Kurtz: We've certainly seen several big changes. One is in the  resource-constrained world. There are bandwidth constraints to support  business innovations.

When    I talk to CIOs, one of the biggest issues on their minds is, how do I    make sure I am allocating more of my time and efforts in technology   that  supports business growth and innovation, versus the maintenance of    existing systems? That's very different than the focus that you would    have had in years past in terms of driving internal automation.  That's   one big change we've seen.

Two is clearly the adoption  of SaaS   technologies and the impact that's having on IT organizations.  We see it   completely changing the way companies think about IT  investment, not   just capital expenditures versus operating expenditures,    but the roles and responsibilities that an IT organization has and  how   it interacts with its internal customers within the functional  parts  of  the organization.

Three, I think you referenced it a  little  bit  earlier, is not just a maniacal focus on managing costs,  but also  the  adoption and return on investment (ROI) that is generated from IT investments. There's always been a focus on    getting a good ROI, but I think it’s a much more significant focus    across the organization on doing that, and particularly from an IT    organization in terms of making sure that they have the ability to  measure that.

Inter-enterprise collaboration

Four was just a focus on inter-enterprise collaboration. Rather than focusing on the internal process    efficiency and effectiveness within the four walls of a company, CIOs    are starting to realize that the next wave of productivity will be  outside their four walls, what some refer to as inter-enterprise  collaboration, meaning how an enterprise automates the processes and the  way it collaborates with its customers and suppliers throughout the supply chain.

...  About 50-60 percent of companies who are moving to a SaaS   environment  or the cloud are doing it because of the cost reduction   opportunities  inherent in not having to deploy, manage, and support   applications.

Not  only do they get the cost benefits of that, but   they typically have  time-to-deployment benefits and less   time-to-realize-value and  flexibility benefits that they didn’t have due   to resource constraints  within an organization. That's a very common   trend in the market, and  specifically within Ariba’s customers, and we   expect to see that  trend continue.

Gardner: I'm  really interested about this notion about how IT needs to operate   more  like a business. What is it that IT needs to do in  terms of becoming  more like  some of the other business units or functions?

Kurtz: It starts with a really well-defined  set of goals and objectives. Why   are we going to undertake something,  what are we hoping to accomplish   with that, and how are we going to  measure that? What are the key performance indicators (KPIs) that we'll be able  to track success with.

To   your point, there were certainly times  in the past when everyone was   buying into the latest and greatest  technology, or something that was   new and cutting edge, and wanted to  try and experiment with it. Given   the economic times over the last  several years, the willingness of   companies to just experiment and see  what happens is dramatically less,   and you see IT organizations taking  on a much more ROI-driven   approach.

Given    the economic times over the last several years, the willingness of     companies to just experiment and see what happens is dramatically less.

So    it's having a very well-defined business case for investments or    initiatives that they're taking on, and making sure not only they    understand what that business case is, but their internal stakeholders    understand what that business case is and are committed to signing off    on delivering those resources.

And it's not just an IT approval,  but it's a CFO approval in many cases, and they're really holding their  internal   customers and stakeholders' feet to the fire and measuring on a  regular   basis what the ROI is for that specific initiative. We've seen a    dramatic shift in the governance around that kind of ROI and adoption    process with all of the initiatives that we see our customers    undertaking, much more so than we would have seen two, three, or five    years ago.

Gardner: I've seen where  the way that IT is   able to cut cost, but also actually increase their  influence and impact   within the organization, is to identify core-versus-context types  of IT activities, and for those non-core ones, look to increasingly  outsource or partner.

Non-core activities

Kurtz: Again, a trend that fits exactly in line with that is that we see    customers taking advantage of the cloud or SaaS, particularly for    non-core activities.

Take, for example, integration. Integration is required in today's world,   whether you're integrating within your  four walls or outside your  four  walls, but is that really a core  competence that you want to have  as  an organization. Or, do you want to  rely on third-party  integration as  the service solution providers who  can usually do the  integration work  faster, cheaper, and more flexibly?  We're seeing  that's just one  example of ways customers are taking  advantage of  that.

