Procurement Software...SAP SRM vs SAP Ariba

In order to enhance the productivity in procurement, most companies are using or starting to use IT solutions to bridge the gaps between various stakeholders. The demand for such IT solutions is further catalyzed by the increasing minimal wage, rising foreign labour taxes and greater government incentives to automate business processes. The usual suspects for procurement solutions include SAP Ariba, SAP SRM, JDE, Fusion Oracle etc.

Coincidentally, both my previous and current companies are looking into the purchase of procurement solutions to streamline and obtain better value for money purchases to increase the bottom line and two software that were considered were the SAP Ariba and SAP SRM.

Image via SAP

Key Differences

1. Security and Privacy: There is an on-going debate between the choice of cloud solution or On premise solutions with the main concerns on security and privacy. With cloud computing, the idea of handing over important data to other companies worries people especially those from the Internal Audit departments with no physical “lock and key” or “Conflict of interest”. Unless the procurement involves national security, company pre-patented product development that will rock the bottom line, such risks are limited.

2. Capital vs Expenses: One of the major differences between SAP On premise solution and Cloud Solutions is the how the costs are being captured. For on premise solution, the hardware and development cost are being capitalized as Assets and depreciated over the lifecycle of the asset with annual licensing captured under P&L expenses. For Cloud Solutions on the other hand, the costs are immediately captured under expenses in the P&L therefore affecting the tax payables and other financial ratios. Accounts aside, the cloud solution will require less capital upfront making it more palatable for more companies.

3. Effectiveness: To ensure the robustness of the IT solution, companies will have to cater additional capacity for unexpected surge in demand from users. Through cloud solutions, there is no need for the additional capacity as the additional capacity would have been diluted to the various “shareholders” of the cloud solution hardware.     

Technical considerations aside, I kinda incline more towards ARIBA cloud solutions as compared to the SAP on premise solution.