Historically, I'm not what you'd call an SAP Business Network fanboy. To me, the business relevance of SAP's "network of networks" exuberance fell flat.
Still, I couldn't deny this: SAP has a formidable collection of software assets in this area (including the intriguing add of trade financing vendor Taulia).
But software assets don't automatically translate to customer value - nor are they necessarily more than the sum of their disparate parts.
However, a chance encounter at last May's SAP Sapphire 2022 forced a rethink (Inside SAP's Business Network push - can the reality live up to the buzzwords?). I left that show impressed by the Business Network leadership team - a team that offered transparent answers to my questions, and a sensible, non-hyperbolic vision for how the SAP Business Network could be a serious thing. But what do customers think? And what results can we document? To press those questions, I maneuvered a swing by SpendConnect Live 2022 into my fall tarmac tour.
SAP Spend Connect Live 2022 - breaking down the news
SAP issued a series of spend management news items timed with Spend Connect Live. Highlights included:
- SAP Fieldglass solutions are now available in the SAP National Security Services (SAP NS2) portfolio, in accordance with Federal Risk and Authorization Management Program (FedRAMP) moderate parameters.
- SAP Business Network for Procurement and SAP Business Network for Supply Chain will be available in the SAP NS2 portfolio in a commercial regulated environment in 2023.
- SAP procurement capabilities previewed - SAP shared "new capabilities, known as "buying 360," designed "to help organizations move toward a more predictive, personalized and sustainable buying experience." Buying 360 is "aimed to improve the corporate purchasing experience at just about any level of the organization. It's expected to be available to select customers early in 2023."
To me, the biggest news is SAP's progress on the unified portal across its Business Network products- as well as improved supplier onboarding. But then again, my take on the biggest news is often different than the vendor's.
SAP Business Network - what problem are we solving?
What about the value proposition behind the news? Many SAP community members have expressed their SAP Business Network skepticism to me. Understandably so; over the years, SAP's leadership has struggled to communicate SAP's business networks play on the SAP Sapphire main stage.
But make no mistake - this isn't just Ariba with a makeover. Behind the scenes, the Business Network messaging is getting crisper. We saw some evidence of that at SAP Sapphire 2022, with Etosha Thurman making a strong keynote appearance. That messaging sharpness - and real world relevance - continued at SpendConnect live.
Now we need to test that against real world issues. During the opening keynote, McKinsey's North American procurement lead laid out the problem: in today's world, silos line the road to failure.
In today's world, being siloed is a losing strategy... And if you're talking about sustainability, it's just part of the same conversation. The dual mission is here to stay... We've got to deliver against multiple objectives. We've got to deliver value; we've got to deliver on our commitments around CO2 and energy efficiency. So all levers will have to deliver consistently on many dimensions.
And at the same time, all of this we're talking about is a lot more complex: a lot more agile procurement function is what I think all of this implies. And yet many organizations are still struggling with the basics.
It gets worse: organizations are struggling to adapt. They need real-time visibility:
What's most concerning to CEOs: there is a lack of real-time data for procurement decision making... There's very little data actually available; we lack the infrastructure data capabilities to meet this part of the organizations. It's not just spend data that we need; we need contractor management data; we need supplier performance. We need whatever each individual category requires. Just finding that data can be a huge challenge today.
Enterprises are not unfamiliar with supplier networks. But these networks are typically bogged down in manual/cumbersome processes; point-to-point EDI is still a major factor. It gets worse: paper processes and even faxes are still enmeshed.
That's part of what the SAP Business Network team is trying to address. As Muhammad Alam,
President & Chief Product Officer, Intelligent Spend and Business Network at SAP told the audience:
That's what the business network now changes. It allows you to break down the silos that now exist across your supply chain, allowing you to operate seamlessly through your value chain, across the breadth of your business processes in a real-time fashion. That is what we believe will fundamentally redefine our business applications of the future; [they will run] on top of the SAP Business Network.
I'm never a fan of the word "seamlessly," which I find utopian. Nevertheless, this is a crucial statement of purpose from Alam - one that impacts the future of ERP, and a whole lot more. I'll get back to that. But for now: how does this networked future translate into product? And can we get a gut check on product adoption?
SAP Business Network - product strategy and adoption metrics
SAP Business Networks is essentially six components, or, as Alam puts it, "building blocks." As he described to Spend Connect attendees:
- Indirect material collaboration - this has evolved from the Ariba Network.
- Direct material collaboration - "Our direct material collaboration expands from planning to contract manufacturing, to quality to invoice and to payment collaboration."
- Logistics collaboration
- Asset management
- Finance Collaboration - via SAP's aforementioned Taulia acquisition
- Workforce Collaboration - via contingent workforce integration with Fieldglass
As for the product strategy, during our sit down, Tony Harris, SVP & Chief Marketing & Solutions Officer, SAP, unveiled the Business Network's new tagline:
SAP Business Network connects people, processes and systems across multiple enterprises, digitizing transactions, and creating transparent, resilient and sustainable supply chains.
