Cloud Computing 1005 Special Edition

8/9/2019 Cloud Computing 1005 Special Edition

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Commerce Cloud Evangelist: Q&A with Aribas Bob Calderoni Page 12

PLUSPeering into the Cloud

Analysts Take on the Cloud-basedsolutions Page 16

Practitioners Look to the Cloud forthe Next Level of Business Efficiency

Page 19

Clarity in the Cloud A Procurement Viewpoint

Page 22

www.SDCExec.com

Special Edition May 2010

Beyond the CloudA new breed of cloud-based applications aims to simplifybusiness commerce and drive new levels of productivity.

And Ariba is leading the charge. Again.Page 8


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Whether youre looking to control supply chain costs, increase sales,

or enhance cash flow and operations, you can do it better with Ariba.

Ariba delivers the technology, capabilities, and global community of

trading partners you need to buy, sell, and manage cash more efficiently

and more effectively than ever before. And because its delivered as a

flexible cloud-based service, you can get results that fit your needs, your

budget, and your infrastructure.

Theres no hardware to install. No trading partner integration to manage.

And an array of business intelligence, expertise, and skills you can dial

up to speed results. And dial down as your needs change.

94 of the Fortune 100 and more than 300,000 other companies rely on

Ariba to do commerce better. Why not join them?

807 11th Avenue

Sunnyvale, CA 94089

Toll-free (USA): 1 866 772 7422Outside USA: +1 650 390 1000

www.ariba.com

Commerce Is Hard.Ariba Makes it Easier.


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Special Edition/May 2010 www.SDCExec.com 3

table ofcontents

4 Executive MemoAribas Push to Transform BusinessCommerceBy Andrew K. Reese

Data PointsRunning the Numbers on CloudCommerceProjected growth in worldwide IT Cloud servicesrevenue, users anticipated benets and businessbenets of the Cloud.By Editorial Staff

Cover StoryBeyond the Cloud

A new breed of cloud-based applications aims to

simplify business commerce and drive new levels ofproductivity. And Ariba is leading the charge. Again.By Editorial Staff

Question SessionThe Evangelist

Ariba Chairman and CEO Bob Calderoni talks aboutProcurements continuing evolution and driving thenext evolution of Business CommerceBy Editorial Staff

Analyst ViewPeering into the CloudAnalysts take on Cloud-based solutionsBy Editorial Staff

Practitioner ViewpointThe Forecast for Procurement: CloudyCloud solutions are fueling the next level ofprocurement and business productivityBy Editorial Staff

Procurement Viewpoint

Clarity in the CloudBy W. Lamar Chesney

8

16

19

22

Inside

12

5

Published by Cygnus Business Media

Special Edition May 2010

S o l u t i o n s -b a se d I n t e l l i g e n c e f o r S u p p l y C h a i n R O I

President, Cygnus Publishing Division Mike Martin

Brand Director Gloria Cosby

Publisher Jolene Gulley

Editorial Staff

EditorAndrew K. Reese

Managing Editor Stacey Meacham

Contributing Writer

W. Lamar Chesney

Art Director Bobbi Burow

Corporate Production Director Brett Apold

Prepress Manager Scott ShearerProduction Service Representative Connie Wol

Audience Development ManagerAngela Kelty

Corporate Sales

Publisher Jolene Gulley, [email protected]

Sales Account Manager Kathleen Arnold, [email protected]

Editorial Advisory Board

R. Jerry Baker, C.P.M, Executive Vice President, MyGroupBuy, Inc.

Carla Lallatin, President, Lallatin and Associates

Dick Locke, President, Global Procurement Group

Julie Murphree, Founding Editor, Supply & Demand Chain Executive

R. David Nelson, C.P.M, Chie Supply Chain/Strategy Ofcer, HTC Global Services, Inc.

Jay U. Sterling, Ph.D., CPA, Sr. Research Scholar, Center or Business &

Economic Research (CBER); Associate Director, University Transportation Center

or AL (UTCA), University o AlabamaJoseph Yacura, CoFounder and Chie Strategist, Supply Chain Management, LLC

www.SDCExec.com

On the CoverPage 8

This Special Edition ofSupply & Demand Chain Executive

produced in conjunction with


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executive memo

4 Supply & Demand Chain Executive Special Edition/May 2010

The first time I spoke with Bob Calderoni in 2001, hed beenin his new post at the head of e-procurement technologycompany Ariba for all of about a day. Ariba, like many

companies born in the tech boom of the 90s, was finding its

way in the wake of the tech bustat the dawn of the millennium.As he stepped into his new role,Calderoni brought two things

with him to the CEO suite. First,he brought his experience andhis viewpoint and sensibilities as a former chief financialofficer; hed been CFO at AveryDennison, SVP of finance atApple Computer and CFO forIBMs $8 billion Storage Systems

Division. That was a good sign forthe investment community that

wanted to see a focus on financesand the bottom line at a time ofeconomic turmoil.

But Calderoni also broughta vision for where he wanted to lead Ariba. His focus wason providing spend management solutions rather thane-procurement technology, and his fundamental premisewas that chief procurement officers must work more closelywith CFOs and other senior management to truly manage andcontrol their companies spend. But whereas industry analysts

and thought-leading procurement executives and Supply &Demand Chain Executive magazine preached the messagethat supply management must be strategic, Ariba under BobCalderoni set out to actually arm Procurement with the solutionsthey needed to make good on that vision.

