In this episode of the Sourcing Industry Landscape, Dawn Tiura interviews Dr. Marcell Vollmer. Dr. Vollmer joins SIG CEO and President Dawn Tiura on The Sourcing Industry Landscape to talk about his role as Chief Digital Officer of SAP Ariba. Dr. Vollmer discusses his role as Chief Procurement Officer during SAP's acquisition of Ariba and touches on the challenges and opportunities that occur during a major business integration.
Dawn Tiura: Hello everybody, I want to welcome you back. This is Dawn Tiura from Sourcing Industry Group and I am so excited. This is my first podcast with the Chief Digital Officer and so I'm going to introduce you all to Dr. Marcell Vollmer, Chief Digital Officer at SAP Ariba. Marcell, thank you for joining me today.
Dr. Vollmer: Thanks for having me, Dawn. It's a great pleasure.
Dawn Tiura: The reason I'm so excited folks, is that you know at SIG we always talk about the CPO needs to move from the tactical to the strategic, and a lot of you are getting there. But then those of you who are actually able to make the journey to being strategic, the next place to go is to digital transformation. And so I have an opportunity to talk about the journey from tactical to strategic to digital transformation with Dr. Marcell Vollmer today, who actually did that. And he did it at a company that you would think it would be very hard to be transformational, very hard to move, and that's SAP Ariba. So, I want to start, Dr. Vollmer, and if I may please call you Marcell, about your journey and where it all began.
Dr. Vollmer: Yes, please. Thank you Dawn, excellent question, and I couldn't be more excited. Basically, after fifteen years in the logistics industry working for DHL and running a lot of projects, integration projects. Moving to SAP, the market leader of business software in business applications—I was thinking about, wow, that's so exciting. I might get even access to the latest solutions and the latest technology and when I joined SAP I figured out, oh wow, the company is so focused on the customer side, they didn't really spent a lot of time and effort on the internal improvement of the system. So, when I started, I had to get a four-digit transaction code to open the catalog to get my laptop, my Blackberry at this point in time. Yeah, Blackberry still existed when I joined SAP back in 2004. And this is really something what was showing that's not really the latest, greatest technology what we have in place. And there's also a need probably on the internal side to exchange it. So therefore, after running some projects, introducing shared services, setting up the first shared service center for SAP, globalizing the shared services organization, and also integrating the largest acquisitions, Business Objects and Sybase, what SAP did at this point in time, that I got asked to basically also forecast on our external spend.
Dr. Vollmer: All the projects, every single one I did before, was pretty much related to optimizing our internal structures, our processes, the systems side, [and] how SAP runs internally. But we haven't really done a lot on the external spend side, the second largest bracket what we have in our P&L. And therefore, I was really excited, getting this opportunity to transforming our own internal procurement organization. In the meantime, we're on about five billion spent with a little bit more than 400 people for the entire Source-To-Pay process, sourcing operational procurement, accounts payable and travel and expenses.
Dr. Vollmer: This is all part of the Source-To-Pay process at SAP, internally. And transforming that has not only the organizational component, it also has a component of introducing the right systems. Supportive side, the systems side and there I was really excited that, and I would say, still today, it is a once in a lifetime opportunity that I was the Chief Procurement Officer and SAP acquired first, Ariba then FieldGlass and then Concur. Basically, the market leaders in the Cloud for Source-to-Pay solutions and also I got access to that and I immediately implemented all the solutions for the company before I moved on and was asked, after more than four years as Chief Procurement Officer for SAP, to become the Chief Operating Officer for SAP Ariba. At this point in time it was still Ariba, and then we transitioned, and we wanted to bring and use the power of SAP. And therefore, we renamed it, one and a half years back, in SAP Ariba. And this was also the time, since beginning of 2017, when I was asked to fully focus on the digital transformation side to become a Chief Digital Officer.
Dr. Vollmer: I've talked here, Dawn, for a second. [It] was a long introduction, but I hope it was helpful—also understanding a little bit the journey, what I have done, and how I could help SAP to transform our internal functions in introducing all the Source-to-Pay Cloud solutions.
