Transcript of a sponsored discussion on how advancements in business applications and the modern infrastructure that supports them portends new and higher degrees of business innovation.

1. SAPAriba Chief Strategy Officer on The Digitization of
Business and the Future of Technology
Transcript of a sponsored discussion on how advancements in business applications and the
modern infrastructure that supports them portends new and higher degrees of business
innovation.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: SAP Ariba.
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re
listening to BriefingsDirect.
Our next technology innovation thought leadership discussion focuses on
advancements in business applications and the modern infrastructure that
supports them, and what that combination portends for the future.
As we enter 2016, the power of business networks is combining with
advanced platforms and mobile synergy to change the very nature of
business and commerce. We’ll now explore the innovations that companies
can expect -- and how that creates new abilities and instant insights -- and
how companies can, in turn, create new business value and better ways to reach and serve their
customers.
To learn more about the future of technology and business networks, we’re joined by Chris
Haydon, Chief Strategy Officer at SAP Ariba. Welcome, Chris.
Chris Haydon: Thanks, Dana. Great to talk to you again.
Gardner: For me, IT architecture is destiny. Now that we have cloud, big data,
and mobile architectures aligned, how does that support where we can go with
new business applications and processes -- to get entirely new levels of
productivity?
Haydon: It's an exciting new age. The new platforms, as you say, and the
applications coming together are a kind of creative destructivism. We can start
all over again. The value chain changing because of digitization, and
technology needs to respond.
So what you hear are buzzwords like adaptivity, configurability, or whatever, but these are table
stakes now for business applications and business networks. This digitization of value chain
forces us to think about how we bring the notion of multiple constituents within the organization,
in terms of the adoption, and then couple that with the agility they need to do to deal with this
constant and increasing rate of change.
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Gardner
Haydon

2. Gardner: People are talking more about “digital business.” It means looking at not just new
technologies, but how you do business, of taking advantage of the ability to have insight into
your business, sharing that insight across ecosystems with partners. Where do you see the real
advantage in action now for a business-to-business (B2B) environment?
Outcome-based conversations
Haydon: We hear about the technology and it’s important, but what we really hear about is the
outcomes. We have very outcome-based conversations with customers. So how does the platform
with the business network give you these differential outcomes?
What's pretty evident is that you have to be closer to your end
user, and it's also about the cloud paradigm adoption. You're only
as good as your last transaction, your last logon, your last order,
or your last report -- or whatever business process you're running in.
It's this merger of adoption and outcome, and how you string these two things together to be able
to deliver the customer benefit.
From a technology perspective, it's no longer acceptable just to think about the four walls or your
firewall; it's really about that extended value chain. So this is where we're seeing this merger of
this business network concept, this commerce network concept in the context of these business
applications.
We're really starting to emerge from B2B, and it's grown out of the business-to-consumer (B2C)
world. With the Facebooks, the LinkedIns, or the Ubers, now you're seeing leading practice
companies needing to embrace these larger value chains or commerce chains to give them the
outcome and also to help drive differential adoption.
Gardner: For organizations that are really attracted to this and recognize that they have to
compete with upstarts, if they get this right, it could be very disruptive.
When we think about having all of your data accessible, when we think about processes being
automated, at some point you're able to gather more data and analysis and process refinement
that you can then reapply to your business, creating perhaps algorithms and abilities to add
intelligence in ways that you couldn’t never do manually.
How do we get companies to understand that feedback loop and get it instituted more rigorously
into their organization?
Haydon: One thing we see is that with the technology we have today, we can hide that
complexity from the users and embed it in the way that end users need to work. Let’s talk a little
bit about an Ariba example here. If you're going to create a new sourcing event, do you really
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3. want to have to think about the business you do with your current suppliers? Absolutely, but
wouldn't it be great when that’s all managed by extra information presented right in front of you?
On top of that, wouldn’t it be also great to know that these three new suppliers in this category, in
this geography that you haven't thought about before, and wouldn't it also be great that they
could be automatically invited at no extra friction to your process? So you get more supplier
diversity. You're able to also let suppliers become more involved in the process, earlier in the
process.
We're redistributing this value chain in terms of linking the insight and the community to the
point of where work is being done -- and that’s part of that transformation that we're seeing, and
that’s how we see it in the Ariba context. But we’re also seeing that in the larger business-
network and business application context across SAP.