On the back of that vision, Ariba has slowly, steadily built astrong record over the past 10 years. The companys networkencompasses four-fifths of the Fortune 500 and 94 of the Fortune100, as well as more than 300,000 suppliers. Industry analystfirms like Forrester and Gartner have pegged Ariba in the topquadrants for a range of spend management solutions. Revenueshave been strong, especially on the on-demand side, and the

company has a healthy stash of cash in the bank to fund furtherdevelopment and growth.

Now, just as the recent economic turmoil is prompting

companies to plumb their supply chains for even more value,Calderoni and Ariba are extending their vision for procurementand spend management with the move to the Commerce Cloud.In a recent earnings call, Calderoni noted: Companies coming

out of this recession are coming out leaner, and theyre embracingnew operating models that rely heavily on external tradingpartners that use alternative low risk infrastructure approacheslike software-as-a-service and Cloud computing. Aribas at thecenter of these more collaborative business practices as evidencedby our continued strong performance, both with our on-demandsolutions and our global trading network.

In this special edition of Supply & Demand Chain Executive,well examine both the broader trend toward the Cloud andAribas push to bring Procurement into the Commerce Cloud.Beginning on page 8, our cover story explores this next revolutionin commerce and describes how Ariba is evolving to meet the

needs of business done in the Cloud. In a Q&A beginning onpage 12, Bob Calderoni sketches out his vision for the CommerceCloud, while the analyst community weighs in, with views fromthe top thought-leaders in the procurement space, starting onpage 16. For a practitioners eye view of procurement in theCloud, we turn to leading executives across industry sectors inthe article starting on page 19. And we round out our coverage

with a column by W. Lamar Chesney, executive vice presidentand chief procurement officer at SunTrust Banks, Inc., which isalready well advanced in its journey into the Cloud.

What do the next 10 years hold for procurement and spendmanagement and for Ariba? Prognostication is as tricky a

business as ever, so lets just say if youll forgive the expression that the forecast remains cloudy. However, one thing thatscrystal clear is that as business heads into the Cloud, Ariba ispositioning itself to be rocket ship that gets it there.

Andrew K. Reese

EditorSupply & Demand Chain Executive

Aribas Push to

Transform BusinessCommerce


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data points

Running the NumbersBy Editorial Staff

Source: Ariba.


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data points

Benefits Commonly Ascribed to theCloud by Surveyed UsersSource: IDC.

Projected Growth in Worldwide IT Cloud Services Revenue, 2009-2013.Source: IDC.

Billions


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data points

Running

theNumbers


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cover story

By Editorial Staff

A new breed of cloud-based

applications aims to simplify

business commerce and

drive new levels of

productivity. And Aribais leading the charge.

Again.

Beyond the Cloud


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cover story

Why is it so easy to buy a book on Amazon.com but so hardto source the goods and services you need to run yourbusiness? How can you manage your personal finances

and pay your bills on time online, yet have no idea what yourespending with whom or when youll get paid at your company?

Why do you know more about what your friends ate for lunch

than the status of your key trading partners? In short, why isbuying, selling and managing cash in your personal life so easy,yet business commerce is so complex?

Theyre questions that have been nagging at Ariba. But thecompany thinks it has the answers. And the answers are to befound in the Cloud.

Sound like a joke? Dont laugh. This is, after all, the companythat transformed Procurement more than a decade ago usingonline catalogs and auction technology that everyone said wouldnever work.

Aribas always been a company that prided itself on innovation,from the day that we started, says Kevin Costello, the companys

president. Aribas latest mission? To improve the efficiency and

effectiveness of business commerce through a new breed of

Cloud-based offerings.Business commerce shouldnt be so hard, says Tim Minahan,

Aribas chief marketing officer. In fact, Minahan thinks it shouldbe as easy as personal commerce. When you go to Amazon.comto buy a book or eBay to sell something, or when you log ontoyour banks Web site to pay your bills, you dont need to thinkabout anything because everything you need to complete yourtransaction is right there.

Commerce in the CloudThis is what Ariba aims to deliver on the business front with

the Ariba Commerce Cloud. The Commerce Cloud is Aribasvision for creating a more efficient and effective way for companiesto control costs, minimize risks, improve profits and optimizecash flow and operations.

Aribas timing in rolling out the Commerce Cloud may bepropitious, given the tumult in the economy over the past two

years and the growing reluctance of organizations to make majornew technology investments. There has been almost a tsunamiof movement towards on-demand technologies, not just in theprocurement space but in all spaces, Costello notes. He citesindustry figures showing that Ariba holds greater than 50 percentmarket share in on-demand application space for procurementand spend management, and he suggests that this position gives

Ariba the credibility it needs to begin evangelizing the Commerce

Aribas timing in rolling out the

Commerce Cloud may be propitious,

given the tumult in the economy

years and the growing reluctance

of organizations to make major new

technology investments.


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cover storyCloud concept.

We see that as companies are getting more familiar withthe concepts behind the Cloud, those concepts are starting toincreasingly take hold, Costello says.

Moving to collaborative commerce, Minahan says, isnt assimple as plugging in a piece of software. It requires technology,

community and capability. Inter-enterprise collaborationmust be built on a technology platform that automates andoptimizes the full commerce lifecycle. But, importantly, thattechnology platform must be shared between the trading partners.Collaboration, after all, is all about sharing a business process.Replicating the sins of the past, when companies had their ownindividual systems and were doing point to point integrations,

would lead to segmented and siloed business processes.Companies should be able to drive an end-to-end commerce

process without integrating to other systems, learning new taxonomiesor going anywhere else to get things done, Minahan says.

