Transcript of a discussion on how business functions such as procurement and supply chain management help businesses extract broad insights and accelerate strategic intelligence benefits.

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SAP Ariba’s President Barry Padgett
On Building the Intelligent Enterprise
Transcript of a discussion on how business functions such as procurement and supply
chain management help businesses extract broad insights and accelerate strategic
intelligence benefits.
Listen to the podcast. Find it on iTunes. Get the mobile app. Download the
transcript. Sponsor: SAP Ariba.
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and
you’re listening to BriefingsDirect.
Our next digital business innovation discussion explores how certain critical business
functions provide unique vantage points from which to derive and act on new breeds of
enterprise intelligence.
These classic functions -- like procurement and supply chain management -- are proven
catalysts for new value as businesses seek better ways to make sense of all of their data
and to build more intelligent processes.
Here to help us explore how businesses can best
operate internally -- and across extended networks -- to
extract insights and accelerate improved decision-
making is Barry Padgett, President of SAP Ariba.
Welcome to BriefingsDirect, Barry.
Barry Padgett: Thanks for having me.
Gardner: Businesses want to make more sense of the
oceans of data they create and encounter, and even to
automate more of what will make them increasingly
intelligent. Why are traditional core processes -- like
procurement, spend management, and supply chain
management -- newly advantageous when it comes to
allowing businesses to transform?
Modern intelligent enterprises
Padgett: We have had a really great run over the last several years in terms of bringing
intelligence and modernization to the front ends of our businesses. We have focused on
customer experience, customer engagement, and linking our business activities directly
Padgett

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to the customer. This has also created transparency. Now, we’re seeing a sea change in
terms of putting the magnifying glass on some of the traditional back-end activities.
In particular, when we think about an intelligent
enterprise, better connecting to that front-end
customer is super important. But we’re also seeing
real demand for connected supply chains. Part of
the reason is that when you look at the statistics --
depending on the industry and geography -- about
60 to 70 percent of the value of any company is in
their supply chain. It’s in the stuff that they procure,
to buy materials, to ultimately produce the goods that they sell. Or it’s in procuring the
services and the people to deliver the end-customer services they provide.
There is an opportunity now to link that 60 to 70 percent of the value of the company
back into the intelligent enterprise. That begins to drive lots of efficiency, lots of
modernization, and to gain some huge business benefits.
Gardner: As we appreciate the potential for such end-to-end visibility, it offers the
opportunity to act in new ways. And it seems like becoming such an intelligent enterprise
– of gaining that holistic view -- must become a core competency for companies.
How does SAP Ariba specifically help companies gain this capability?
Padgett: When we think about connected supply chains and collaboration across our
different business units at the companies that we all represent, it’s super important that
we think about scale. One of the things that SAP Ariba has focused on over the last
couple of decades is really building scale as relates to supply chain and the supplier
networks.
To give you a sense of the size, we currently have about 3.5 million suppliers transacting
on the Ariba Network, and the volume that they put across that network every year is
about $2.1 trillion. To put that into context, if you add up all of the global volume going
through Alibaba, eBay, and Amazon combined -- it’s a little over $800 billion. And so the
Ariba Network generates almost three times the business of those other three platforms
combined.
When we think about the sheer volume of the events, transactions, and insights
available to us now on such a network of that size, we can then combine that with cloud-
based applications -- combining it also with SAP’s capabilities and their new S/4HANA
core -- and you can unlock some real value.
Delivering this intelligence around context and processes -- as it relates to everything
from sourcing, to managing your vendors and their contracts, and to managing risk –
ultimately drives a ton of cost savings, efficiency, and transparency through to all those
buyers and suppliers.
About 60 to 70 percent of the
value of any company is in
their supply chain. It’s in the
stuff that they procure, to buy
materials, to ultimately produce
the goods that they sell.

