Transcript of a BriefingsDirect podcast on the value of building and exploiting cloud-based communities in business processes.

1. Analysts Define the Business Value and Imperatives for
Cloud-based B2B Ecommerce
Transcript of a BriefingsDirect podcast on the value of building and exploiting cloud-based
communities in business processes.
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor:
Ariba.
Dana Gardner: Hello, and welcome to a special sponsored BriefingsDirect podcast, coming to
you on location from the Ariba LIVE 2010 conference in Orlando, Fla.. I’m Dana
Gardner, Principal Analyst at Interarbor Solutions. We’re here the week of May 24,
2010, with a group of IT industry analysts and Ariba executives to explore the
business implications for eCommerce in the cloud-computing era.
As more services, applications, and data are developed for, and delivered via,
cloud models, how do business to business (B2B) commerce and procurement adapt? Or,
perhaps we have the cart in front of the horse. Are the new requirements and expectations of
modern, global business processes, in fact, driving the demand for IT solutions that can be best
delivered via cloud models?
Either way, the promise of cloud aligns very well with the sophistication of modern B2B
eCommerce and the pressing need for speed, agility, discovery, efficiency, and adaptability.
Ecosystems of services are swiftly organizing around cloud models. How should businesses best
respond?
Please join me in welcoming our distinguished panel to help answer these and other top
eCommerce and cloud questions. We’re here with Robert Mahowald, Research Vice President at
IDC. Welcome to the show.
Robert Mahowald: Thanks very much, Dana.
Gardner: We’re also here with Mickey North Rizza, Research Director at AMR Research, a
Gartner company.
Mickey North Rizza: Hi, Dana.
Gardner: Tim Minahan, Chief Marketing Officer at Ariba.
Tim Minahan: Hey, Dana.
Gardner: Also, Chris Sawchuk, Managing Director at The Hackett Group.
Chris Sawchuk: Hi, Dana.

2. Gardner: Let me go to you first if you wouldn’t mind, Robert. I posed the question as to
whether it is the technology that has made cloud computing possible, and now businesses are
adapting to that. Or, is it the other way around? Are the business demands, in fact, making cloud
computing more attractive? And why?
Mahowald: It’s a little bit of both. Actually, there is a lot more possibility now for collaborative
commerce, when business applications have built a scenario where a lot of our
data and application functionality exists outside of your organization. In that
situation, it becomes far easier to source new partners and customers, leverage
and trust data that lives in the cloud, and invite authenticated partners to enter
into that kind of exchange.
So, it’s a little bit of both. It’s easy to see the way that the cloud has grown up and become more
capable to support some of the business requirements that we have. At the same time, many of
our business requirements are changing to adapt to a growing wealth of solutions in the cloud.
Gardner: Okay, Mickey, from your perspective, what’s going on with the IT enablement versus
the needs and requirements in the field? As we’ve heard at this conference, wouldn't the notion of
boundarylessness, the cross-organizational commerce, perhaps be better adapted to a cloud
model?
Looking at the cloud
North Rizza: We’re actually finding companies are spending more time looking at the cloud.
What happens is that you have your trading partners specifically around the sale
side and the supply side of the organization. If you start looking just across your
own businesses and internal stakeholders, you realize they can actually work
together, get the information they need, and spend a lot of time on their business
process, using just basic technology and automation components.
But, when they start looking at that extended network, into their trading partners,
they realize we’re not getting everything we need. We need to pull everything together and we
need to do it more quickly than what we’re doing. We can’t wait for on-premise, behind-the-
firewall type applications. We need something that’s going to give us both the service and the
technology and allow us to work in that trading-partner community in a collaborative
environment.
In a recent study we just did, we found that 96 percent of the companies in that study are, or will
be, using cloud applications. Within that, we see 46 percent are using hybrid cloud solution. That
solution is really around the cloud technology, optimizing across their IT investment and on-
premise, typically around enterprise resource planning (ERP), but there are many other instances
as well. And then, they're tying that back in to the cloud services, where it’s actually extending
the capabilities from their IT standpoint. And, that’s 46 percent out of the 96 percent within that.