Dawn Tiura: I think it's incredible. So, you joined SAP after…so you were with DHL. You had some work before that in call centers, HR systems, change management, so you were pretty well-versed across the board, especially dealing with people and the need for change and how to change. So, when you came to SAP, Head of Strategic Projects, in 2005, and then you were one of the very first truly global shared services operations that was created. And then if I recall correctly, at 2011 is when you became the CPO and Senior Vice President of Global Procurement. So, that was the year before you acquired Ariba, correct?
Dr. Vollmer: Yes, exactly. Dawn, our internal procurement organization one year prior to the acquisition of Ariba, which was in 2012. In April we announced intent to acquire; 1st of October 2012, we got the approval to acquire and take over Ariba.
Dawn Tiura: That's fantastic. So, did you immediately know that you wanted to implement Ariba, or were you a little bit cautious? Did you jump right into it? Tell me about that journey.
Dr. Vollmer: So, basically when I was starting, 2011, to take on the role as the Chief Procurement Officer, basically my first task was to set up the right organization for future procurement organization and my main focus was at this point in time to globalize all the procurement functions. To introduce category management. To implement an end-to-end Source-to-Pay process covering really not only the strategic side, [but] the sourcing functions, the operational procurement. I introduced also the shared services concept. What I did before for finance and some other functions, I also used it and leveraged the potential of shared services for procurement operations at the same point in time. And basically I was also sitting together with our internal IT organization. I was assessing also all the potential solutions in the market—what exists for procurement.
Dr. Vollmer: I have to say, I hadn't heard about Ariba before, and I was still excited in 2011. So a year before we even acquired the company, learned, hey, they are really the market leaders. They have an amazing set of Source-to-Pay solutions in the Cloud already available, and they would have been my preferred choice—they were my preferred choice at this point in time. And then was really excited that I learned that we want to also do as a company as SAP a strategic move to acquire Ariba, not only for the Source-to-Pay solutions, and it was also due to the Ariba network. So, the largest business network, B2B network, with a total spend, at this point in time it was a little bit smaller, but in the meantime, we have about 1.5 trillion U.S. dollar of commerce on the Ariba network and more than 3.5 million connected companies to the network. So, the total size is larger than Amazon; Alibaba; eBay. So, all the well-known B2C networks, combined. And this was really also one of the reasons why SAP acquired Ariba for 4.3 billion back in 2012 to get access to this large opportunity.
Dr. Vollmer: And now in the meantime, five years later, six years later, now—we are very close to six years after the acquisition has been announced—that it is really paying off, and we can leverage and continue to develop the Source-to-Pay solutions on the one side. To help companies to leverage their purchasing power, to basically get hard savings, and on the other side also to help all the functions to automate all the transactional processes and make the operations much more efficient. So that's really a great journey and exciting that I had the opportunity and the honor to be part of that as CPO, and later on also as COO, and now today as Chief Digital Officer. An exciting time and a lot of changes and a fast transition to the Cloud what we see in the market. I couldn't be more excited.
Dawn Tiura: Well, I'm excited talking to you. So, you were quoted recently in an article about procurement and innovation and the question was, "What should procurement's role be in innovation?" And your response at the time was "Ideas and creativity are the foundation for innovation, but they alone are not innovation." So, can you speak to that a little bit? Do you see procurement's role as a seat at the innovation round table?
Dr. Vollmer: Absolutely, and this is exactly what I tried to do in my role Chief Digital Officer: to help customers to define a digital transformation strategy. Not only for procurement for Source-To-Pay, but also for the entire supply chain and all the processes related to that. And when I talk to CPO's and also read the analyst reports, the strategy papers from leading consultancies, so basically it really turns out that procurement is at a kind of inflection point. So, procurement is known, and when you look back, I think what's more you were purchasing for the function. It was really more used for the operational processes and basically to ensure whenever a company needs something, there's one function in place purchasing to help, to get it, and to drive the process everything what is needed to ensure that the goods [and] the services are getting delivered in time, and of course, in the needed quality.