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Gardner: It's a new set of attributes that companies can't refuse to take advantage of. If
their competitors do it better than they do, they could lose out on the new efficiency and
innovation.
Let’s step back and take a look at some of the trends that are making this a unique time
for the concept of an intelligent enterprise. What makes this the opportune time for
companies to place the emphasis on being more intelligent?
The third wave
Padgett: We are in the third wave of intelligence, insomuch as I think the first wave was
when everyone recognized the analogies that were used, like data is the new currency,
data is the new oil, and big data. We had this unbelievable excitement around being able
to unlock and gain visibility into the massive repositories of data that sit around our
businesses, and around the applications that we use in our businesses.
Then we had the second wave, which was the realization that this huge amount of data -
- this vast set of attributes that we had to go and gain intelligence from -- was maybe a
little bit more challenging than first met the eye in terms of how we get access to it.
Some of it was structured, some of it was unstructured, some of it was in one database,
another was in a different database, and so we began creating data lakes and data
warehouses.
Now we are in a third wave, which is that -- even
recognizing that we finally have the data together
in some sort of consumable format -- we really
need outcomes. And so we are looking to our
vendors that we use and the application suites
that we use at our companies to help us to drive
new outcomes.
It’s less about, “Show me all the data!” And it’s less about, “Help me, I can’t get my arms
around the data!” It’s now more around, “How can we use some of these latest
technologies that we keep hearing about -- artificial intelligence (AI), neural networks,
machine learning (ML), blockchain -- to start to actually drive business outcomes?”
We are getting fatigued around the actual words themselves: big data, AI, ML. And now
we are driving more toward the actual business outcomes.
I liken it to any kind of new technology that comes along. We get very excited about it,
but then, ultimately, we begin talking about what impact it can have for our businesses.
And so, whether that was the initial wave of moving to the cloud by taking advantage of
things like HTML or .NET in the early days, we talked a lot about the technology. And
now that cloud transformation is fairly mature and robust, we really don’t talk about the
technology beneath it anymore. Now we talk about the advantages that cloud offers our
business in terms of actionable insights, real-time data, and the cost benefits.
Now we are in a third wave,
which is that -- even
recognizing that we finally
have the data together in some
sort of a consumable format –
we really need outcomes.

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We are now seeing that same kind of maturation cycle now as relates to the intelligent
enterprise, and certainly the data that powers it.
Gardner: Allowing more people to take advantage of this intelligence in their work
processes, that seems to be where SAP Ariba is headed for the procurement
professionals, and for those evaluating supply chains. It brings that intelligence right into
their applications, into their workflow.
What is required for enterprises to better bring group intelligence into their business
processes?
Collaboration time
Padgett: You hit the nail on the head. It’s now less about integration, and more about
collaboration. Where we see our customers collaborating across their businesses. It
drives real benefits across their organizations. That’s certainly system-to-system, so
both with other SAP assets as well as non-SAP assets, in a heterogeneous
environment.
But it also means engaging the various business units and organizations. We are seeing
a lot of companies move procurement and the chief procurement officer (CPO) to
become much more of the hub of broad collaboration.
We like to say that our CPOs are now becoming our
chief collaboration officers (CCOs), because with the
transformation we see across supply chains and
procurement, we gain the opportunity to bring every
component of our business together and begin to
have a dialogue around where we can drive new
value.
Whether that’s in the marketing team, or the sales team, or the operations team, or
whatever it happens to be -- we end up procuring a lot of goods and services and
adhering whatever it is that we’re procuring to the outcomes we are looking to drive.
That can be customer adoption and retention, or innovation, or whatever core mission
that we have at our company. It could be around purpose and ethical supply chains and
business practices. It really all comes back to this central hub of how we are spending
our money, who are we spending it with, and how can we leverage it better to do even
more with it.
Gardner: In order to empower that CPO to become more the collaboration officer, an
avalanche of data isn’t going to do it. Out-of-context intelligence isn’t going to do it.
We like to say that our Chief
Procurement Officers (CPOs)
are now becoming our chief
collaboration officers (CCOs).

