Sometimes in the heat of a mergers and acquisition moment, it is difficult to see the wood for the trees. The details obscure the bigger picture.
So it was in September when SAP announced the headline-grabbing $8.3bn acquisition of Concur, the leading cloud-based provider of travel and entertainment management software.
Most analysts and commentators focused on the dollar price tag – understandable since it is the largest-ever acquisition by SAP and one of the biggest software deals of all time. But that is only part of the story.
The real significance of the deal is that it positions SAP to expand the capabilities and reach of SAP’s existing Business Network and highlights the growing importance of business networks as the platform for next generation digital commerce.
Cloud-based business networks are emerging as a foundational component of the global Networked Economy, connecting millions of companies and their employees (wherever they are) instantly with their trading partners, customers and payment systems.
In much the same way that personal networks like Amazon, Facebook and Uber have made it simple for consumers to shop, share and consume in new and more informed ways, business networks provide an equally simple and scalable way for companies to discover, connect and collaborate with the trading partners and resources they need to operate in today’s dynamic world. And, like most open marketplaces, the business network also ensures that buyers and sellers always receive the best price for their goods and services.
When a consumer shops on Amazon, for example instance, they do not need to worry about connecting securely to individual merchants, banks or credit card companies. It’s all done for them within the network. A business network provides a similar simple, secure way for companies to conduct their operations.
Here is another way of thinking about it. If Enterprise Resource Planning (ERP) systems are about managing corporate resources and networking within the four walls of an enterprise, the business network is about extending those capabilities and business processes outside those four walls.
Business networks are in part a response to the post-recession pressure to do more with less and the emergence of the virtual connected enterprise. Traditional enterprises, particularly those in the manufacturing sector, undertook most of their operations in house.
But that has changed. Today companies own less infrastructure, inventory and manufacturing equipment than ever before. They have outsourced everything from manufacturing to customer service and a growing portion of their workforce is not on their full-time payroll.
“The move from the Industrial Age with its factory-based make – sell driven business models, to the Information Age and the sense – respond business model, is impacting the world across social, technology and economic arenas in a way that is reminiscent of the shift from the Agricultural Age to the Industrial Age a few hundred years ago,” says IDC’s Michael Fauscette.
Today, in order to compete effectively, a company must have the capability to respond in real time, or near real time to new threats, including not only product and service innovations, but business model innovations that can completely disrupt an enterprise.
“Business is no longer about just executing a process within a company, but across an entire value chain,” said Dana Gardner, Principal Analyst, Interarbor Solutions. “It’s not simply about automating and doing business processes faster, but tapping collective insights and best practices to do things better and better and in entirely new ways.”
For example, mobility creates new avenues to increase business productivity and get work done. The connected employee has greater flexibility and can work anywhere through the business network, reaching all enterprise assets from multiple devices and virtually unlimited locations.
Fauscette argues that in the Information Age, connected commerce consists of two halves, the procurement / supplier network and the marketplace.
The supplier network is a technology-enabled community of vendors and customers/prospects that forms a marketplace of goods and services.The network provides procurement organizations with the opportunity to participate in this marketplace of goods and services with strategic benefits like reducing spending, more collaborative relationships with suppliers, improved supplier performance and in general more repeatable and predictable outcomes.
Connected commerce in turn, creates scale, efficiencies and other benefits for both suppliers and customers while much more effectively leveraging the Internet and other technologies like mobile and cloud.
In addition, the (big) data from the network (and other sources including social media and the connected devices, provides a valuable tool to increase business performance .
These are fundamental changes that will ultimately affect all companies. As Michael Fauscette concludes, “businesses need to examine the opportunity and leverage business networks effectively across the enterprise.” That represents the ‘wood’ in SAP’s purchase of Concur.
This story originally appeared on SAP Business Trends.