SAP-Ariba-052212SAP’s planned acquisition of Ariba is not only the latest bold move by the software vendor to become a major player in the burgeoning Cloud marketplace, it is also an important market indicator of the next wave of Software-as-a-Service (SaaS) in the supply-chain arena.

THINKstrategies has been tracking the evolution of the SaaS market since its inception and have found a common pattern of adoption among business users. SaaS adoption is typically driven by disgruntled corporate end-users or executives who are looking for easier to use and more economical alternatives to their legacy, on-premise applications. The first round of experimentation with SaaS alternatives is usually in front-office application areas, such as collaboration, sales/marketing automation or even customer relationship management (CRM). Of course, Googgle Apps and Salesforce.com have been in the forefront of this aspect of the SaaS/Cloud movement.

Once the viability of SaaS alternatives have been proven in the front-office, corporate executives begin to explore ways of swapping out their back-office systems, such as financial management and enterprise resource planning (ERP) with Cloud-based alternatives from companies like NetSuite, FinancialForce, Intacct or Plex Systems. This second wave of SaaS adoption has become so widespread that SAP, Oracle and Microsoft are all escalating their efforts to win a share of the market.

Once corporate executives have become comfortable with employing SaaS/Cloud alternatives in their back-office environments, they start to examine how they can also be used to change the way they interact with their business partners and customers. This is the third wave of the SaaS/Cloud migration process which is transforming the way businesses build and support their supply-chain operations and procurement processes. Rather than rely on standalone, inhouse systems and custom software, a growing number of corporate executives are recognizing the benefits of leveraging proven third-party services, especially those which capitalize on the economics and additional functional capabilities of the Cloud.

An indication of the growing interest and adoption of Cloud-based e-procurement and supply-chain services is Coupa Software which recently announced it has recorded 13 consecutive quarters of new sales growth and its newest customers include Amerinet, Avalon Health Care Group, Citizens Republic Bancorp, Inc., Corbus, LLC, Gannett Co., Inc., and Service Corporation International. As a result, Coupa secured $22 million in Series E financing.

These trends have driven SAP to acquire Ariba, which has been migrating its operations to a Cloud delivery engine. More than 730,000 companies use Ariba’s e-procurement and supply-chain services to handle over $319 billion in transactions a year. SAP believes its 190,000 customers will benefit from Ariba’s services and vast network of users.

You can expect other major players to follow SAP’s lead and acquire other Cloud players, like Coupa, to accelerate and expand their penetration of the rapidly growing Cloud marketplace. This will bring the third-wave of SaaS/Cloud adoption more clearly into focus.

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