Research

Publication Date: 24 May 2006

ID Number: G00140843

SAP Advances With Frictionless Buy, but SRM

Weakness Remains
Andy Kyte

Buying Frictionless will give SAP a good on-demand e-sourcing solution, but in the short
term it won't fix gaps in its supplier relationship management products. The deal means
little change in this software market.

2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form
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NEWS ANALYSIS

Event
On 17 May 2006, SAP announced it will acquire Frictionless Commerce, a supplier of supplier
relationship management (SRM) software. The deal is expected to be completed in June 2006.

Analysis
SAP has been very successful in selling its mySAP SRM product, but customers have been less
successful in deploying it. The SAP SRM solution lacks many key features available from
alternative best-of-breed suppliers, especially in the areas of the user interface, optimization,
analytics and reporting. Buyers of mySAP SRM have seen innovation being delivered by
suppliers such as Ariba, Emptoris, Frictionless and Procuri, and many of them have adopted
these solutions, effectively writing off their SRM licenses. While SAP has not yet revealed its
pricing strategy for the Frictionless on-demand solution in mySAP SRM, Gartner believes that it
will only be made available to existing mySAP SRM license holders subject to an additional
payment (0.9 probability). Version 5.0 of mySAP SRM will still leave SAP's product behind its
best-of-breed e-sourcing competitors, but the announcement of version 6.0 for 4Q06 creates
hope for an improvement in the future.
SAP users who wanted to use a Frictionless solution were able to do so anyway. About one-third
of Frictionless users are SAP clients. The Frictionless e-sourcing solution makes an unusual entry
point to SAP's e-sourcing, as the Frictionless functionality is more sophisticated than SAP's. With
less than seven months before the promised date for version 6.0 of mySAP SRM, SAP and
Frictionless will have to work very hard to transfer knowledge and integrate Frictionless capability
into core SRM developments.
For SAP to be serious about procurement, it needs to publish a full road map that shows how it
will use this acquisition to address the deficiencies in mySAP SRM 5.0. It will have to deliver
leadership and innovation to provide customers with integrated "one-stop shopping" for all their
procurement application needs.

Recommendations

Users of the Frictionless software-as-a-service offering who are also SAP clients:
As one of the few winners in this deal, you should eventually see better integration
between the two products.

mySAP SRM clients: This announcement has very little impact on your use of
Frictionless. Continue to evaluate the wider e-sourcing market until integration between
Frictionless and mySAP SRM is clearly demonstrated to deliver an advantage.

Users of mySAP SRM who need access to procurement contract management

capability: Pressure SAP to migrate the Frictionless solution into the core SRM product.

Analytical Source: Andy Kyte, Gartner

RECOMMENDED READING

"The Enterprise Procurement Report Card for 2000 Through 2005 Shows Mixed
Results" Procurement departments made improvements in the early years of this
decade; however, Gartner's report card gives them mixed grades. By Andy Kyte

Publication Date: 24 May 2006/ID Number: G00140843

2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

Page 2 of 3

"Develop a Governance Model to Transform Procurement Capabilities" The

transformation of procurement from an administrative capability to a strategic
competence demands the articulation of a customer-focused governance model. By
Andy Kyte

(You may need to sign in or be a Gartner client to access the documents referenced in this First
Take.)

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Publication Date: 24 May 2006/ID Number: G00140843

2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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