Collaborative commerce also requires a community, so

companies must have the ability to quickly pre-enable a networkthat allows them to rapidly discover, connect and collaborate withthe trading partners that can deliver the greatest value to them.

Finally, with regard to capabilities, next-generation commerce willrequire companies to ensure that they are employing best practicebusiness processes in collaborating with their trading partners.The point, Costello says, is to avoid simply doing a bad processfaster. Its about leveraging the functionality available through the

Cloud to enable new ways of doing businessfor buyers and suppliers. Costello points

to the capabilities in Ariba Discovery,a tool within the Ariba Network

for doing trading partner discoveryand qualification. Its a new wayfor buyers to source new suppliersby identifying and interacting withsuppliers that they might otherwise

not have known about, he says.And its a new way for sellers to find

prequalified leads that they wouldnt haveknown about. So its about taking advantage ofthe community of businesses in the same waythat Facebook or LinkedIn allows you to tapinto a community, or a network, of people.

Components of theCommerce Cloud

Given these requirements, Minahan

suggests that the only way to deliver this inter enterprisecollaboration platform is to turn to the Cloud. First, becauseit needs to be Web-based technology that is shared amongeveryone. Second, because there needs to be a pre-enabledtrading community built-in. And third, because you need tobe able to leverage the intelligence for that community so that

everyone makes not just faster business processes but smarterbusiness processes.Ariba believes that it has brought together these different

aspects of collaborative commerce within its Commerce Cloud.The offering encompasses applications for spend management,

working capital management and sales acceleration deliveredas cloud-based services. The services are wrapped around the

Ariba Network, which connects more than 300,000 globalsuppliers across 130 countries and 70 currencies, and is used toprocess more than $121 billion in annual PO spend volume.The Network, in a sense, is the community, allowing companiesto discover, connect and collaborate with a global network of

trading partners.Companies can also access market, category, technical, strategic

and other expert capabilities within the Cloud to support

changing business needs and objectives and tap into the knowledgeand experience of procurement staff and executives through the

Ariba Exchange, a networking and peer collaboration forumlinked to the Cloud. Finally, the Commerce Cloud providesaccess to a range of Ariba solution partners, including businessprocess outsourcing providers, financial institutions, integrationservice providers and specialists in working capital managementand document scanning and archiving.

Everything thats needed for efficient and effective business

commerce is in the Cloud, Minahan says.

Impact on Procurement ... and ITThe movement of procurement and supply management into

the Cloud is likely to have an impact on both how the technologyconsumer interacts with the solutions and how a solution providerbrings new capabilities to market. For procurement executives,Minahan suggests that the move from transactional, price-basedrelationship management to the strategic collaborative value-driven relationship management a broad transition takingplace in supply chain management, but one consistent with themove to the Cloud will put a premium on a different skill set.

It requires much more strategic thinking: strategic planning,project management, financial acumen and analytics, and theability to leverage technology in order to facilitate not just fasterbut more effective collaboration, Minahan says.


Bhaskar

Himatsingka

Kevin

Costello

Tim

Minahan


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In addition, Cloud-based supply chain strategies will put apremium on ITs ability to work with procurement to modeland think strategically about business processes rather than justscrewing in technology to solve a business problem. Its notso much about the technology alone, although technology isa key enabler, says Minahan. It is really about the business

process transformation thats enabled, that is, the combinationof technology and, in this case, community and capabilities, andthat requires a different skill set. As a result, the technologyleader in the company must be able to make key decisions about

which portions of a business process, and which portions of thecompanys IT infrastructure, could benefit from connectingto, and leveraging, the capabilities of the Cloud. The goal isto enable the best process that can give the company and itsentire value chain the greatest competitive advantage. Its notsimply a question of what I put on my servers and what I put inthe Cloud, Minahan says. Thats the least of it.

Bhaskar Himatsingka, Aribas chief technology officer, says that

the move to the Cloud also is changing the way that solutionproviders like Ariba develop their solutions and work with theircustomers around those solutions. This is a function of the

responsibility for the timing and management of upgrades tosolutions shifting to the providers of Web-based applications.There are two aspects to this, Himatsingka explains. One ishow we ensure that we introduce capabilities in a way that is

not disruptive to users who are on the system today, in termsof the user experience. Second, its a matter of how we educateboth end users and administrators about new capabilities. Thedays of shipping a CD with the software and then waiting forthe company to do the change management and training areover. That ship has sailed. Ariba, for example, typically makes

available upcoming software a couple months before it goesinto production so that users and administrators can try outnew functionality. That helps build familiarity with, but alsoconfidence in, new releases.

Solving the Business ProblemHimatsingka hastens to add that Ariba is not setting out

to position itself as a Cloud company in the same waythat saleforce.com is looking to become the next-generationapplication development platform for third-party solutionproviders. We are positioning ourselves as a business commercesolutions provider a provider whos going to enable businesses

to get to the next stage when it comes to collaborative businesscommerce, be that about buying, selling or managing cash,he says.

If the past is any indication of future success, its almost a surebet Ariba will do just this.


