When a company goes through the due diligence process looking to acquire another organization prior to the signing of a definitive agreement or announcement, it typically has a code name for the project. Historically, the suitor uses the first letter of the target's name as the start of the cipher that will stand in its place. In the case of Ariba, SAP used the internal code-name "angel" when discussing the deal. But whether or not Ariba proves to be SAP's true benevolent procurement and supplier network seraph, mediating network transactions and more between the heavens and the ground in the cloud, remains to be seen.

SAP shared on their analyst call that Ariba is currently the world's largest network for "buyer/seller collaboration" bringing "instant access to a network of 730,000 companies [which] is expected to grow to 1 million companies in 2012." Yet Ariba and SAP are not alone in the network game. There are a range of supplier networks and invoicing network connectivity providers in the market, ranging from SAP partner Hubwoo (it remains to be seen what role Hubwoo will play for Ariba going forward following the close of the Ariba transaction), Basware, Oracle, OB10, Transcepta, Pagero, Rearden, Coupa, ADP (oil and gas specific), Tradeshift and many others with varying degrees of capabilities and business models. In addition, on the EDI-side of the equation, GXS (which has broader ambitions and capabilities than what it is most known for) and IBM/Sterling also add to the collective network competitive environment.

[More]

Please excuse our back-of-the-napkin math, but while we're waiting on hold to join the SAP/Ariba analyst call, we thought we'd share some quick arithmetic on SAP's recent cloud transactions.

SuccessFactors
2011: 1,578 employees, sales $327.9M - $208K per employee
SAP paid $3.4B -- 10.4X revenue or $2.15M per employee

Ariba
2011: 2,432 employees, sales $443.8M - $182K per employee
SAP plans to pay $4.3B - 9.7X revenue or $1.77M per employee

SAP
2011: 55,765 employees, sales $19,116.3M - $343K per employee
At the same 10X evaluation SAP would be worth $191B -- however today their market cap is $70B

[More]

Moments ago, SAP announced it would acquire Ariba. According to the news, "SAP AG and Ariba announced that SAP's subsidiary, SAP America, Inc., has entered into an agreement to acquire Ariba for $45.00 per share, representing an enterprise value of approximately $4.3B ... The Ariba board has unanimously approved the transaction." SAP is funding the transaction from "free cash and a €2.4B term loan facility." Further, "The transaction is expected to close in Q3 of calendar year 2012, subject to Ariba stockholder approval, clearances by relevant regulatory authorities and other customary closing conditions ... The transaction is expected to be accretive to SAP's non-IFRS EPS in 2013."

With the acquisition announcement, it's clear that SAP is playing for cloud-keeps in the business applications space, even if Ariba represents a source-to-pay provider that ported its CD business to a SaaS model. Coming on the heels and post-merger integration of the SuccessFactors transaction and the internal SAP cloud team realignment, the Ariba news will no doubt be a surprise to many in the field. While we will analyze the solution and product synergies of the announcement throughout the next few days, there is significant overlap in the solution base between the two providers, and still, a number of holes that SAP will have left to fill (e.g., advanced sourcing/optimization).

[More]

Cut cut cut.
General Mills Unveils Restructuring, Including 850 Job Cuts -- General Mills Inc. (GIS) unveiled restructuring plans aimed at improving productivity and cutting costs, moves that are expected to reduce its global workforce by about 850 positions. The food company, whose brands include Cheerios cereal, Yoplait yogurt and Betty Crocker baking products, has roughly 35,000 employees, according to its website. The restructuring plan includes organizational changes expected to improve its business alignment, and actions aimed at accelerating administrative efficiencies. Further details weren't provided. General Mills projected restructuring charges of about $109 million, including $94 million in its current fiscal quarter that ends May 27. The plans include asset-related costs of about $13 million related to write-downs of production equipment.

