SAP has taken further steps to improve its cloud position with the proposed acquisition of cloud ecommerce platform provider Ariba for a cool $4.3bn in cash. If all goes to plan this will be its second major cloud acquisition in recent months and will exceed the $3.4bn it paid for HR cloud provider SuccessFactors at the end of last year (see here). Both moves are attempts to accelerate and bring critical mass – and credibility – to SAP’s still emerging cloud business and provide an expanded user base to sell additional product to.
The offer, which is being recommended by the board, represents a 20% premium over the pre-offer share price and is expected to close in Q3. Although it has reinvented itself over its lifetime Ariba is an established player in the market and generated revenue of $444m (an impressive 38.5% increase) in its last financial year, including 62% organic growth from its business trading network.
Ariba works for SAP in several ways. It boosts its cloud business of course in terms of product scope and the number of users (when combined with the SuccessFactors customer roster SAP will have one of the largest cloud customer bases), but will also provide an outlet for further sales of SAP’s business applications. We can see scope for mobile sales too. Ariba’s real time trading platform would also be a good showcase for SAP’s in-memory technology. It takes SAP into a growing area and we expect it will also provide another point of intersection between on-premise and cloud based solutions which will move SAP’s hybrid strategy forward.
What is puzzling is why SAP plans to operate Ariba as an independent business under the name “Ariba, an SAP company” rather then integrating it into the new cloud division that SuccessFactors Lars Dalgaard is heading up (see SAP’s latest cloud push). The point of the division was to unite SAP’s cloud offerings, but this planned acquisition appears to sit outside it.
Then there is the Oracle factor. It may well come in with a counter offer. Ariba would be an equally attractive purchase for Oracle (and many Ariba customers are also Oracle customers) and a swoop would also dent SAP’s cloud ambitions. SAP (and Oracle) need to expand their cloud portfolios as part of their competition with each other and to prevent leakage to up and coming cloud providers. It will be interesting to see how the Ariba acquisition process moves forward. We can be sure this is not the last proposed cloud acquisition.