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questionsession

The EvangelistUnder the leadership of Chairman and CEO Bob Calderoni,Ariba revolutionized procurement. Now the company is at it

again. This time, its taking on business commerce


13/24


question session

SDCE: Ten years ago, Ariba set its sightson revolutionizing procurement and helping

companies to better manage their spend. Now

youre tackling the entire commerce process. Why

the wider scope?

Calderoni:Over the last decade, businesshas spent billions on technology to streamline andautomate internal functions such as Procurement,Human Resources, Accounting, and Sales andMarketing. Yet commerce between companiesremains hugely inefficient. And thats costingour customers and their trading partners a lot ofmoney. The Global 2000 alone loses $380 billion in

productivity a year by our estimates.To get to the next level of productivity andsavings, companies need to tackle the inefficienciesthat hinder effective commerce like conductingtransactions manually and sending paper-basedinvoices and leverage solutions that allow themto share common processes among key tradingpartners and adapt these processes as their needsand resources change. And Ariba is uniquelypositioned to help them do this.

SDCE: How so?

Calderoni:Inter-enterprise collaborationhas failed because it is largely driven throughproprietary systems that have no scale. Whatcompanies need is a common platform like the

Ariba Commerce Cloud through which they canautomate shared business processes among partnersand fuel the agility needed to adapt and adjust theseprocesses as their needs and capabilities change.

But technology alone isnt the answer. Technologycan help companies do things faster and moreefficiently. But doing bad things faster wonthelp them deliver results. To get to the next levelof enterprise efficiency, companies need inaddition to technology skills and capabilities tosupplement their internal resources, and market orcommunity knowledge that they can use to makemore informed business decisions.

The power of the Ariba Commerce Cloud is

that it introduces a new level of information andperformance transparency that allows companies to

By Editorial Staff

I

t cant be done. Its a phrase that

Ariba Chairman and CEO Bob

Calderoni has heard more than a

few times. But one that hes never put

much stock in. You cant automate the

procurement function. Buyers and sellers

will never go for it. You cant deliver your

solutions on demand. Youll die without

the license revenue.

As Ariba embarks on its latest effort to

shake things up with the launch of the

Ariba Commerce Cloud, the skeptics

are again chiming in. You cant do real

business in the Cloud. But Calderoni is

tuning them out and moving forward with

an ambitious plan to transform the way

that business is done.


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optimize their business processes and ensure thatthey are making the best decision for their businessand their partners. Whether youre buying, selling ormanaging cash, you can do it better in the Cloud.

SDCE:What do you say to Procurement

executives who have already invested in behind-

the-firewall applications and are now being told

that they need to invest in Cloud-based apps to

achieve the next level of success?

Calderoni:The beauty of the Cloud isthat companies can extend and improve theircollaborative trading relationships regardless oftheir architecture or delivery model decisions. For

example, Ariba On Demandcustomers who embrace theAriba Commerce Cloudbenefit by having all theircommerce processes in oneplace. Customers using AribaOn Premise or third-partyapplications from vendorslike SAP or Oracle benefitfrom more efficient tradingpartner enablement andmore effective collaboration

around procurement and financial processes. Evencompanies with no commerce applications at allcan benefit from the Cloud through new businessdiscovery and better collaboration with customers.

SDCE: Ariba is widely known as a leaderin Spend Management. But youre talking now

about helping companies better manage their

finances, increase their sales and maximize their IT

investments. Can you deliver all of this?

Calderoni:We have been for quite sometime. Spend management is the most visible aspectof what we do because cost reduction is job numberone in todays economy, and we have proven ourability to deliver some pretty hefty savings on adime. But our solutions have always done morethan help companies cut costs. They help financeimprove cash flow and increase productivity.

They help IT maximize their resources and makethe most of their investments. They help legal

manage their contracts and mitigate risk. And theyhelp sales and marketing find and accelerate newbusiness opportunities.

Its not unlike what we did when we shifted ourbusiness to a SaaS model and re-engineered all of

our solutions to be delivered on-demand to makespend management affordable and available tocompanies of all sizes. By delivering our solutionsthrough the Ariba Commerce Cloud, we can helpmore companies and functions within them drive more value across the entire commerce process.

SDCE: So this is bigger than SpendManagement.

Calderoni:Its all about BusinessCommerce. Commerce is the lifeblood of theglobal economy and the engine of business. Butcommerce is hard. To be successful, companiesneed to sell their product or service at the bestpossible price; buy the goods and services they needto operate at the lowest-possible cost; and controlfinance activities so they have the cash to reinvest ingrowing their business.

Companies that manage this commerce lifecycleefficiently and effectively can drive highly profitablegrowth and gain a competitive edge. And thatsexactly what we are aiming to help them dothrough the Ariba Commerce Cloud.

SDCE: Skeptics claim that Cloud-basedsolutions are neither mature nor secure enough

to manage business commerce. How do you

respond to that?

Calderoni:They said the same thing aboutthe Internet and procurement 10 years ago, andlook how far the discipline has come. Procurementis a much more efficient, effective and strategicfunction because of the technology-enabledsolutions and processes that companies haveimplemented to drive it.

SDCE: What does the move to Cloudcomputing mean to procurement as a profession?