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What is it that SAP Ariba uniquely brings that allows for a contextual injection, if you will,
of the right intelligence at the right time that empowers these people, but does not
overwhelm them?
Deep transparency
Padgett: First and foremost, its transparency. There is a very good chance that a lot of
our prospects -- and certainly a lot of your listeners -- won’t be able to put their finger on
exactly what they spend, who they spend it with, and whether it's aligned to what
outcomes they are trying to drive at.
Some of that is a first-line defense of, “Let's actually look at our suppliers. Are we
completely and fully automated with those suppliers so that we can transact with them
electronically and cut out a lot of the manual process and some of the errors and
redundancy that exists at our organizations?” There are some cost savings there. For
sure, there is some risk management.
And then, when we go a step deeper, it’s, “How do we make sure that the suppliers that
we are doing business with are who they say they are? Do they support the kinds of
attributes and characteristics that we want within our suppliers?”
Then we can go deeper, looking at the suppliers of those suppliers. As we go two, three,
four, five rungs deep into the supply chain, we can make sure that we are marrying, if
you like, the money that we are spending with the outcomes we are trying to drive at for
our companies.
That’s what the Ariba does, not only on the supply side -- to make it easy for suppliers to
do business with their customers -- but also for our buy-side customers, the procurement
customers, to make sure that they are getting transparency into everything. And that
extends from their contracts, to making sure that they are administering and managing
those contracts effectively, to also ensuring that they performance-manage those
suppliers. They are then able to take risk out of their businesses, and ultimately link the
dollars or the Euros they spend as a company with the core mission and purpose that
they have.
Those missions can be ensuring that they have the right kinds of environmental
sustainability and impact or looking to drive forced labor and slave labor out of their
supply chains. Or they simply could be trying to ensure a diverse supplier base,
including empowering minority and female-owned
businesses or LGBT businesses. There's really an
opportunity there, but it all comes back to that
very first point I made around first creating the
transparency. Then you can go unleash the
opportunities and innovation that you seek, once
you have the transparency.
You can go unleash the
opportunities and
innovation that you seek,
once you have the
transparency.

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Gardner: Let's go to some examples or use cases as we define the outcomes that are
possible when you combine these cultural changes, attributes, the powerful tools and
insights from an organization like SAP Ariba.
I recently saw some information about a digital manufacturing capability, using both the
Ariba Network as well as SAP services. Is this a good example of bringing more
intelligence and showing collaboration across an entire manufacturing ecosystem?
Share creativity, innovation
Padgett: One of the best manufacturing networks out there is the SAP Manufacturing
Network. It’s connected to the Ariba Network. There are about 30,000 discrete suppliers
connected to that network, specifically focused on manufacturing. And again, when you
open up this kind of collaborative community on a network, we can start to do really neat
things.
Let’s say you’re trying to create a new product, or you want a new part manufactured.
With this kind of collaborative network, you can throw up a 3-D drawing, collaborate in
real-time with whatever subset of those 30,000 discrete suppliers you want, and start to
drive innovations that you wouldn’t have been able to do on your own.
It’s about how to harness the creative genius
that exists outside of the four walls of your
business when you are embarking on new
projects. It means having a network available
to you that operates in real-time to change
the paradigm and the way you think about
innovation at your company.
You can find vendors very quickly. You get to manage those vendors in completely new
ways. You can collaborate in real-time, which allows you to do more in less time. It
provides an edge in terms of when you think about competitive differentiation. This is no
longer, “How do we make our back-end more efficient?” It’s more about how to drive
competitive differentiation across an industry, to be agile, and to do things -- particularly
in the manufacturing network -- that you haven’t been able to do before. That means
such things as linking the operations centers on a factory floor to the supply chain in
real-time, as well as to your warehouses, across the globe.
There are a lot of really great examples in all industries, but manufacturing has some
particular opportunities given that we are making such a quantum leap from how we
used to do things. It’s a new paradigm, an intelligent enterprise.
Gardner: Manufacturing capabilities and efficiencies also shine light on why having a
mission-critical network is important. Because you are dealing with intellectual property -
- such as designs of new products and sharing of secrets -- if you don’t do that in a
secure way, with compliance built-in, then you could certainly run into trouble.
It means having a network
available to you that operates in
real-time to change the paradigm
and the way you think about
innovation at your company.