3. The next bucket is 41 percent around the private cloud That’s really around the aspect of just
optimizing across IT with technology only from the cloud application standpoint, not putting
those services in. The reality is that we’re actually missing the standpoint that could take it to the
next step. We think there are some great opportunities here for companies to move forward.
Gardner: Tim Minahan, you've announced at Ariba LIVE the Ariba Commerce Cloud. Clearly,
the technology is allowing new and different things, but I suspect there are some significant
business drivers. What do you see as the business drivers enabling these cloud models for not
just the IT people, but also the business side of the house?
Minahan: What we're seeing now is that we’ve really entered the state of new normal. We’ve
just gone through a major recession. Companies have taken a lot of cost out of
their operations. It's cost reduction in the form of laying off employees, and
reducing infrastructure cost, including IT cost.
If you look at most of the studies out there, the CEOs, CFOs, and COs, are
saying, "We're not hiring that back. We are looking for a new level of
productivity, and more agility. To do so we're going to rely much more on
external trading partners, which means we're going to need to collaborate with
them much more.
"We're also going to look at alternative IT models to help support that collaboration outside of
our enterprise, because our ERP investments do very well at automating information and process
within the four walls. It stops at the edge of the enterprise and, at the end of the day, we do
business. We buy, sell, and manage cash with our external trading partners and we need to
automate and streamline those processes as well."
Gardner: Chris Sawchuk, some of your research has pointed up the need for doing things
differently. Do you see these cloud models as repaving the cow paths, or are we entering into
something that's a bit more transformative in terms of both how IT responds to business and also
how business conducts itself?
Sawchuk: There are a couple of things. You said something about the repaving of cow paths. I
think we are moving into an era where processes are becoming more and more commoditized. If
you look at what's happening with process redesign, we're not where we need to be yet. But, if
you look at the needs of where we're going, what the cloud does is provide an environment for
more collaboration and more visibility.
Gardner: Let's look at this now from the perspective of how business applications are adapting.
We're very much aware the business process has become an emphasis, but how does that change
the notion of installing a business application versus subscribing to a service? What is different
now between a business application and the business process, and aren't the business processes
the more important of the two?

4. Different services
Mahowald: We're seeing a couple of different kinds of services develop around SaaS services.
We're seeing tactical services that enable the application service to be delivered, and then domain
services that actually consume the services and bring it to buying companies.
You might think of an accounting service that provides human capital skills on top of the
software-as-a-service (SaaS) service. We call that software
within a service, and it provides expertise that doesn't
exist in the application. It helps some user companies
actually offload and outsource that capability. It's a big
dynamic and we see the combination of those people skills and the SaaS service coming together
in a way that's very impactful for business.
Gardner: Mickey?
North Rizza: Let me just add something else. If you look back at the way business typically has
been done, it's been across functions. You see functional areas coming together across an
enterprise, and that's typically where the business processes have stopped.
You've also seen the applications come out even from the ERP standpoint in the different pieces
that come together to marry that entire ERP system. What you see happen is that every function
has a piece of that. You see the various markets that have developed supplier relationship
management (SRM), customer relationship management (CRM), and what not, out there in the
marketplace.
What's now evolved is that those business processes really go end to end into that trading partner
network. What you are finding is that you can use those applications, but you don't necessarily
have to use those applications. You can use the services that go with it.
The point is that you're actually making some cost-value trade-offs, lowering your overall cost
and extending some of this into your partnerships and your trading partner community. What
you're doing is driving value. At the end of the day, all you want to do is deliver a value, and
that's what's happening.
Gardner: When we saw SaaS becoming popular, it was really taking a business application and
putting it up on the Web. But now with cloud, we're thinking about ecosystems, multiple
partners, looking at supply chains. So it seems to me, Tim, that the business process ecosystem is
perhaps the killer application, if you will, of cloud computing. Why does that fit so well into the
procurement function?
Minahan: That's absolutely right, Dana. Robert and Mickey hit on it as well. SaaS was all about
a new delivery model for an existing business process. When you move into cloud, when you
move into some of these collaborative processes around supply chain, and procurement, and the