Knowing your needs
Gardner: So to borrow the B2C example, if Uber is our poster child example, instead of my
standing outside of a hotel and having visibility of all of the cars that are driving around that
neighborhood, I could be a business and get visibility into all of the suppliers that are available to
me. And those suppliers will know what my needs are before they even get to the curb, so to
speak.
What's the next step? When we gain that visibility, when we have supply chain and buyer and
seller synergy, what comes next? Is there some way to bring that value extended to the end-user
at some time?
Haydon: The next step is network resource planning. This is the awareness about your supply
base, but also what other stakeholders in that process might mean, and this is what it could be for
the end user. It's not just about the supplier, but also about the logistics provider. It’s about how
you might have working capital and finance.
What if you could dynamically match or even have a conversation about differential service
levels from a buyer or supplier? I'm okay to take it tomorrow if I can get it at 8 a.m., but it's $2
cheaper, or I am happy to take it today because of some other dependencies.
This is a type of dynamic “what if,” because we have the technology platform capability, in time
real-time memory analytics, but also in the context of the business process. This is this a next
generation capability that we'll be able to get to. Because the network is external to the
application, because together we can understand the players in the network in the context of the
business process, that's where that real next evolution is going to come.
Gardner: It sounds as if we're really starting to remove the margin of error from business. We're
starting to remove excess capacity, become fit for purpose through that dynamic applicability of
insight and analysis. How much can we squeeze out? Do we have a sense of how substantial
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4. these business network capabilities will become? What sort of payoff are we anticipating when
we can remove that margin of error, with tighter integration across ecosystems? What’s the gold
piece that we are going after here?
Haydon: Well it’s a big, big, big number. Even if we go back a couple of years -- and there’s
some good work being done on just the inefficiencies and the first sort of magnitude on paper --
and that’s just moving something from a paper format and dematerializing that into an electronic
format. Four years or five years ago when a study was done on that, that was conservatively
somewhere between $600 billion and $1 trillion just in the Global 2000 corporations.
There is an order of magnitude more opportunities globally from just this compression of cycle
times, in the broader sense, and responsiveness and adaptability throughout the whole world
globally.
At Ariba, we just passed a great threshold in 2015. We ran more than $1 trillion in commerce
across our business network. If you just start doing a little bit of math around what a one percent
or two percent improvement of that can be from better working capital management, or more
flexible working capital management, just pure straight productivity and just competition, of
leveling the playing field for the smallest micro-supplier through the largest international
supplier, and just leveling that all out. There are stupendous gains on both sides of the balance
sheet.
Adoption patterns
Gardner: When it comes to adoption patterns, some organizations may have been
conservative and held back, perhaps resisted becoming cloud-based. What sorts of organizations
are you seeing making a bold move, not just piecemeal, and what can they get a lot done in a
relatively short amount of time?
Haydon: In industries where they are traditionally conservative, they really do need to change
their value chains, because that’s what their customers are demanding. And so, financial services,
where historically you would think the old “big iron” approach. Those types of companies are
embracing what they need to do on cloud to just to be more adaptive, to be faster, and also to be
more end-user-friendly, and the total cost of ownership approach from the cloud is really there.
But we're a long way away from on-premises applications being dead. I think what the cloud
gives enterprises is they can go largely to the cloud -- and we see companies doing that -- but that
the legacy-hybrid, on-premise model is really important. That’s what’s great about the cloud
model. You can consume as you go. It doesn’t all have to be one big bang.
For pragmatic CEOs, CFOs, or CIOs, that blend of hybrid is the legitimate strategy -- where they
can have the best of both worlds. With that said, the inextricable pool of cloud is there, but it can
be a little bit more on their own terms, on what makes sense for their businesses.
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5. Gardner: We have been at the 70,000- to 80,000-foot height on this discussion. Let’s bring it
down a bit lower. Help our readers understand SAP Ariba as an entity now. What does it consist
of in terms of the software-as-a-service (SaaS) services that have been acquired and built, and
how that then fits into a hybrid portfolio.
Haydon: Number one, we fundamentally believe in Ariba, and it had to give differential
outcomes to our customers, that linking cloud applications with the business-network construct
will give you better outcomes for the things we just spoke about earlier in the conversation:
visibility, supply chain, adaptability, compliance, building on networks of networks to be able to
deliver different outcomes, linking to payment networks like we have done with Ariba and
Discover, linking to content networks like we have done with eBay, but bringing them into the
context of the business process can only really be enabled through networks and applications.