Calderoni:Procurement cant continueto pull the same lever anymore. Cost reduction

question session


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remains their top priority. But to drive theirobjectives, they are going to have to collaborate

with their suppliers in new and different ways andconnect with other processes across the value chain.Theyre going to need to align with finance and

leverage things like working capital managementsolutions not only to improve their own cashposition but to ensure that their suppliers remainviable. They cant do these things using traditionalsoftware or proprietary systems. But they can do itin the Cloud. By making these connections, they

will ultimately become more strategic and creategreater value for their organizations.

SDCE: Will the next wave of procurement

enhancements be driven by Cloud offerings?

Calderoni:Cloud solutions are goingto drive the next wave of business commerceimprovements. And as a key component of thecommerce process, procurement will clearly benefit.Spend is easier to manage on a common platform.

With the Ariba Commerce Cloud, Procurement hasmore visibility into corporate spending and can drivenew levels of process efficiency and compliance.They also have access to the worlds largest suppliernetwork, through which they can uncover newsources of supply, secure best-value agreements, andstreamline procure-to-pay operations.

SDCE: Whats next for Ariba?

Calderoni:Our goal is to simplify businesscommerce because it shouldnt be as hard andineffective as it is today. And were going to continueto invest in developing and delivering solutions

that can do this. Companies should be able to dobusiness like they shop in their personal lives. Theyshould be able to replicate an Amazon.com-like userexperience and not be tied to legacy technology thatis difficult to implement and use. They should beable to get the same level of information on theirtrading partners that they can get on their friendsthrough social networks like Facebook and Twitter.

And they should be able to interact with their peersto learn best practices and leverage community-based

intelligence to make informed decisions rather thanacting on gut instincts.



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analyst view

The analyst community projects rapid growth in the adoption

of Cloud-based solutions and services as business leaders

increasingly see potential for rapid value

By Editorial Staff

into theCloud

Peering


17/24


analyst view

The technology sector is abuzz these days withchatter about Cloud-based applications andtheir potential to fuel higher levels of trading

partner collaboration and drive rapid returns for alower upfront investment than behind-the-firewallapplications. But at least one industry analyst cautions

supply chain executives against getting overly fascinatedwith the technology of the Cloud.

Do you really need to know what it means? No,as long as it gets your business issues resolved, saysMickey North Rizza, who focuses on supply management

technologies as a research director at AMR Research,a unit of Gartner.

North Rizza speaks almost daily with procurementand supply chain executives about how to enable theirtransformation initiatives. She says that many of thebusiness leaders she speaks with are interested in Cloud-based solutions and the concept of the Commerce Cloud

because the Cloud represents technological innovation.But she notes that the economy also is driving companiesto look for rapid returns, and they see the Cloud aspotentially driving value quickly.

Theyre more open to understanding how technologyfrom a Cloud-based perspective can help them versuswaiting on a long implementation to get somethingdone, North Rizza says.

Cumulating CloudsMaureen Fleming, program director for business

process automation and deployment at analyst firm

IDC, offers a broad definition of the Cloud: Itsconsumer and business services delivered and consumedin real time over the Internet, she says, adding thattypically Cloud-based applications are distinguishedby their strong use of standards and strong self-servicecapabilities. In addition, Cloud-based offerings typicallyprovide for a pay-as-you-go model.

Flemings research suggests a coming rapidaccumulation of Cloud-based services. IDC estimatesthe market for all Cloud offerings at $17.4 billion in2009, but the firm projects the market will grow to$44.2 billion in 2013. Indeed, Frank Gens, chief analyst

and senior vice president with IDC, reports that Cloudcomputing adoption is growing at over six times therate of what he calls traditional IT.

IDCs research also highlights specific benefits thatare driving interest in the Cloud, including the abilityto pay for what you use, thereby avoiding overpayingfor IT capabilities (cited by more than 80 percent ofrespondents in a September 2009 IDC survey); easy andfast deployments; subscription-based payment models;and the way that Cloud-based offerings force adherenceto standards to gain access to business services.

Supply Management Gets ontothe CloudSpecifically within the supply management arena,

the potential benefits that are drawing companies toCloud-based solutions are similar, according to DebbieWilson, research director for procurement strategiesand systems with Gartner. In an article for SDCExec.com highlighting the findings from a recent researchreport on sourcing applications, Wilson notes that the

on-demand or software-as-a-service delivery modedominates this market segment.Of the 107 companies we surveyed for the report, only

29 percent license their strategic sourcing applicationsuite and run it behind their firewall, Wilson writes.An on-demand, subscription-based implementationis preferable for these suites because most buyersdont need to customize the suite to use it effectively;vendors assume the responsibility for upgrades; buyerscan expense rather than capitalize their investment;and most buyers want to keep suppliers out of internalsystems anyway.

Dennis Gaughan, who studies IT management andservice-oriented architecture as a vice president at AMRResearch, suggests that it is only natural that supplychain executives should find the Cloud so attractive.

Writing in an April 2010 report entitled Are SupplyChain and the Cloud Like Chocolate and PeanutButter?, Gaughan notes that in multi-enterprise supplynetworks, companies must collaborate across enterpriselines with many different partners.

The emerging cloud applications and platforms,

the analyst continues, are designed with collaborationin mind, providing centralized access to informationand delivering a user experience that fosters strongcommunity development.

Dispelling the Storm CloudsThe analysts do see companies carefully considering

several issues as they look to move into the CommerceCloud, including security issues (particularly arounddata security), availability and performance (particularlyfor mission-critical supply chain applications), andlong-term cost.