5. financial supply chain, it really involves multiple parties. It's really about business process
transformation, a business process that's shared among multiple trading partners.
To do that, it’s not just the ability for everyone to share a common technology platform upon
which they can collaborate around the process, but rather everyone needs to be digitally
connected in a community, so that they can add new trading partners or remove old trading
partners, as their needs change.
Finally. the really interesting thing as you blur the lines between applications and community, is
the ability to drive capabilities, the ability to drive the right business process. When you register
and log on to Amazon to place an order, you don’t think about the buying process. The buying
process is already optimized for you end-to-end, from discovery and qualification, through
getting feedback from community and expert opinion to make sure you’re making the right
buying decision and then being able to actually execute the transaction. That's the same dynamic
that's beginning to occur in the business world, as you look about these networked or cloud-
based business process models.
Gardner: Another thing we see in the market is that when the social networks gravitate to the
cloud, suddenly collaboration takes on almost in accelerated pace, perhaps even a multiplier
effect.
The collaboration aspect
North Rizza: What we’re finding from the AMR side of the equation is that we started looking
at this from both the suppliers and the customer aspect and putting the clients where they actually
sit within this collaboration aspect.
First, many of them are focused just on the transaction. They're looking at the order-to-cash
cycle. They understand what the transactions are. They use their ERP system. They understand
how the bills get paid.
There’s still paper process. A lot of money is sitting in there on the paper side of the equation,
and they really aren’t connecting the dots. What they are recognizing, specifically over the last
couple of years, is that they need to do a better job on managing order-to-cash.
They get a couple of things out of that. They actually get acceleration of working capital. They're
able to work better with their trading partners and they start connecting the dots to say, "Gee, it
isn’t just all about the transaction but also how we are managing that cash, the terms that we have
with our particular suppliers and what that trading partner network looks like."
If they start to get that piece underway, they start looking at. "Wow. We’ve got other aspects
we’re really doing business." From a sourcing aspect, we’ve got bidding events, auctions,
performance, and score cards and we’re exchanging information and looking at 360-degree
views.

6. We’re also sharing demand forecasts. We’re looking at contract manufacturers. We’re
understanding the issues around them, and we become much more integrated and much more
collaborative to share those pieces of information. So, we start building relationships with our
trading partners.
It's not all about just collaborative practices, as we call it, in a transactional value, and "do as I
say, not as I do." It's all about, "This is win-win. This is how we’re going to get there. This is
how we’re going to change the market. And, this is what we need you to do as part of our
extended enterprise and our trading partners to help us get to the next segment."
The reality is that the call-based applications are bringing that extended enterprise to the table,
and companies are starting to rethink and refocus around those business processes.
Sawchuk: One benefit that we didn’t touch on during our discussion here is a benefit I call the
democratization of collaboration. When you think about the past, it has always been the big
companies who could collaborate. They had the tools, they had the investments, they had the
dollars.
What you're now had seeing is an environment where anybody can participate. Small, large, etc.
all become connected in this world. That just takes things to a different level than what we’ve
experienced. Just economically, everyone is now connected across the board in a much more
equal and level playing field.
And, there's some of the stuff that Mickey was talking about. We now have the opportunity, the
focus on agility, and the focus on where we’re going. It's a much more volatile world. We’ve got
to build more agility and more variabilization into our business models, not only our staffing, our
people, the way we do business, and our technology tools, but also the more extended value
chain. Where we draw the lines between what we do becomes much more transparent and it's
easier to make those decisions than we have in the past.
Gardner: When you say democratization, do you mean we can be more inclusive? Are we
talking about bringing small and medium businesses (SMBs) or maybe even smaller companies
across the board? What do you mean by democratization?
Much more involvement
Sawchuk: It's much more involvement across the board, whether it's the small business,
medium businesses, large enterprise, etc. We all now have the ability to collaborate in a new way.
We’re moving from sort of the haves and have-nots type of world, from a technology standpoint,
to a world where everyone has access. Now, we can all collaborate in this new community-type
of environment.
Gardner: Robert, it seems like we’re moving from collaboration to community. How does
community, perhaps with some social and discovery aspects, become transformative? This is
something that's greater than the sum of the parts that we’ve had in the past?

