spelled out further details of its overall cloud computing strategy, with which it hopes to shoulder aside rivals such as Oracle as well as pure cloud vendors like Workday and NetSuite.

Ariba had $444 million in revenue during 2011 and has 2,600 employees. Its trading network is involved with more than $319 billion in "commerce transactions, collaborations, and intelligence among more than 730,000 companies," according to a statement.

When the deal closes, SAP will "consolidate all cloud-related supplier assets" under the auspices of Ariba, which will operate as an independent subsidiary. Its CEO, Bob Calderoni, will be nominated to SAP's global managing board.

Those plans suggest that SAP is eager to make Ariba's substantial user base, which has other options for B2B commerce platforms, feel secure in their investments.

Ariba's network will grow to more than 1 million companies this year, SAP co-CEO Bill McDermott said during a conference call with media and analysts. "The growth opportunity in this arena is huge," he said.

SAP plans to keep Ariba's system open to other platforms, allowing customers to tap it from "any source system," according to McDermott. "All those companies that are not using SAP need not worry," he said.

Ariba's trading network and procurement applications would also complement SAP's cloud-based ERP (enterprise resource planning) suite Business ByDesign, as well as the Business One application for smaller companies, McDermott said.

Online trading networks like Ariba's "take the guesswork out of finding the best business partner" and make those interactions more efficient, SAP co-CEO Jim Hagemann Snabe said during the call.

In one respect, the deal is surprising, given SAP's purchase last year of Crossgate, a company with some capabilities that overlap Ariba's. But SAP may have been motivated in part by the large number of influential B2B e-commerce customers it will gain. Ariba's network connects half of the Fortune 500, according to Calderoni.

SAP plans to utilize both the Crossgate and Ariba technology platforms, Snabe said, although he didn't provide specifics. It also plans to bring its HANA in-memory database into Ariba's technology stack, as well as analytics. The latter combination will help customers better understand their spending and supplier relations, according to Snabe.

The Ariba deal is one of the latest instances of consolidation in the e-commerce and procurement software market, coming after IBM's purchase of Emptoris late last year.

Startup Coupa could also find itself with some suitors. The SAP-Ariba deal "shows that some of the larger incumbents like SAP are trying to understand the cloud," Coupa CEO Rob Bernshteyn said in an emailed statement. It also gives companies like Coupa the ability to position themselves as independent from any given ERP system, he added.