SAP Ariba: What does the SRM follow-up solution have in store for the purchasing of services?
For many companies, the end of SAP SRM which has been announced for 2027, raises the question of how to proceed – if SAP has its way, Ariba solutions shall do the job. SAP's "Transform SRM" program specifically supports the move to the cloud. Looking at service purchasing, especially construction services: What can Ariba do and where does the dedicated SRM follow-up solution reach its limits?
From SAP SRM to Ariba – through the lens of SAP
SAP's strategy is to replace SAP SRM with SAP Ariba and SAP S/4HANA: "One system covering purchase orders, release, delivery and billing, strategic agreements with preferred suppliers, centralized requests via a global platform and, lastly, analytics across all partners," is SAP's promise regarding the Ariba solution portfolio which consists of various cloud solutions for strategic as well as operational purchasing that can also be used in stand-alone mode.
SAP Ariba Network, a platform for communication and collaboration with suppliers, plays a central role in this, as all processes related to sourcing, direct and indirect procurement, and billing run via this platform on a standard basis. More than 3 million registered companies make it the world's largest B2B network - and it is therefore of particular interest to companies with global procurement processes.
For the procurement and management of personnel services, SAP recommends the special solution SAP Fieldglass, which maps the entire life cycle of external employees from the recruitment of suitable temporary staffing candidates to onboarding and offboarding. The focus here is on the "who" of the services. However, if the services are about "what" and "how much" and involve material, SAP recommends using the Ariba solutions integrated in S/4HANA
This is how SAP Ariba sees end-to-end processes in the procurement of services
The SAP whitepaper Transform Procurement with SAP S/4HANA and SAP Ariba Solutions presents two process variants, one originating from the ERP system (here: S/4HANA) and one from SAP Ariba
- With the standard purchase-to-pay (P2P) process, all workflows are transferred to the Ariba cloud, and only the invoice is stored in the ERP system.
- With the start of a purchase-to-order (P2O) process in SAP S/4HANA, the purchase order and goods receipt document or the approved service entry sheet are posted in the background in the ERP system.
A different understanding of services
However, regardless of the basic scenarios that involve different Ariba solutions in each case: In comparison, service descriptions and service entries are subject to an entirely different approach than in Germany.
Because regardless of whether SAP parlance refers to so-called "Complex Services" or "Simple Services," billing is usually done on an hourly basis. In the project business, for example, services to be provided are described in separate Statements of Work (SOWs), which contain information on the initial situation, goal, focus, and task requirements – without a predefined, fixed structure. Contractual agreements refer to fixed hourly rates, which are then used for billing.
The procedure in Germany is quite different: Services, in particular construction services, are described in the form of multi-level item lists, which are exchanged in accordance with the German GAEB format. Such complex item lists have nothing in common with SAP's understanding of "Complex Services".
An item "Paint 1 sqm wall", for example, has a unit price, which may include a material and labor component - an order is placed specifying the unit price and the area in sqm. A service report is therefore not calculated on the basis of hours, but on the basis of the area painted, i.e., the service rendered. Only this differentiated description of the service to be rendered enables precise billing, which provides much greater transparency than the exclusive consideration of supplied material and hours spent.
This clearly indicates what is coming into effect in the framework and ultimately in the simplification approach of S/4HANA which is also evident in the structure of Ariba: Services are to be processed in a streamlined manner, as a simple list, called "Lean Services" in SAP parlance. However, the limitations remain apparent at the latest when dealing with services that are recorded using item lists with a complex structure
Limitations of SAP Ariba and the consequences
Two limitations associated with Ariba have far-reaching consequences, to the detriment of handling, data consistency and transparency in the area of requests and billing of services or construction work:
- While SAP SRM users could rely on the MM-SRV module in ECC to map multi-level service hierarchies, with Ariba Network they have no such option:
Ariba Network does not support service hierarchies, i.e., services that are made up of more than one hierarchy level. These purchase orders cannot be transferred. - Neither the current SAP ECC nor the future S/4HANA Procurement Suite or SAP Ariba support the German GAEB format (Gemeinsamer Ausschuss für Elektronik im Bauwesen) for the exchange of item lists.
As a result, companies that plan their construction services in GAEB formats and are using an AVA system (request, awarding and invoicing), for example, do not have the standard option of importing their item lists into SAP – be it for a request or for a purchase order that is to be communicated with the service providers via SAP Ariba Network. This means that in the case of a request, the necessary data for an automatic price comparison at item level is missing, and in the case of a purchase order, a service report at item level is not possible.
Workaround cancels out "Procurement Transformation"
Ariba users have only one workaround when ordering construction services or services based on multi-level item lists: An item list can only be added as an attachment. This means: only one item showing the order total is posted in the SAP system (keyword: 1 service unit); all details are in the attachment and can only be accessed separately as a PDF document.
This thwarts dedicated controlling and reporting. Because only if the individual services (i.e., items of the item list) are stored in the SAP system in the form of service lines can services be recorded at service line level – and thus ensure transparent billing.
Conclusion
The digital transformation of procurement from SAP's perspective sees S/4HANA as the digital core upon which SAP Ariba applications are connected. Together with SAP Ariba Network, the world's largest "super network", they are intended to lay the foundation for an end-to-end standardized source-to-settle process, reports Beschaffung aktuell in the article "Auf zu neuen Ufern – Erkenntnisse von der Ariba Live 2018".
It is only logical that due to this standardization directive - in a global context only local – formats fall through the cracks. Lean services in a catalog structure, however, do not manage to meet the local requirements for the processing and use of multi-level sitem lists in the GAEB format
Companies whose core competency involves purchasing and processing services, and whose procurement processes are largely based in this area, cannot achieve the desired process optimization and cost transparency with the SAP Ariba solutions – and therefore they benefit insufficiently from the opportunities of digitalization in this area.
In Germany, for a differentiated and transparent commissioning and billing of services, especially construction services, the exchange of item lists in the GAEB format is indispensable. If this process is to be optimized and integrated into the SAP system, the only option is a special solution that integrates SAP, supports the GAEB format and can map the entire structure of a GAEB-based item list in the SAP system at the push of a button.