7. Mahowald: It's a good point. As Mickey points out, what we really have when we have the
element of community injected into commerce is that there is a tremendous amount of
transparency. It means that partners know who they can work together with and optimize both
sides of the equation, so that it suits the end result very, very well.
It also means that you can source new providers. You can actually change the terms of the
contract and some of the ways in which you deal with certain suppliers in a way that's
transparent to others, bring them in on the deal, and drive that transparency at a greater value for
both organizations.
The idea of a community means that each can bring potentially the best terms, the best offer, and
the best product to the table, so that at the end of the day, the buyer gets the most value. That
means repeat business, and that helps everybody.
Gardner: Tim Minahan, we have extended enterprise, business processes empowered by
community and collaboration. Is there a name for that?
Minahan: There is a massive movement afoot in the enterprise space that's beginning to blur the
line between enterprise applications and the community. As Robert and Mickey just said, what
got in the way of business-to-business collaboration before was that there was no transparency.
There was no efficient way to discover, qualify, and connect with your trading partners, before
you could even collaborate with them.
There was a level of un-trust, a higher transaction cost that artificially inflated prices and costs
that went around things. The ability to get rid of all the paper, connect digitally with everyone,
and then open this up in a community environment, where you can collaborate in a host of
different ways and not just around the transaction really is transformative.
As companies begin to look at particularly "extraprise" type applications, the community is
going to become more and more important, whether that's the community of you and your
trading partners or s community of you and your peers that can help you design the better
process.
Gardner: Are these self-defining communities? It seems to me that we've broken down silos,
and therefore have entered a more human and potentially innovative and creative way to
construct relationships. Does that make sense, Chris?
Process enrichment
Sawchuk: Certainly, there's this whole collaboration that's occurring. What's interesting is that
they made a comment earlier about the fact that processes become more commoditized over
time, and where we really move from is this world of process enablement, which is where
technology started, to a world of process enrichment.

8. When you think about these communities, over time, the communities themselves and the
connections become more commoditized. The differentiation is that services and the intelligence
is actually built within those communities themselves. The real question is how do you deal with
all that, all of the various types of intelligence, because it becomes self-learning types of
communities over time.
These clouds learn about the different behaviors. Look at what Google has been doing in terms
of learning about the behaviors in the social media world. As you can learn more about that, you
can provide that as services back to all the participants within that network.
Gardner: Perhaps the flip-side of that is also the ability to gather metadata about what's going
on within the process, who the participants are, what works, and what doesn't work. There seems
to be an opportunity to bring a higher level of analytics to bear on these extended processes in a
cloud environment than you would be able to get in the traditional enterprise packaged-business
applications approach. What do you think of that?
North Rizza: I'd agree with you. In fact, I'll tell you that there are some analysts within the
Gartner community who are actually looking at pattern-based recognition strategies and helping
companies understand what they're really getting using those analytical tools to understand how
they then drive the right trends.
At AMR, we actually look at it from a demand-sensing, a demand shaping ability. So, what's
going on? What are we sensing? Where do we need to shape it? If you look at, what you're
seeing is the power of many coming together, versus single processes and single entities.
If you just think of the consumer side where you are trying to bring that in and change the way
we're doing business, think of eBay. It used be that you go and sell something from your garage
outside at a yard sale, or a tag sale depending on where you are.
The secondary aspect now is that I can sell it on eBay and have more individuals bidding on it.
Maybe it's important to them, and I might hit those individuals with something that everybody
else might have thrown out in the trash. It would only have meaning to a certain group of
clientele. And, that particular clientele is going to come together in that community. Hopefully,
you just raised the dollar that you're going to get from that.
So, when you start looking at that community from a business aspect, power just keeps
increasing, increasing, and increasing.
Sawchuk: What's going to be key over time is think about the lives we live today and the
informational overload that we have. As you can rate these communities, there is going to be all
kinds of information intelligence created. How do we dissect that and make it smart, relevant,
timely, and in bite-sized chunks that we can deal with.
Today, my wife uses Facebook. I don’t. I just don’t have the time. So the question is whether
we're going to create all this community, all of this collaboration, all of this information in