From an Ariba perspective, we like to think of it in three pillars for everyone. We talk about our
cloud applications, and we have leading, leading practice, widely, broadly adopted source-to-pay
cloud applications in a fully integrated suite.
From a cloud perspective as well, you can have the Lego-block approach, where we can take any
one of our modules, from spend visibility all the way through the invoicing, and start your
journey there, if that's your line-of-business requirement, or take the full suite approach.
Intrinsic to that offering, of course, is our business network. Why I bring that up is that our
business network and our cloud applications are agnostic. We don't actually care, from a cloud
perspective, which back-end system of record you wish to use.
Of course, we love and we believe that the best out there is S/4HANA from SAP, but there is also
a larger market, whether it's the mid-market or whether there are other customers who are on
other journeys on the enterprise resource planning (ERP) for legacy reasons. We can connect our
cloud applications and our network to any one of those.
Three levels
So, there are three levels: network, our end-to-end cloud applications, and last but not least, and
which is really relevant from the technology journey, a rock-solid platform. And so I am moving
toward that platform that runs our cloud apps and our network in conjunction with SAP for the
security, for the privacy, for the availability, for all of these really important things that enterprise
customers need.
Also, you have to have the security to run these business processes, because they're entrusting
those to us, and that's really what cloud means. It means entrusting your business processes to us
to get a differential outcome for your business.
Gardner: As organizations try to become more of a digital business, they will be looking to
bringing these benefits to their ERP-level business applications, their supply chain and
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6. procurement, but increasingly, they're also looking to manage better their human resources and
recognizing that that's a dynamic marketplace more than ever.
Haydon: Yes.
Gardner: So let's talk about how the business network effect and some of these synergistic
benefits come to play in that human resources side of running a digital business?
Haydon: That's also one of the great parts from an SAP portfolio. I like to think about it two
ways. There’s human capital management internal, and there’s human capital management
external. Leading companies today want to have agility on how many full-time employees they
can hire, and how to manage contingent or temporary labor aspects.
From an SAP perspective, what's great is that we have the leading cloud for Human Resource
Management and Talent Management solutions with Success Factors, and we have also have the
market-leading Contingent Labor Management solution with Fieldglass.
Together with Ariba, you're able to, one, have a one-visibility view into your workforce in and
out, and also, if you like, to orchestrate that procurement process to get sourcing, ordering,
requisitioning and payment throughout.
From a company perspective, when you think about your spend profile, 30 percent to 70 percent
of the spend is about services as we move to a service-based economy. And in conjunction with
SAP Ariba and SAP Fieldglass, we have this broad, deep, end-to-end process, in a single context,
and -- by the way -- integrated nicely to the ERP system to really again give those best outcomes.
Gardner: When people think about public clouds that are available to them for business, they
often couple that with platform-as-a-service (PaaS), and one of the things that other clouds are
very competitive about is portraying themselves as having a very good developer environment.
But increasingly, development means mobile apps.
Haydon: Yes.
Mobile development
Gardner: What can we gain from your cloud vision as being hybrid, while also taking
advantage of mobile development?
Haydon: From a platform perspective, you need to be “API First” because if you're actually able
to expose important aspects within a business process, with an API layer, then you give that
extensibility and that optionality to your customers to do more things.
Let’s talk about concrete examples. An end-to-end process could be as simply as you could take
an invoice from any third-party provider. Right now, Ariba has an open invoice format. If
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7. someone chooses to scan it themselves and digitize it themselves or something that a customer
wanted to do, we could take that straight feed in.
If you want to talk about a mobile API, it could be as simple as you want to expose a workflow.
There's a large corporate mandate sometimes to have a workflow. If you travel, there's a
workflow for your expenses, a workflow for your leave request, and a workflow for your
purchase orders. If you want that cost – the end-user that has five systems or would rather come
to one, you can have that API level there.
There is this whole balance of how you moleculize your offerings to enable customers to have
that level of configuration that they need for their individual business requirements, but still get
the leverage of not having to rebuild it all themselves.
That's certainly a fundamental part of our strategy. You'll see that SAP is leading in itself under
our HANA Cloud Platform. SAP Ariba is building on that. I don’t want to flag too much, but
you’ll see some interesting developments along that way as we open up our platform from both
an end-to-end perspective and also from an individual mobile perspective throughout the course
of this year.