On the first point, Gaughan writes in his report,Although the issues on security in the cloud are muchbetter understood than three years ago, the fundamental

Line-of-business

leaders are on the

hook for major results,

and theyre looking for

a rapid return to value

AMR analyst Mickey North Rizza


18/24


challenges of protecting data outside acompanys firewall remain and need tobe mitigated. However, with vendorssuch as Cloud poster child salesforce.com and Ariba gaining wider adoptionfor their Cloud-based offerings, those

concerns are steadily being allayed as morecompanies gain greater experience andgreater confidence in the Cloud. Dittoon the performance issues.

Regarding cost, the question is whetherthe subscription model ultimately willentail a higher total cost of ownershipversus paying a one-time license fee. That

does not necessarily apply in the caseof enterprise applications, since majorsolutions typically require significantongoing maintenance fees for upgradesand continuing support and serviceanyway.

In addition, with the economy comingout of the Great Recession, North Rizzapoints out that many companies havecurtailed their investments in majorplatforms or applications. And yet theirbusiness challenges are still just as urgent,and the line-of-business leaders know theystill need tools to address those challenges.

So its natural for them to start looking fora solution that requires a lower investmentright now.

Because the line-of-business leadersare on the hook for major results, thatsforcing their hand. They cant live with

what they have and still get the resultsthey need to produce unless they hiremore people and they cant hire morepeople. So they need a new solution,North Rizza says. With the Cloud, theycan often make the decision to go with asolution or service that they need, get theROI faster, and demonstrate the resultsthey need to achieve. Theyre lookingfor a rapid return to value, North Rizzaemphasizes.

Sharing the Cloud with ITOne touted benefit of moving tothe Cloud is that it typically requiressignificantly lower levels of IT involvement

in the deployment and adoption of thesolution. But North Rizza believes thatthe Cloud will actually foster greater levelsof collaboration between Procurementand IT. Its going to make the IT andbusiness folks come together and talkabout whats really required to run thebusiness, she says.

In addition to a close partnership withIT, the success factors for implementinga Cloud-based solution are similar tothose for behind-the-firewall applications,North Rizza adds. It still comes downto user adoption, the applicability of thesolution, and how it solves the businessproblem, she says. It really is about thebusiness problem.

So does the Cloud represent arevolution or an evolution in howcompanies are leveraging technology?

The real answer to that question may be,Who cares? Businesses arent focused onthe technology, the analysts say. Instead,executives are more worried about solvinga business problem and about whetherCloud-based applications can do thatbetter and faster than other options.

What matters to them is whether theycan get a solution and use it and make adifference in their business thats whatultimately matters, North Rizza says.How that hooks up with your overall

IT strategy is important, and theyre notignoring that. But theyre really lookingat how to drive the business.

analyst view

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19/24


In todays economy, its all about doing more with less. Anddoing it faster, better and cheaper than ever before. Its atall order. And the pressure is on Procurement to deliver.

Over the last decade, Procurement has proven its ability to drivesavings and efficiencies using business commerce technologies. Butcan it continue its run and get to the next level on software alone?

The High Cost of InefficiencyBusinesses have spent billions on technology to streamline

and automate their internal operations. Yet commerce betweencompanies remains naggingly inefficient.

Consider this: According to industry analysts, more than

80 percent of business-to-business commerce transactions arecompleted manually. And companies still send 85 percent ofinvoices and payments on paper. The cost of this inefficiency:

$650 billion a year by some estimates.To stem these losses and drive the next level of improvements

across their business, many companies are looking to a newbreed of solutions.

Productivity 1.0The first wave of technology-enabled productivity focused on

making employees more effective in their daily jobs by simplifyingkey tasks such as developing documents, presentations andspreadsheets and communicating with other team members. Andit led to the dawn of the desktop operating system.

The second wave leveraged Web-based technologies to drive

greater productivity within particular functional areas likeProcurement and Human Resources. And with it came the adventof the enterprise operating system.

practitioner viewpoint

The Forecast for Procurement:

CloudyCloud solutions are fueling thenext wave of procurement andbusiness productivity

By Editorial Staff


20/24


practitioner viewpointProductivity 3.0

The next wave of productivity is all about collaboration andaims to attack the inefficiencies that remain between companiesto enable more effective collaboration among trading partners.Industry watchers say Productivity 3.0 will be fueled by Cloud-based platforms that allow businesses to share common business

processes in areas like product development and commerce.According to global market intelligence firm IDC, Cloudinfrastructure computing will move squarely into the mainstream asa significant number of Fortune 1000 companies adopt the utilitycomputing model demonstrated by moving a portion of theirsandbox apps into production on public Clouds. (IDC, WorldwideSoftware Business Solutions 2010 Top 10 Predictions: The NewNormal for Enterprise Software, #222024, February 2010).

Insiders agree. I believe that most CIOs have built their lastdata center, said Charles Bonomo, chief information officer withMSC Industrial Supply. Computing power will be the first andmost visibly impacted area. The model of buying computing power,

as/when I need it, from a remote data center, run by a companythat specializes in building the worlds best data centers, makesmuch more sense than trying to build this capability myself.

So just what is Cloud computing? And can it really transformbusiness commerce? More important, how will it shape the futureof procurement?