Now, let's be honest, I wouldn't recommend using that to impress your friends and relatives this holiday season. But beneath the catch phrases, I see a worthy aspirational statement. Does that tagline sound like old school Ariba to you? The stakes are much higher now. Harris says it's working, and he brought the stats:
We achieved 47% year over year growth last year ... In terms of the growth of the network overall. We're now managing $4.9 trillion annually on the network.
Ah, but that brings up one of "Jon Reed's patented burning lessons for the modern enterprise" - exceeding your metrics isn't the impressive part. It all depends on what you're measuring. For example, I don't necessarily care about volume. SAP can fall into that easily; SAP is good at volume. And yes, for a business network to work, it needs critical mass. But:
- Are we truly making a difference in customers' lives?
- Are we helping them to discover new suppliers?
- Are we effectively onboarding new suppliers, without UX headaches - and truly making supply chains more diverse?
- Are we getting customers out of their manual processes, the spreadsheets-by-email-status-quo-purgatory that has them flying by the seat of their pants?
- Are we helping to turn ESG into a daily practice?
Harris must have read my mind. He added:
I'm not sure any CPO is ever looking for millions of suppliers. They're more interested in: 'Have you got the right suppliers for my business on the network'? The stats I'm particularly interested in is: over the last 12 months, we've seen an 18% growth in new relationships between existing network members. So more suppliers are finding new customers and vice versa, which is exactly one of the ambitions we're trying to achieve with the network.
When the pandemic started, we were managing around $19 billion of transactional collaboration, in terms of suppliers being matched with buyers requirements. We're now handling something close to $60 billion in discovery matches a year.
Are we in line with customer needs? Prior to the show, I asked ASUG CEO Geoff Scott to weigh in. He believes the UX ease of consumer commerce puts pressure on spend management vendors:
There's no better sense of the need to live in an integrated world than what you see happening spend today. Organizations need to process payments faster; they need to get sales orders done. We want the back end of commerce to work as easily as the front end. So: press a button, go to a website, order something, pay for it, and move on. I think it's a great example of where our experiences as consumers... Now, we are trying to carry them into our experiences as employees - and they don't equate necessarily one for one. But they need to.
But it's not just consumer-grade UI. Sounds to me like Scott is making the case for workflow automation and ease of integration in spend.
You and I were talking just a minute ago about low-code and no-code. How do you apply that to an incredibly, complex area? How does all that come together to drive simplicity speed?
My fear was that this event would feel like Ariba Live, with a fresh coat of paint. It was not. I talked with customers in multiple spend areas. From what I can tell, spend customers are energized by SAP's approach here - though the ones I talked to are really focused on one area of spend. Or even within one area, like appliance producer/distributor Mabe, which is now expanding its Ariba supplier onboarding from Mexico to internationally.
However, many of the customers *are* engaged in some type of broader transformation, of which these spend projects are a part. Which raises a potent question: what does a supplier-driven transformation look like? What are the levels of maturity? How can you stack up quick wins, and assess your progress?
We've talked so much about customer-driven transformations, but isn't a supplier-driven transformation worth charting out as well? These projects have the potential to change how we think about ERP. Why shouldn't supplier integration and collaboration be considered a core ERP concept? Customers derive much more value of out ERP when it's not inward-focused. ERP needs to change. I see no reason why a different kind of supplier network couldn't help drive it.
Granted, the SAP Business Network should not be thinking only about SAP customers. SAP's supplier "building blocks" should play nicely with any ERP system in the back end - including old school stuff like JD Edwards (yes, there was a customer with this architecture at the show). You can make the argument that SAP should even be aggressive about showing these integrations with other ERP platforms at future shows. Nothing earns customer trust like showing your tools play nice with others.
Alam's team is focusing their product investments in three priority areas: UX, data intelligence, and "collaboration by default." I won't detail those here, but on the UX side, the first products getting the latest UI makeover are the Travel and Expense applications. Collaboration by default is where things get really interesting. So much of procurement is caught up in "dark data" like spreadsheets. The collaboration that does happen usually lacks transactional context. Conversations and documents not tied to transactions clog the supplier work stream, and are aggravatingly tough to locate and wade through later. If SAP can advance that, it will be welcomed.
I don't want to give the impression these projects are easy for customers. Modernizing your spend software invokes change management challenges, but with a twist: you must achieve buy-in outside your organization. You can't always put your foot down like Walmart and demand your suppliers do hoop-jumping into a new system. There is also the matter of trust: trust in the system, trust in the data. SAP has to earn that; its customers must do the same with their suppliers. My next piece from the show will get into those customer use cases in depth.
End note: realize I didn't get to the updated news on onboarding and the unified portal - that's for the next article. This piece was heavily impacted by fellow analyst Josh Greenbaum, who sense-tested this content on his well-honed BS meter during our post-event meetup. I will link to his post when it goes up. SAP's Kelly Murray went above and beyond to get me to the show and get me a terrific schedule to press these topics.