SAP’s Ariba Acquisition Will Fuel Cloud Business

by Trefis Team
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SAP (NYSE:SAP) has closed the $4.51 billion acquisition of Ariba, the maker of Web-based software that connects suppliers and buyers online. Aribas software is completely cloud based and this acquisition is key for SAP as it tries to win market share in the cloud based CRM business. Ariba provides web based customer support, help desks, network to connect buyers and sellers and other e-commerce solutions.

This acquisition will help SAP reach its 2015 goal of increasing cloud business revenue to 2 billion euros ($2.57 billion) and the number of SAP users to 1 billion. Some of Ariba’s top customers include companies such as UPS, British Airways and Clariant. [1]


Check out our complete analysis for SAP

Leveraging Ariba’s Customer Base

At the time of the acquisition, Ariba had nearly 730,000 customers and SAP plans to double it by 2015. SAP has nearly 200,000 customers Ariba’s customers are close to 730,000 and the combined annual revenue of all these businesses is around $8 trillion annually. Approximately $350 billion in trade is conducted each year using the Ariba platform as well. This huge customer base along with the cloud based product portfolio will fortify SAP’s cloud business as it fights for market share with Oracle and Salesforce.com.

Cloud, Mobile and HANA Key Drivers In 2012

The cloud business is likely to experience adoption by small and medium size businesses as the SaaS model makes it cheaper to adopt and deployment on the cloud makes it easy to integrate. The absence of legacy ERP and CRM systems makes the cloud model more viable as there are no integration issues. Larger businesses take much longer to fully move to the cloud as this involves migrating legacy systems.

We expect revenues from large businesses to grow rapidly in the medium to long run as they look to incorporate cloud based systems. The mobile services are likely to be driven by the bring-your-own-device movement as employees demand access to business data on their mobile devices, and we believe there is a large opportunity to tap the existing customer base. Despite the shift, large businesses will keep a mix of both systems, with critical systems still being maintained in house and not on the cloud.

We currently have a $73 Trefis Price Estimate for SAP which is about 10 percent more than the current market rate.

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Notes:
  1. SAP Seeks To Double Aribas Customers By 2015, www.marketwatch.com, Oct 1, 2012 []
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