CWS 3.0: May 23, 2012

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Software Giant to Buy VMS Provider Ariba

Business software giant SAP AG yesterday announced plans to buy Ariba Inc., in a deal that will give Ariba an enterprise value of approximately $4.3 billion. Ariba is a Sunnyvale, Calif.-based provider of cloud-based solutions for spend management, including a vendor management system for contingent labor.

Ariba ranked as the sixth-largest VMS among systems that provided data in Staffing Industry Analysts’ 2011 VMS and MSP Supplier Competitive Landscape report. Ariba posted $3.0 billion in statement-of-work spend and $1.7 billion in temp/contract spend in 2010.

However, spend handled by Ariba in the contingent labor/staffing category is dwarfed by the total amount of spend overseen by the company, said Bryan Peña, vice president, contingent workforce strategies and research, at Staffing Industry Analysts.

“I think this acquisition has more to do with SAP trying to beef up its procurement technology offering than contingent labor,” Peña said.

Ariba’s total spend, including contingent labor and other categories, is approximately $319 billion, according to the company.

The deal could also be a strategic buy for SAP because a number of Ariba customers use Peoplesoft, Peña said.

The deal is the latest of several large IT firms acquiring companies in the talent and procurement space. IBM announced in December it was buying VMS provider Emptoris Inc. In February, Oracle Corp. reported it will acquire Taleo Corp., a provider of talent management software, including an applicant tracking system for staffing firms.

Jim Lanzalotto said the combined SAP and Ariba entity will create a unique offering. The deal will help create a closed loop system so a buyer can do everything from source to pay, said Lanzalotto, who runs Scanlon.Louis, a strategy and marketing outsourcing firm, and Evalu8, a digital media buying and social networking company.

SAP’s strength has been in the back office, although it has been moving more into the front office, he said. And the Ariba buy will give it more of a presence in the front office. 

SAP expects the deal to close in the third quarter.

Founded in 1996, Ariba posted revenue of $444 million in 2011 and has approximately 2,600 employees.

Management will remain at Ariba after the deal, and the company will continue under the Ariba brand, according to a filing with the U.S. Securities and Exchange Commission.

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