9. services, and then be able to dissect that and make it relevant for what we are trying to achieve.
It's going to be a key differentiator.
Overload of information
We’ve always been in a time, where we try to get access to more information, more knowledge,
and more intelligence. We're quickly moving into a period of time where it's going to be an
overload of that kind of information.
Gardner: I suppose that’s one of the tasks of business intelligence (BI) then, to sift through all
of the voluminous data and find the real gems. Back to you, Tim. How does BI, from your
perspective, have a role to play in these extended commerce cloud activities?
Minahan: There are three aspects of it. If you have the community, you have the network or
transactional environment where businesses are actually doing business. So, you have the
transactional information in aggregate that can be a bellwether for economic indicators or even
around particular commodities -- what folks are doing, whether it's a good time to buy or not a
good time to buy. Or, if it is a good time to buy, if you are a seller, how aggressive should you be
in that bidding? That’s the transactional information.
Then, there is the community information that you mentioned before. We've used a lot of
consumer examples here today, but what makes eBay so great and make these examples earlier is
the fact that I am a seller and I have no idea who that buyer is. But, I now gain a degree of
confidence, thanks to the community that has rated that buyer.
I know that they pay on time and that they’ve done business with 20 other sellers on there. So, I
get a degree of confidence. On top of that, it provides utility that allows me to secure a payment,
even if the buyer turns out to be not so good.
The third component, which is important, and which Chris is talking about, is taking that
intelligence and putting in context of the business process. The reason we have information
overload today, or one of the reasons, is because of the information that’s out there. We’ve
aggregated all this information. I'm doing business process over here, and, oh God, I go over
there to get that information. It's the ability to aggregate information and put it right within
context with other business process.
So, I've gone out and aggregated my spend. I know where my spend leverage is. Guess what! I
now have this market intelligence on what's going on, pricing in the season that I'm supplying the
market, and what other buyers are experiencing in the market.
It might not be such a good time to go out and source that, so maybe I will go my second largest
category of spend and source that first. That’s the type of the analytic that you need, which is in
context with the business process.

10. Gardner: And, that’s where we move to intelligent sourcing, rather than perhaps just
accelerated sourcing?
Minahan: Yes.
Gardner: Robert, we've talked about how a vibrant, collaborative environment can be very rich
and rewarding. We've talked of how BI in a sea of data can be exploited for analytic insights.
And, we've talked about how extended applications as business processes could be very rich.
One of the things we haven’t talked about is how to keep a lid on this. If we have too much
collaboration, too much data, too many processes, then the folks who are very comfortable in a
locked-down ERP environment might have their way again.
So, how do we prevent falling back into old patterns of being a bit risk-averse, but at the same
time, applying the right security, governance, and management that enterprises insist on?
Managing governance
Mahowald: It's a good question. One of the things we're going to see in the next handful of
years, and we're already starting to see at the largest organizations that are using SaaS services, is
essentially a czar to manage governance across multiple locations.
It's important, as we start to put more-and-more business activities into these communities, and
more-and-more of our data and transactions happen outside the organization on SaaS services,
that we understand exactly what that means for organizations, where customer data and our own
data actually resides and how we can find it during an audit in a way that guarantees that we've
met our business requirements.
We don’t want to restrict ourselves and say don’t participate in this community. I think it's
healthy and it ultimately drives tremendous value for us. What we do want to say is that we have
to apply the same kind of governance and rules that help us manage our processes that are now
onsite in this new world, where we are participating in communities and SaaS services. The same
thing should apply there.
Gardner: Mickey, this idea of finding a balance between openness, innovation -- and on the
other hand -- control and governance -- are you familiar with any examples of people who are
already practicing this balance well?
North Rizza: What we’re finding, to the point that Robert just made, is that the bulk of the
companies we work with are spending more time around the governance structure. But, they’re
also spending more time around master data management (MDM), understanding what that
really means and how those pieces come together.
This comes back to the point that both Tim and Chris had made around what you need to really
worry about, what does that mean to the business processes, and what’s important.