Where does your infant sleep?
A Crib for Baby: Made in China or Made in USA? -- Stanley Furniture Co. is betting baby cribs are among the few things Americans will pay a hefty premium for just because they carry a "Made in the U.S.A." label. The 88-year-old company recently shifted its crib manufacturing back to the U.S. from China, to a sprawling factory here that not long ago was earmarked for closure along with Stanley's other two domestic plants. Today, the Robbinsville factory is an oddity in an industry that has been abandoning the U.S. because of costs: It is growing and investing over $8 million in new machinery.

[More]

Spend Matters' fearless leader was recently interviewed by Coupa when their customer roadshow event swung through Chicago a couple weeks ago. In about 20 minutes of taping, a video crew captured a series of four shoots, each covering a different topic. Over the next few weeks, we'll be featuring these videos, starting with Jason's predictions on the Top Procurement Trends For 2013. What does the Spend Matters crystal ball say for what is coming down the pike?

[More]

Later this week, I'll be giving a keynote at Forrester's Sourcing & Vendor Management Forum 2012 in Las Vegas. The key premise of my talk is that what your suppliers do (and don't do) matters. In our view, company executives must now concern themselves not just with the performance and risk of their own operations -- they must consider their supply chains as extensions of their organizations where they're accountable for supplier behavior and activity.

The task to manage this responsibility falls on procurement and vendor management organizations to get things right. But whether these tasks involve proactively managing supplier labor and environmental practices or analyzing how suppliers vet, treat and manage sub-tier vendors to reduce supply chain risk, companies must take action. Throughout the talk, I'll share our hypothesis that supplier networks, collaborative groups and even social applications will play an increasing role in how we manage global suppliers.

[More]

Last week, ISM announced the appointment of Thomas Derry as its new CEO, effective July 30th, 2012. Derry currently serves as VP and COO of a similarly sized organization, the Association for Financial Professionals. According to ISM, "in his role with AFP, Derry is responsible for strategic planning and development, including U.S. and Canadian membership organizations and two wholly owned, for-profit U.K. subsidiaries. He has experience in all organizational functions, including advocacy, finance, human resources, sales, product development, publications, certification, education and training, conference production and marketing. Prior to joining AFP in 2003, Derry was with LexisNexis Group in Dayton, Ohio."

Spend Matters' Peter Smith and Jason Busch had the chance to interview Derry shortly after the news was announced. Peter, incidentally, is a former chairman of the Chartered Institutes of Purchasing and Supply (CIPS), in the UK, which is increasingly seen as a "competitor" -- if you can label associations as such -- to ISM on the world stage, outside of the home market for each. In a multi-part interview series, we'll share what we learned from Derry. Our net impression is that he is a worldly thinker who will take a more activist stance for the profession and ISM's membership base in issues pertaining to trade, policy and the like.

[More]

Spend Matters welcomes a guest post from Robert Miles of Mintec Ltd.

US lumber prices have been lumbering on in a fairly choppy way since the start of the last quarter of 2011. There have been one or two slight hitches, but the latest posts look to have been hammered in -- in a reasonably positive way.

Trends in lumber are often seen as an indicator of economic growth. Nowadays, new homes being built in North America are picking up slightly, but we are a long way from the boom building days of five years ago. Since lumber is such an important part of construction, other large economies tend to rely on a healthy building industry at their heart.

[More]

The FT's take on Amazon Supply.
Amazon noses into industrial supply chain -- The prospect of head-to-head competition with Amazon would fill most companies with dread. Yet the US's biggest industrial suppliers – who provide manufacturers such as General Electric, General Motors, Boeing and Caterpillar with everything from toilet paper to complex electronic components – seem remarkably unruffled by the debut last month of Amazon Supply, a website with more than 500,000 products aimed at grabbing a share of the $160bn market for US industrial supplies.

Happy birthday, Youtube.
YouTube Turns Seven Today, Now Uploads 72 Hours of Video Per Minute -- On its seventh birthday, YouTube is now uploading three days of video (72 hours) every minute. Running that through WolframAlpha comes to a staggering 37,840,000 hours of video per year. That's a lot of cat videos! A tweet from YouTube's official account today says "It's our birthday! 7 yrs ago we introduced YouTube to the world and now you upload 72 hours of video every minute. Wow! youtubeshare.com/5O0"

[More]