Gardner: Now this concept of API First, it's very interesting, because it doesn't really matter
which cloud it’s coming from, whether on a hybrid spectrum of some sort. It also allows you to
look at business services and pull them down as needed and construct processes, rather than
monolithic, complex, hairball applications.
Do you have any examples of organizations that have taken advantage of this API First
approach? And how have they been able to customize their business processes using this hybrid
cloud and visibility, reducing the complexity?
Haydon: I can certainly give you some examples. This just starts from simple processes, but
they can actually add a lot of value. For example, you have a straightforward shipping process,
an advanced shipping process. We know of an example where a customer took 90 percent of
their time out of the receiving and made the matching of their receiving receipting process
almost by 95 percent, because they can leverage an API to support their custom bar-coding
standard.
So they leveraged the standard business-network bus, because that type of barcode that they need
to have in their warehouse, and their part of the world, was there. Let’s wind the clock back three
or four years. If we had asked for that specific feature, to be very candid, we wouldn’t make it.
But once you start opening up the platform at that micro level, you can actually let customers get
the job done.
But they can still leverage that larger framework, that platform, that business process, that cloud
that we give them. But when you extend that out for what it could mean, again, full payment, or
for risk, or for any of these other dimensions that are just typically organizational processes to
the current -- whether it’s procurement or whether it’s HR recruiting or whatever it's like -- it gets
pretty exciting.
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8. Big data
Gardner: One of the other hallmarks of a digital business is having aspects of a business work
in new ways together, in closeness, that they may not have in the past. And one of the things
that’s been instrumental to business applications over the past decades is this notion of a system
of record or systems of records, and also, we have had this burgeoning business intelligence (BI)
now loosely called big data capability.
And they haven't always been that close, but it seems to me that with a platform like SAP
HANA, combined with business-networks, that systems of record and the data and information
in them, and the big data capabilities, as well as accessing other data sets outside the
organization, make a tremendous amount of sense. How do you see the notion of more data,
regardless of its origin, becoming a common value stream to an organization?
Haydon: This becomes the fundamental competency that an organization needs to harness. This
notion of the data, and then the data in the context of the business process, and then again to your
point, how that’s augmented in the right way, is really the true differentiation for where we’ll go.
Historically, we laid down the old railway tracks on business processes, but there is no such
thing as railway tracks anymore. You rebuild them every single day. Inside that data, with the
timeliness of it, is sentiment analysis so that from a business-network context, it enables you to
make different and dynamic decisions.
Within SAP Ariba, we're fundamentally rethinking how we can have the data that’s actually in
our environment and how we get that out -- not just to our account managers, not just to where
our product manager is, but more importantly, out to our end users. They can then actually start
to see patterns, play with it, and create some interesting innovations. We're working with our
customers to identify and remove forced labor in the supply chain, or advance global risk
management or even expedited delivery and logistics.
Gardner: Okay, we talked about business-networks in the context of applications working
together for efficiency, we’ve talked about the role of hybrid cloud models helping to accelerate
that, we've talked about the data issues and some of the development and customization on
mobile side of things. What have we missed, what is the whole, greater than the sum of the parts
component that we’re not talking about that we should?
Haydon: There are probably two or three. There’s certainly the notion of the user experience and
that's a function of mobile, but not mobile only. The notion of reinventing the old traditional
flows and thinking that was prevalent even five years ago on what constituted one type of work
channel no longer exists.
There's the new discipline of what a user experience is about and that's not just the user interface,
that’s also things like they’re just the tone or the content that’s presented to you. It’s also what it
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9. does mean on the differential devices and way you’re working. So I think that's an evolving
piece, but cannot be left behind.
That's where the B2C world is blazing and that's now the expectation of all of us in that, when
we go to work and put our corporate hat on, as simple as that. These two are security and
privacy. That is top of mind for a number of reasons and it's really fair to say that it’s in a
massive state of flux and change here in the United States, but certainly in Europe. It doesn’t
matter which region you are in, APJ or Latin America as well.
Competitive advantage
That's another completive advantage that enterprises and providers in this space like SAP and
SAP Ariba, can, and will, and should, lead on. The last point, maybe a trend, is that you're really
seeing very quickly the transition between the traditional service and material flows that exist,
and then the financial flows.
We're seeing the digitalization of payments just exploding and banks and financial institutions
having to rethink and look at what they're doing. With the technology and the platforms we have,
that linking of that is physical flows, whether they be for services or materials and that crossing
over to that payment and then the natural working capital because, at the end of that, commerce
follows money.