11. Because we’re on this information overload, you have data everywhere. What are the pieces of
information you need to actually do your job, and then what does that job look like? What is the
business process that you need to do within a certain parameter and timeframe that you need to
get done, and where does that go? Where does it stop and start?
And then supply chain: Does it go out into the extended partner network? What do the
collaboration aspects look like and what are the rules around that?
So, from the aspects of the types of the companies we’re seeing and supply chain companies we
look at that are using these, anywhere from sourcing and procurement, all the way into supply
chain execution, supply chain planning -- we see some even in the inventory -- they're having
some issues around this. It's really about putting the focus and the emphasis on those areas and
understanding what that means as my business changes.
Gardner: Tim, we have more members in the network. It seems to me that Metcalfe’s Law says
the network then gets more valuable that way. Is that how you all see it?
New ways to collaborate
Minahan: Yeah. It’s absolutely true. First, going back to earlier comments, you need to connect
folks. Then, you need to provide new ways for them to collaborate. In fact, in appropriate
network, they will force new ways to collaborate. They’ll discover new ways to not just execute
transactions with known trading partners, but discover new trading partners, and leverage the
network by the community information to qualify those trading partners, so they can be more
secure.
They want to collaborate on new business processes, well beyond the transaction too. Should we
establish supply chain financing programs or receivables financing programs, or should we work
to out-task a certain portion of the process to someone else in the value chain?
Gardner: Let’s go to the question about getting started, but without getting overloaded and
overwhelmed. To you, Robert, what’s your advice to folks as to how to approach this in a
manageable way?
Mahowald: If I’m an IT organization, one of the first things I want to understand is my
constituency. The organization I want to serve are my internal users. I want to understand what
their requirements are and how they may or may not be using staff services now to get the job
done, and for what reasons.
I want to build a strategy based on the recognition that substantial number of organizations do
have business units that use SaaS services, and I want to find a way to build it into my long-term
IT strategy, because at the end of the day my goal was not to be a cost center at the organization.
My goal is to be a service center and that’s a transformation I need to build into my business
plan.

12. Gardner: Mickey, closing thoughts on getting started?
North Rizza: Basically, what we see the best companies doing is that they start to understand
what their overall business objectives are. Then, they peel that back and say, "What am I looking
at in my different functions across the business and what does that mean, if I want to improve the
process and I want to get those end results."
As they starting peeling that back, they soon discover that it’s usually around revenue cost
savings. It’s also about improving the business process and reducing cycle time. When you put
all those together and you look at a recent study that we just did, you recognize that there are
very large gaps between those that have already deployed cloud-based technologies and
solutions.
Then, you step back to those that are even considering or using them as part of their overall
extended enterprise. What we’re finding is that the gap is so large and its benefits are so great
that there is no reason you wouldn’t want to take all that and put it in there.
The bottom line is that if you don’t do it, there isn’t even a ton of money on the table. You’re not
able to take out the cost that you want to take out. You can’t get the products in there and teach
the individuals the business process and cut down your cycle time that you’re going for. And
most importantly, you’re not getting your revenue. You’re leaving it on the table.
Gardner: I’m afraid we have to leave it there. Thanks for joining us for this special sponsored
BriefingsDirect podcast. We’re coming to you on-location from the Ariba LIVE 2010 conference
in Orlando. We’ve been discussing the business implications and multiplier effects for value in
using cloud computing to conduct eCommerce.
Please join me in thanking our panel. We’ve been here by Robert Mahowald, Research Vice
President at IDC. Thanks.
Mahowald: Thanks very much, Dana.
Gardner: We’ve also been joined by Mickey North Rizza, Research Director at AMR Research,
a Gartner company. Thank you.
North Rizza: Thank you.
Gardner: And Tim Minahan, Chief Marketing Officer at Ariba.
Minahan: Thanks, Dana. It’s been a pleasure.
Gardner: And last, Chris Sawchuk, Managing Director at The Hackett Group. Thank you.
Sawchuk: Thanks, Dana.

13. Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks for listening
to this BriefingsDirect podcast, and come back next time.
Listen to the podcast. Find it on iTunes/iPod and Podcast.com. Download the transcript. Sponsor:
Ariba.
Transcript of a BriefingsDirect podcast on the value of building and exploiting cloud-based
communities in business processes. Copyright Interarbor Solutions, LLC, 2005-2010. All rights
reserved.
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