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Why is having this in the right network – one built for compliance and security -- so
important?
Mission-critical manufacturing
Padgett: Yes, you mentioned the idea of mission critical. A lot of what we think of
traditionally as back-of-the-house process around procurement may have been looked at
as business critical.
But we need it to think about them, too, as mission critical. We need to think differently
because of things like manufacturing networks, using the intelligence available to us via
the Internet of things (IoT) on our factory floors, and when there is an urgent requirement
for parts when there is a failure. We need to be ready when it happens or about to
happen.
We need to link immediately in real-time to our supply chains, our suppliers, and our
warehouses around the world. We can now keep those machines up and running much
more efficiently without downtime, which drives competitive differentiation and top-line
revenue growth for the company. This is a really good example of the difference
between business critical and mission critical.
Gardner: How does the intelligent enterprise help engender a richer ecosystem of
partners and alliances? How do third-parties now become an accelerant or a force-
multiplier to how businesses react in their markets?
Padgett: The whole paradigm around a network
fundamentally has a requirement that all the
parties are participating. There has to be value
for all parties, otherwise it falls apart and it
doesn’t work. If it’s too heavily buy-side focused,
you don’t have suppliers there. If it’s too heavily
supply-side then you don’t attract the buyers. So
it’s like a flywheel -- and all aspects have to be in
balance, meaning that everybody is winning.
When you look at the intelligent enterprise, it has to extend to both sellers as well as
buyers. The cool thing is that in these networks, sellers can use the same technologies.
They get to analyze data from millions of sources, they get a 360-degree-view of buyers,
and of their health. They get to get embedded into their demand chains, and not just the
supply chain.
You are a far better supplier by being able to work with your buyers and get
fundamentally more visibility and transparency into their planning and buy cycles, and
ultimately be able to anticipate in real-time the kinds of demand your customer is having
or will have.
The whole paradigm around a
network fundamentally has a
requirement that all the parties
are participating. … It’s like a
flywheel – and all aspects have
to be in balance, meaning that
everybody is winning.

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This allows you to plan and ensure that you can meet their requirements, and hopefully
exceed them. And that’s new. That’s not the kind of collaboration that existed in the past.
This is an evenly weighted, balanced scorecard in terms of making sure buyers and
sellers all see value and a reason to participate.
Other examples would be a seller quickly and easily getting simple information like a
change-in-payment status, updates on a decline in sales, changes in leadership, pricing
fluctuations around commodities or supply, and being able to look at those in real-time
and cross-reference them. They can analyze that, not only with things they’ve done in
the past, but also what’s happening in the marketplace overall.
There is a lot of value here. Being able to tap into these opportunities is super important.
So, suppliers should also want to participate. Would they see this as a tax, or just
something else that we are asking suppliers to do in order to get more business?
The 3.5 million suppliers active on the Ariba Network
see the opportunity for new business and for
discovery. They join these networks because it’s not
only an opportunity to service their existing customers
in a better and more modern way, but because there’s
an opportunity to attract new customers.
It speaks to collaboration and it speaks to the discovery process available to buyers so
they source a really diverse and rich set of suppliers for their community.
Gardner: As procurement professionals elevate themselves to a more strategic level
and add value via collaboration and intelligence, they are clearly less of a cost center.
Are we at a pivot point where the notion of procurement as a cost center needs to be
reevaluated?
Profitable procurement goals
Padgett: That’s certainly the ambition, the goal, and the aspiration. The best business
case an organization has for driving savings within their organization is through the
procurement business case.
We’re finding that a ton of the digital transformation projects happening right now around
the world are led via a procurement project. You start with modernizing and creating
intelligence in your supply chain and in your procurement processes. The savings that
come out of those projects, which are materially in the 4 to 8 percent of what a company
spends in total, forms the driving force that then helps fund the rest of the digital
transformation.
Certainly there is an opportunity for the CPO between being a cost and value center. But
the thing that gets this off the ground and funded is the fact that there are a ton of
The 3.5 million suppliers
active on the Ariba Network
see the opportunity for new
business and for discovery.

