In addition, the expensive infrastructure supporting a company-specific instance of software is no longer needed. With the arrival of cloud computing, integration with corporate environments and supplier interaction have been simplified. Several iterations may be required to set up a single linkage.įor cloud computing and services, an Internet connection and a subscription are all that is required. Connecting a supplier to this type of environment for document exchange is equally cumbersome using electronic data interchange (EDI), as establishing EDI linkages requires individual, point-to-point mapping of the transmission for each supplier. In traditional, on-premise software implementations, all the servers, installation, configuration, customization, and administration are maintained by the customer. In the end, collaboration at this level can add to the costs of procurement, rather than lowering costs. While granting access could make interactions with the supplier more efficient, the protocols for access are often so unwieldy and unique to the organization that interacting with an organization could become complex and expensive for the supplier.
Many organizations are wary of opening up their integrated ERP systems, usually placed behind firewalls for protection, even to suppliers on a limited, controlled basis.
Phone calls and emails are still required for supplier interaction at the system level. On-premise software can address much of the procurement process from behind a customer’s firewall, but it typically lacks capabilities for real-time, in-system interaction between the customer and supplier. Ariba began as a focused solutions provider for internet-based procurement in 1996 and offered many on-premise solutions, but since the mid-2000s and SAP’s acquisition of the product, SAP Ariba has evolved to offer various cloud-based solutions.Ĭhallenges of On-Premise Procurement Solutions SAP Ariba offers a comprehensive array of tools and solutions to cover core procurement activities and to resolve challenges pertaining to the principal-agent problem, demand planning, suppliers, purchase agreements, consumption of goods, invoicing, and analysis. Instead, choosing cloud- and subscription-based solutions results in very little up-front costs, no maintenance costs, and a pay-as-you-use model. This is good for organizations that might be reluctant to make huge up-front investments in on-premise solutions, IT infrastructures, and so on. Procurement fits nicely within a cloud model it simplifies the continuous interaction between suppliers and customers, which is required for successful procurement operations.
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