Procurements ViewCloud computing to me seems to be a new buzzword for

something that has been around for quite some time, at least inconcept, says Kevin Castle, chief procurement officer and directorof global procurement with Varian Inc. Cloud computing

basically allows IT infrastructure, software, best practices andstandards to be shared across an entire community in a way thatallows individuals to only pay for what they use, while leveragingan infrastructure that is far greater than one could cost-effectivelybuild on their own.

When it was first suggested that technology could be used toautomate and enhance the procurement process, more than afew eyebrows were raised. Today, youd be hard pressed to finda company that hasnt implemented some sort of software tobetter manage its spend.

Companies of all sizes, across industries and geographies havetools in place that give them greater visibility into and more

control over their spend; allow them to more effectively managetheir contracts, suppliers and risk; and streamline and enhance

invoicing and payment processes. Yet many still struggle toconnect and do business with key trading partners.

Inter-enterprise commerce is still very difficult because it islargely driven by closed systems and processes, says Kevin Costello,president of Ariba, Inc., a leading spend management solutionsprovider. The key to extending and improving collaborative

trading relationships lies in open systems that can be easily accessedregardless of their architecture or delivery model decisions.

Translation: Cloud-based solutions. Many companies are stilltrying to figure out what the Cloud is and how it might actuallybenefit their business. But Varian isnt waiting.

Procurement organizations that strategically implement newlyaccessible Cloud applications can create competitive advantagefor their companies, Castle says. Those that take a sit-and-waitapproach may find that competing supply chains will quicklysurpass them in agility, speed and efficiency.

Varian currently manages all its sourcing projects throughthe Ariba Commerce Cloud, a Web-based platform for inter-

enterprise commerce. Within the Cloud, Varian has createdstandard global processes for sourcing events, RFI, and Leanand Six Sigma projects, complete with the templates, processsteps, decision trees and authorizations needed to execute them.

Commodity managers manage their global categories andsuppliers in the Ariba Commerce Cloud. Supplier report cardsare tracked and commodity teams survey key stakeholders aroundthe globe to determine how suppliers are performing with bothobjective and subjective data in the Cloud. Negotiation plans areapproved and all projects are tracked with complete transparencyto ensure sourcing decisions are made based on auditable lowesttotal cost data in the Cloud. Global spend data are scrubbed

from SAP and encoded into a UNSPC-structured format thatallows for spend visibility, reporting and analysis in the Cloud.

Finally, we in Procurement can make decisions on how touse technology to facilitate best practices that match the wayour supply chains actually interact, rather than adjusting ourprocesses to match inflexible and cumbersome software and ITpolicies that dont coincide with our objectives, Castle says.

A New Way of OperatingIn an environment where budgets are tight and resources

constrained, organizations are increasingly moving towardmore variable operating models that allow them to balance their

internal competencies with external technology, expertise andinfrastructure delivered as a service. Theyre looking for solutions

Finally, we in Procurement

can make decisions on how

to use technology to facilitate

best practices that match the

way our supply chains actually

interact, rather than adjusting

our processes to match inflexible

and cumbersome software and ITpolicies. - Kevin Castle, CPO,

Varian Inc.

Cloud computing will change

business commerce as it is

less restrictive and minimizes

barriers to entry. - Michael

S. Clem, director of global

purchasing for North America,

AGCO Corporation


21/24

practitioner viewpointthat can be dialed up or down as their needs and objectives change.

And, of course, they want to reduce their costs.Cloud solutions promise to deliver all this. And some like

Michael S. Clem, director of global purchasing for North Americawith AGCO Corporation, believe they can. Cloud computingshould reduce capital investment, improve reliability and offer

continuous access to stateof-the-art technology through lowercost upgrades due to shared engineering costs, he says.But in Clems mind, this isnt the real value of the Cloud.

Cloud computing will change business commerce as it is lessrestrictive and minimizes barriers to entry, he says.

Patricia Spugani, program director for global web sales strategywith ibm.com, agrees. Because of the flexibility and shared natureof Cloud solutions, costs for adoption of spend managementcapabilities decrease and time to realize ROI decreases, she says.As a result, there will be wider adoption of e-purchasing by morecompanies in both mature and growth markets.

Spugani believes Cloud solutions not only will increase the

adoption e-purchasing but also will enhance the buyer-supplier

relationship by facilitating standardized processes and capabilitiesacross all procure-to-pay transactions between buyers and suppliers.

Changing the Buyer-Supplier DynamicClem, who uses Aribas Cloud-based solutions to manage his

sourcing activities and supply chain, is already seeing this. We

have developed a more precise and fast-paced way of doingbusiness with our incumbent supply base that is highly acceptedand respected, he says. And there is definitely a sense of best-in-class processes e-auctions for example.

IBM has done the same. We were able to build a softwarecatalog for a client who uses the Ariba Commerce Cloud in lessthan two weeks, Spugani says. The process was quick andefficient for both the customer and IBM. We were able to transactbusiness very quickly, resulting in increased client satisfactionand a new sales opportunity.

Making It Work

Like any new technology, successfully implementing Cloudsolutions requires careful planning and lots of change management.It also takes a realistic view of what Cloud-based applicationscan and cant do.

Cloud computing only reduces some of the friction in the valuechain, Castle says. Perhaps you could compare it to trading up froma Volkswagen Bug to a Ferrari. If youre strategically heading for acliff, the only thing a Ferrari will do is send you off the cliff faster.

Castles advice to other supply chain leaders? Have a clear visionof where you want to go and see Cloud computing for what itis an enabler to get there, not a destination in and of itself.