Dr. Vollmer: So, this is basically looking a little bit back, 1950 plus, when the function really became more and more professional and more and more established in companies. But basically then we have also seen that there's a need, and there's an opportunity to get much more out of procurement as a function and really leveraging the purchasing or consolidating aggregating spend. Do a more professional demand planning I think in the 90's and later in the 2000 years, we are seeing that the function is evolving. Basically now it is really question about what is the future for human function. And when I see that operational tactical tasks are getting more and more automated due to Cloud solutions systems processes; even using machine learning, artificial intelligence to drive transactions in a much more efficient way. What is really left in procurement? And I learnt that procurement needs to transform into a value-adding function focused on a strategic task. This is what still will continue.
Dr. Vollmer: Chief Procurement Officer or strategic procurement people working in the processes— they need to be collaboration manager; they need to be a business partner. But they need also to be a partner on the supplier side to really define strategies and execute answer. And innovation is one key element from my understanding and also when I listen to other Chief Procurement Officers, Chief Supply Chain Officers—what is the expectation on procurement as a function that you can really generate impact? And only procurement has a really close connection and relationship to the suppliers. And when you look a little bit into what does it mean, it is still very abstract and it's a lot of words basically what I'm using but basically they are really good examples of how to do that. And when Tim Cook, for example, the CEO of Apple, he was a former Chief Supply Chain Officer for the company under Steve Jobs. Basically he invented together with suppliers the Gorilla Glass for smart phones, for the iPhone released in 2007. That's a really good example also how to come up and how to really focus on an innovation that goes into a product and basically makes a product so great, so usable that the glass is not scratching and you can use it.
Dr. Vollmer: But there are also other examples in place, like when you look at Nestle for example. They developed together with the supplier the coffee caps and the coffee caps machines what are needed. And you see this is today a very well-known multi-billion-dollar business model, which caps generated. And this is exactly where procurement can really drive innovations in the future. Besides the roles that will continue as a risk manager, as a negotiator to get the hard savings, drive compliance, but also to ensure that you have a sustainable supply chain. So, these are the roles for procurement I see in the future, and this is also how procurement really can drive together with suppliers and on a network to collaborate to ensure that you can define future innovations.
Dawn Tiura: So, I have to tell you, when SAP acquired Ariba—I was there in the early days of Ariba, I was really worried. SAP was known as a strong German company with rigorous discipline, and you were acquiring a Silicon Valley darling. There was a lot of concern about the culture fit and was SAP going to kill the innovation that Ariba was known for. So, tell me a little bit about that because you were the 800-pound gorilla in the room and everybody kept staring at it and going, "Oh my gosh, how are you going to able to stay nimble? How are you going to be able to stay current? How are you going to keep changing? SAP is so big. It's moving a Dreamliner to try and make it shift anything. And yet, from everything I'm hearing, you're not that stereotype German who says, "No, this is the way it is and this is the way it is always going to be." How were you able to adapt and assimilate the cultures? And I mean no offense by that, by the way.
Dr. Vollmer: No, Dawn. I get it and I really appreciate the question and I mentioned a little bit that I was driving the integration for our two former acquisitions, Business Objects and Sybase when I was the Integration Lead. And I think during that time, we learnt a lot about what to do and what not to do. So, basically, after the acquisition of Ariba, we also decided that we don't want to fully integrate the company and make it entirely part of SAP. Basically, going into this 800-pound gorilla organization and being kind of absorbed. Because this is exactly when you lose the DNA, when you lose the innovation power, and also when you basically break the organization. Never the less, of course, let's be very open here, when you acquire a company you lose a lot of talent and the minute men get exchanged.