Also, of course, the solutions that Ariba  provides in the spend management space, we're seeing where customers  want to focus on the core enterprise resource planning (ERP) capabilities around finance and operations and leverage tools like  Ariba's Spend Management Suite to help their organizations buy better  and connect with their ERP, but do it in a cloud-type of way.

Gardner: One of the things that I keep coming up against when I talk to folks in IT is that there’s still the manual paperwork at the spreadsheet level, when it comes to managing contracts and licenses and keeping    track of use-pattern licensing, and how to charge back for that. It’s a    nightmare for them.

Kurtz: We have many customers who use our spend management solutions to manage  their IT spend,  whether  that’s the  sourcing and negotiating of hardware or  infrastructure or  contract  labor or software licenses, managing the  contracting process  and the  ongoing contracting lifecycle of that, all  the way through the   procurement of it and then the relationship  management aspects of it. We   absolutely support those processes that  IT organizations need to  manage  their cost within their organization.

We    see 80 percent of business-to-business  transaction still completed    completely manually. We see 85 plus percent  of invoices and payments    still being paper based or people cutting  checks.

Gardner: Is IT really a laggard  when it comes to  automation at this level?

Kurtz: You  would be really  surprised how much we see in terms of the world   continuing to be a very  manual set of processes and capabilities. If   you look at it not just  within IT, but if you take a step back and look   at it on a broader  basis, across the market, we see 80 percent of business-to-business transactions still completed completely manually. We see 85-plus   percent  of invoices and payments still being paper based or people   cutting  checks.

We see the vast majority of early payment   discounts are  completely missed. Some estimates indicate that 70-plus   percent of all  early payment discount opportunities, which procurement   and other  organizations work so hard to negotiate, get missed. The   estimate on  what this cost companies around the world is $650 billion   in economic  impact annually.

The very core of this problem is   how an IT  organization connects their internal systems, most likely   ERP, within an  organization to the systems and ERPs of their customers   and suppliers  to automate that supply chain. That’s where the big   automation  opportunity, efficiency, and effective gains are, or will   be, next is  just because the proliferation of all the combinations of   systems within  your organization, your suppliers, your customers.

Just   think  about the number of combinations that can be and how it can be   very,  very challenging and difficult to connect those systems into the   optimal  or most efficient supply chain.

Gardner: For   the benefit of our IT audience, tell us about Ariba. How does Ariba take what it does and then  apply to IT?

That    community includes our network that connect buyers and sellers,     whether they're collaborating with suppliers, looking for new business     opportunities, or helping to manage their working capital.

Kurtz: Ariba, at the highest level,  helps companies buy better, sell better,  and manage their cash better, and we do that in a couple of ways.

One,    by providing technology or applications that have capabilities across    each of those functions around buying, selling, and managing cash.   Then,  we have a community that is part of our Commerce Cloud,    as we refer to it. That community includes our network that connect    buyers and sellers, whether they're collaborating with suppliers,    looking for new business opportunities, or helping to manage their working capital. It's a network that facilitates documents, information, and financial supply chains.

Then,    we have a variety of capabilities to help our customers adopt and be    successful. Some of that’s delivered by us and some of it by partners    who plug into the cloud. At the highest level, that’s a little bit of    what we do.

How our IT organization is taking advantage of that  I   think was your next question. We see a proliferation of  organizations   taking advantage of the ability to plug into the Ariba  Commerce Cloud  in  different areas.

Some organizations start with our legacy, which is spend management and helping customers buy better, whether that’s identifying savings    opportunities, identifying new sources of supply, negotiating better    agreements, managing the contracting process, all the way through,    procuring solutions, collaborating with your suppliers and receiving    invoices back from your suppliers to managing cash, including payment    term optimization, invoice reconciliation, and even working-capital    management solutions.