Because of the flexibility

and shared nature of Cloud

solutions, costs for adoption of

spend management capabilities

decrease and time to realize ROI

decreases. - Patricia Spugani,

program director for global websales strategy, ibm.com


22/24


Supply chain management and procurement organizationsare being asked to bring value to the enterprise in new ways.Long since passed are the days when it was acceptable to be a

well-run transactional, back-office function. Especially in todaystumultuous economic environment, supply chain managementand procurement executives must not only learn how to bringinnovation to the table but also demonstrate the delivery of thatinnovation. It is in part the price for enjoying a seat at the table.

William Buxton, principal researcher with Microsoft Research,

describes innovation this way: Too often the obsession is withinventing something totally unique, rather than extracting value

from the creative understanding of what is already known. Forsupply chain management and procurement executives to deliverinnovation, they must connect elements of such traditionaldisciplines as sourcing, contracting, demand management,compliance and performance management, to name a few. And, asbusinesses become increasingly networked in commerce clouds,

creating value as part of integrated webs of companies, supply chain

management must expand its innovativeness through managingsupplier, partner, customer and internal client relationships.

Innovation is part art, part science. And, indeed, supply chainmanagement is to be viewed as a science thats artfully applied.To be well applied, supply chain management must be built on

a solid, proven foundation of principles, policies, practices andprocesses. However, to enable a world-class procurement function,this foundation must, in turn, be further supported by a technology

system that adds rigor, discipline, consistency and quality to thoseprocesses and protocols. Without a thoughtfully designed systemto enable effective and efficient processes, one cannot attain world-class status, and innovation will continue to be a difficult journey.

A thoughtfully designed system provides both certainty andflexibility. The market is evolving rapidly, and this dynamicenvironment demands that companies respond not only tothe direction of change but also to the pace of change, thedigestibility of change and the complexities that are inherent

in change. The systems that enable this flexibility today areevident in the Cloud. Indeed, the Cloud comprises both theon-demand solutions that power one companys internal processes

as well as the electronic networks connecting companies andtheir ecosystems of suppliers, partners and customers. Cloudcomputing, in a sense, is the utility that provides a channelfor the data and information exchange, process integration andtransparency between buyer and supplier interactions througha low-cost means of integration.

Enterprises that are able to leverage the power of Cloud-basedsolutions and the Commerce Cloud will benefit from the speed,agility and scalability that the Cloud enables. The Cloud actuallyaccelerates change by allowing for the faster introduction of newcapabilities and new functionality in the applications that drive

commerce. At the same time, the pay-by-the-drink model ofCloud solutions allows companies to be more agile by turning thedial up and down for services that they are leveraging, scaling asnecessary to meet the demands of the market. Moreover, the Cloud

can empower procurement to take advantage of the latest supplychain management solutions and to ensure consistent quality andservices without having to draw excessively upon scarce internalIT resources. And finally, the Cloud can ensure a company obtainsmarketplace competitiveness, as it allows the business to plug andplay the most appropriate mix of solution capabilities, knowingthat those solutions are the most advanced available.

At my company, SunTrust Banks, we have been exploiting

almost all aspects of the Cloud-based solutions for supply chainmanagement available from our solution provider partner, Ariba.This includes basic functionality such as managing RFx documents,or awarding and managing contracts, as well as more advancedcapabilities such as tracking the inclusion of diverse suppliers in ournetwork, or allowing users to actually buy off-catalogue througha series of supplemental supportive risk mitigation processes,management of finance and payables processes, and tracking supplier

performance and supplier relationship health.Moving supply chain management to the Cloud will require

a focus on managing change and expectations similar to anyother significant enterprise transformation. It also calls for a

willingness to partner with IT in a very positive, productiveway that addresses the CIOs concerns. Recognize that movingsupply chain management to the Cloud will impact every aspectof the business. While one need not be a Pollyanna, maintainingmomentum will require strong leadership that demonstratesconsistent articulation and reinforcement of the benefits of change.

The Cloud represents both an evolution of the technology thatdrives business and a revolution in how business will be conducted.From such, innovation will surely emerge. Leaders must be preparednow to step boldly into the new connected world that is emergingand leverage that which already exists.

procurement viewpoint

About the Author: W. Lamar Chesney is executive vicepresident and chief procurement officer at SunTrust Banks,Inc., based in Atlanta, Ga.

Clarity in the CloudBy Lamar Chesney

Moving supply chain management

to the Cloud will impact every

aspect o the business. Maintaining

momentum will require strongleadership and consistent articulation

o the benefts o change.


23/24

Manage Key Categories in

Ever-Changing Market Conditions

In todays knowledge-based economy, it takes more than gutinstincts to make wise and strategic business commerce decisions.Access SupplyWatch today to gain the category insights andcommunity-based intelligence that you need to make the mostinformed decisions for your company.

Visit www.ariba.com/SupplyWatch to learn more.


24/24

Does your company still use faxes, e-mails, and phone calls to make

deals? Does it take forever to get an invoice out and even longer to

get paid? Is finding and connecting to your trading partners expensive

and time consuming? There is a better way.

The Ariba Commerce Cloud provides the technology, capabilities, and

global community of trading partners needed to drive more efficient

and effective business commerce. Whether youre buying, managing

cash, or selling, you can do it better in the Ariba Commerce Cloud.

See for yourself what the cloud can do for you. www.ariba.com

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