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efficiency and process opportunities in cost savings that exist within procurement. That’s
kind of table stakes, and the blocking and tackling of getting started.
But once you get started, your observation is right on. Once we’ve saved a huge amount
money and optimized the process and transparency in our businesses, we can extend
that and create more value and differentiation for our organizations on the basis that we
now have a ton of new tools and transparency available to us.
Gardner: There is still more to come, of course, in terms of what new technologies can
provide. What should people be thinking about in terms of products that will soon enable
this intelligence to become more practical?
Insightful intelligence evaluates risk
Padgett: We recently launched products like the Ariba Supplier Risk capability, which
allows our customers to go in and evaluate their supply chain and look for areas where
they have risk or exposure. That can use our data, the customer’s data, or third parties
connected to the Ariba Network, such as Verisk Maplecroft or EcoVadis.
They basically deliver insights into environmental and sustainability risk factors. Another
third-party connected to the network is Made in a Free World, and they score and detect
forced labor in your supply chains. There are really interesting opportunities in terms of
managing risk.
Then there are more meat-and-potatoes kinds of opportunities. We’re partnering with
IBM and utilizing their Watson capabilities as well as the SAP Leonardo intelligence suite
to do things like drive smarter contracts and build out more powerful intelligence
capabilities within the ecosystem.
That could be simple things like making sure we don’t have duplicate payments across
our businesses or looking at the hundreds or potentially thousands of contracts that we
manage in our organizations and ensure that we apply intelligence so we’re being
notified proactively if there are risk factors. Maybe there is an exchange-rate clause, for
example, in some of the contracts that we manage; whether some action that’s required
or a threshold that activates a different clause in our contract.
We can’t expect across the thousands of
contracts that we manage for a contract
manager to remember all of those. And since
they’re all usually in different formats and
archived in different locations, we can use
intelligence to drive efficiency, manage risk,
and ultimately contribute to the bottom-line,
which helps us to then reinvest those bottom-
line savings into some top-line initiatives.
We can use intelligence to drive
efficiency, manage risk, and
ultimately contribute to the bottom
line, which helps us to then
reinvest those bottom-line savings
into some top-line initiatives.

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Gardner: I’m afraid we will have to leave it there. You’ve been listening to a sponsored
BriefingsDirect discussion of how enterprise functions are providing a unique vantage
point from which to derive and act on new breeds of intelligence.
And we’ve learned how such business functions as procurement and supply chain
management are providing newfound wellsprings from which to extract insights and
accelerate and inform better company decision-making.
Please join me in thanking our guest, Barry Padgett, President of SAP Ariba. Thank you,
Barry.
Padgett: Thanks so much.
Gardner: And a big thank you to our audience as well for joining this BriefingsDirect
modern digital business innovation discussion. I’m Dana Gardner, Principal Analyst at
Interarbor Solutions, your host throughout this series of SAP Ariba-sponsored
BriefingsDirect discussions. Thanks again for listening, and do come back next time.
Listen to the podcast. Find it on iTunes. Get the mobile app. Download the
transcript. Sponsor: SAP Ariba.
Transcript of a discussion on how business functions such as procurement and supply
chain management help businesses can extract broad insights and accelerate strategic
intelligence benefits. Copyright Interarbor Solutions, LLC, 2005-2018. All rights reserved.
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