Finally, for sellers, it helps create a    marketing channel, new business opportunities, improved efficiencies,    and collaborating with and transacting with your customers and    prospects.

Modular basis

The    nice thing about the way Ariba works is that you can plug in and use    any of those pieces on a very modular basis as you need them. That’s    been particularly attractive to IT organizations for the exact reasons  we talked about before, which is looking for   very specific ROI and very  specific initiatives around their pain and   needs within an organization.  We've got the flexibility to help solve   those on an individual or  holistic need.

And 100 percent of what we do is offered through the cloud.

Supply chain activity

Gardner: We've been describing IT and its relationship to a provider like  Ariba   through primarily a consumption framework. But it seems to me  that  there  is also the opportunity for IT to take something like the   services you  offer with your Ariba Discovery and your ability to use the cloud and ecosystem  of providers to   initiate a process, and then to manage it as a  procurement or a supply   chain activity.

Kurtz: This is  really  the next evolution of where companies are going for  automation   benefits. It's what we think about as extending the ERP into    inter-enterprise collaboration. That’s where companies like Ariba can  really help IT organizations.

There   are some great examples of  customers out there who are doing that. If   you think about it on the  buying side of the world, take a company  like  Nalco,    which is the largest sustainability company in the world. They had    really struggled with lack of automation around purchase orders with    their customers and then the purchase orders being delivered to their    suppliers from Nalco.

They were literally losing five percent of    their orders that they just couldn’t track being delivered from their    organizations to their suppliers. These lost and delayed orders meant    that they couldn’t bill customers in a timely manner. It meant lost    sales. It meant extending "days sales outstanding" and significant    customer satisfaction issues.

By    leveraging Ariba Solution and the Ariba Network they were able to     collaborate with suppliers and customers to significantly improve their     customer satisfaction.

A team of people were having to  call   and check on order status and invoice processing payments and  payment   status, a completely inefficient processes between Nalco's  customers,   and its supplier partners.

By leveraging Ariba Solution and the  Ariba Network they were able to collaborate with suppliers and customers  to   significantly improve their customer satisfaction, reduce "days  sales   outstanding," and cut headcount that were very involved in working  on   things that could be easily automated.

Let’s take another  example from the side of the business everyone gets most   excited  about, the revenue growth or sell side of the house. Fastenal is a great example, where an IT organization helps extend the  services   it provides internally to its customers externally to  Fastenal’s   customers by leveraging eCommerce and the Ariba Network to connect and collaborate with its customers.

Real-time acknowledgments

One    of the benefits of the extension that Fastenal has done is the  ability   to collaborate with its customers to provide real-time  purchase order   and delivery acknowledgements, which have greatly  improved customer   satisfaction. It has reduced their purchase order  error rates by over 80   percent, and it reduced "days sales  outstanding" by over 70 percent, a   significant working capital  improvement.

Other companies are   doing the same kind of thing  as Fastenal and receiving really good   revenue growth or new business  opportunities as well. It is not uncommon   to see companies like  Fastenal finding 50 percent-plus increases in   product line cross-sells  and up-sells, and seeing even 20 percent plus   year-over-year sales  growth within existing customers. Then, we have   solutions like Ariba Discovery even finding new business in customers that they have never done any business with before.

That’s    just an example on the sell side of the house of how IT organizations    are extending and can extend the service that they are providing.

One  of the most important things to keep in mind is that at   Ariba our  mission in life is to help extend or   complement the ERP investments  that many IT organizations have made.  We  help extend those outside the  enterprise and the enterprise   collaboration, whether that’s buying,  selling, or managing their cash.

You   mentioned a few examples  of spend management, but also it’s about   helping companies sell  better, drive revenue growth, and manage their   cash better by  automating functions like accounts payable and providing   benefits to  accounts receivable on the sell side.

If you look at   it in  those terms, we help companies free up their limited IT  resources  to  focus on innovation, not supporting applications or  integration or   customization, and focus on driving business adoption  and leveraging  the  core internal capabilities of ERP.

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