It’s all about the commerce. So it's the whole space in that whole area and that technology is the
trend as well. Security UX and the whole payment working capital management or the
digitalization of that are the three large things.
Gardner: And these are areas where scale really helps. Global scale, like a company like SAP
has, when the issues of data sovereignty come up and you need to think about hybrid cloud, not
just in its performance and technical capabilities but the actual location of data, certain data for
certain periods of time and certain markets, is very difficult to do if you're not in those markets
and understanding those markets. It's the same with the financial side. Because banking and
finance are dynamic, it’s different having that breadth and scope, a key component of making
that possible as well.
There's one last area we can close out on and it’s looking a bit to the future. Some competitors of
yours are out there talking about artificial intelligence (AI) more than others, and when you do
have network effects as we’ve described, big-data mesh across organization thinking of data as a
life cycle for a digital business, not just data in different parts of your organization.
We can think about expertise in vertical industries being brought to bear on insights in the
markets and ecosystems. When and how might we expect some sort of an AI, value, API, or set
of APIs to come forward to start thinking things through in ways people probably haven’t been
able to do up until now or in the near future.
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10. Haydon: The full notion of something like a [2001: A Space Odyssey’s] HAL 9000, is probably
a little way away. But then again, what you would see within the next 12 to 18 months is specific
-- maybe you call them smart apps rather than intelligent or smart agents.
They already exist today in some areas. You will see them augmented because of feedback from
a system that’s not your own, whether it’s moving average price of an inventory. Someone will
bring the context of an updated price, or an updated inventory and that will trigger something,
and that will be the smart agent going to do all that work for you, but ready for you to make the
release.
There still is a notion of the competency, as well, within the organization, not as much a
technology thing, but a competency on what Master Data Governance means, and the quality of
that data means, and being able to have a methodology to be to manage that to let these systems
do it.
So you will see probably in a lower-risk spend categories, at least from a procurement
perspective indirect, or may be some travel and these aspects, maybe a little bit of non-inventory
materials repair and operating supplies, you probably fair way away from fully releasing direct
material supply chain in some of these pretty, pretty important value chains we manage.
Self-driving business process
Gardner: So maybe we should expect to see self-driving business processes before we see
self-driving cars?
Haydon: I don't know, I'm lucky enough to live in Palo Alto, and I see a self-driving car three
days a week. So we'll back out of that one.
But there is a really important piece, at least from Ariba perspective and an SAP perspective. We
fundamentally believe that these business-networks are the rivers of data.
It's not just what's inside the four walls of your firewall. You will truly get the insight from the
largest scale of these rivers of data from these business-networks; whether it be Ariba or our
financial partners, or whether it be others. There will be networks of networks.
This notion of having a kind of the bookend of the process, a registry to make sense of the actors
in these business networks and the context of the business process, and then linking that to the
financial and payment change, that's where the real intelligence and some real money could be
released, and that's some of the thinking that we have out there.
Gardner: So, a very bright interesting future, but in order to get to that next level of value, you
need to start doing those blocking and tackling elements around the rivers of information as you
say the network effects and putting yourself in a position and then be able to really exploit these
new capabilities when they come out.
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11. Haydon: It's scale and adoption. From the scale and from the adoption, will come that true
benefit from the networks, the business process, and the connectivity therein.
Gardner: I’m afraid we will have to leave it there. You’ve been listening to a BriefingsDirect
thought leadership podcast discussion on how advancements in business applications and the
modern infrastructure that supports them portend new and higher degrees of business innovation.
And we have heard how the power of business networks is combining with these advanced
platforms, and mobile synergy and data analysis, to change the very nature of business and
commerce.
So, please join me now in thanking our guest, Chris Haydon, Chief Strategy Officer at SAP
Ariba. Thanks so much, Chris.
Haydon: Thanks, Dana.
Gardner: And a big thank you, too, to our audience for joining this SAP Ariba-sponsored
business innovation thought leadership discussion. I’m Dana Gardner, Principal Analyst at
Interarbor Solutions, your host and moderator.
Thanks again for listening, and do come back next time.
Listen to the podcast. Find it on iTunes. Get the mobile app. Sponsor: SAP Ariba.
Transcript of a sponsored discussion on how advancements in business applications and the
modern infrastructure that supports them portends new and higher degrees of business
innovation. Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.
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