Posted by Duncan Jones on September 21, 2011
Yesterday, SAP announced its intention to acquire business-to-business (B2B) integration provider Crossgate http://www.sap.com/index.epx#/news-reader/?articleID=17515. This was no great surprise, as SAP was already a part-owner and worked closely with the company in product development and marketing and sales activities. SAP will be able to offer a much better ePurchasing solution to customers when it has integrated Crossgate into its business, because supplier connectivity is currently a significant weakness. As I’ve written before (So Where Were The Best Run Businesses Then?), many SRM implementations rely on suppliers manually downloading PO from supplier portals or manually extracting them from emails and rekeying the data into their own systems. Not only does this cost the suppliers lots of money, it creates delays and errors that discourage users from adopting SRM.
SAP doesn’t intend to use Crossgate only for transactional processes; it also wants to develop support for wider collaboration between its customers and their supply chain partners, both upstream and downstream. That’s a sound objective, although not an easy one for SAP to achieve, because its core competence is in rigidly structured internal processes and it hasn’t done a good job to date with unstructured processes, nor with ones that go outside the enterprise’s four walls. Buyers who think they can force suppliers to comply with their edicts, just like employees do, soon end up wondering why no-one is using their ePurchasing solution.
What does the acquisition mean for sourcing professionals who are wondering where Crossgate or its competitors fit into their application strategy? My take:
· This acquisition will be good news for sourcing professionals with an SAP-first strategy. If you don’t mind increasing your dependence on this powerful tech giant,you can now buy a wholly-SAP solution instead of a partner product. For instance, buyers that sign flexible enterprise deals will be able to treat Crossgate like other SAP packages, whereas previously they had to manage it separately.
· Sourcing professionals with a more eclectic approach shouldn’t worry either. IMO, SAP will face some challenges incorporating Crossgate in its portfolio, such as harmonizing commercial models, marketing it to the right people in the target’s organization, and expanding the supplier-facing aspects of its service. Moreover, many organizations want to reduce their dependence on SAP, not increase it. So there’s still plenty of room for best-of-breed specialists to thrive, including supplier networks such as Ariba and Perfect Commerce, B2B integration solutions such as GXS and IBM Sterling, and in-house platforms offered by SI’s such as CapGemini and Infosys.
· Customers of sub-scale networks should start creating their migration plans. Several sites that market themselves as networks don’t actually provide many-to-many connectivity. They rely on a few large enterprise customers telling their suppliers to join their chosen provider, but those suppliers may have to connect with several other providers specified by their other customers. In effect, they are merely outsourced single-company portals, and they’re obsolete. Buyers need true networks with the scale to reach all their suppliers. That means the network already has them as members or can attract them to join with a solid value proposition, such as the ability to connect them with several customers at once. SAP’s sales and marketing muscle combined with Crossgate’s many-to-many model, following on from IBM’s acquisition of Sterling Commerce and Ariba’s of Quadrem, will accelerate the end of the tier-two and tier-three providers.