Dr. Vollmer: This was also the situation at Ariba. I think I got asked from Steve Singh, the CEO of Concur, the largest...we did in 2014, the travel area. Due to the fact also that I had some experience on the integration side and also I could bring the point on the table what not to do and what we learned. So, therefore, probably he asked me to become the Chief Operating Officer for Ariba to exactly focus on how to keep the company together. How to hire the right number of people to define the processes we need to be successful, and to continue the innovations journey to ensure that we have the leading solutions for Source-to-Pay in place to cover, and I think SAP Ariba has the most complete set of Source-to-Pay solutions in the market at this point in time. But also, to ensure that the Ariba network, the B2B network, will have everything what is needed to be the leading network as well as also to continue growing.
Dr. Vollmer: And we could go from around one million companies now to more than 3.5 million companies on the network. So, basically, the minute a couple of companies are joining the network because they see and understand what the power of the network is. And you can also see this when you look at what's happening on the B2C side. Alibaba is still as of today, the largest IPO in history. And the reason for that is—they are a B2C network, and they are a marketplace.
Dr. Vollmer: And that's exactly when you now think about it what this can do, not only for the B2C side but also for the B2B side. I say it's understandable that this is exactly the reason why you need to invest and also need to have the right culture and generation power in an organization. And it's easier to assist an organization with around 4,000, 5,000 people compared to 90,000 people organization, what SAP is globally, to ensure that you keep here the construct to build together.
Dawn Tiura: That's fantastic. So, tell me then, your journey now to the Chief Digital Officer is more focused on the customers, is that right?
Dr. Vollmer: Yes, that is absolutely right. At the beginning when I started back in last year, January 2017, after almost two years as Chief Operating Officer, basically my focus was to help customers to define digital transformation strategies and execute on them. And of course, to have a very positive business case driven by hard savings, but also driven by the collaboration and the future procurement organization that you can do as well as the automation of all the transactional processes.
Dr. Vollmer: On the other side, I had also one task to ensure that Ariba gets fully integrated in our SAP solutions, in our former systems, so that the leading ERP System, the next generation of Enterprise Resource Planning—that's what ERP stands for—and this was my task as well, to ensure that I initiate the process and also drive the integration. This has been done in 2017; the teams are working; the integration is really now achieved. There is a little bit more to do but basically the teams are cooperating so closely together that we decided that my role is now fully focused to help customers to define digital transformation strategies but also to execute on that. To ensure that they have everything in place—what is needed to be successful in the future.
Dr. Vollmer: And this is now what I'm doing: defining from the very beginning, the strategy, develop the business case, and also help them to execute and use my experience as Chief Procurement Officer on how to make the change management's implementation success to really have a future-ready procurement organization fully integrated in supply chain with the lines of businesses to think about the components. But also, and that's very important, to realize the business case which might help the company to either increase the profit on the other side to finance the larger transformation, the digital transformation, for the frontline processes as well.
Dawn Tiura: That's amazing. I love the journey that you're talking about and I'm hoping that at Ariba Live coming up in Las Vegas on March 3rd through 5th or perhaps if you're going to be in Amsterdam April 23rd to 25th. Excuse me, Las Vegas, March 5th through 7th and April 23rd through 25th in Amsterdam. I understand we're going to hear more stories about the incredible transformation from tactical to strategic that you guys are enabling the CPO's to become. So, I'm really excited to hear about that, because I tell you, if I hadn't had the opportunity to really sit down and talk to you recently, I would've said, you know Ariba. But now I know, if you haven't looked at Ariba lately, you don't know Ariba. If you think you know Ariba, you don't know Ariba. And I have to say, Marcell, a lot of that is because of what you were sharing about how you have showed me that Ariba is nimble. They still are acting like a start-up. They're still being innovative, and yet they sit underneath SAP and alongside, I should say, with SAP. So, this has been so refreshing. I really love the message that you're carrying.
Dr. Vollmer: Thank you, Dawn. I highly appreciate it. And please stay tuned what we will disclose as the latest innovations. It will be definitely exciting, learning a little bit more about machine learning, artificial intelligence, Blockchain, all these innovations, but also how to really ensure that we have a product, something what you can see, touch and feel and will help to improve the processes, and also bring the innovations to procurement to finance what a company can use to be successful and drive the entire Source-to-Pay process in a more efficient way using all available technologies, systems what we have at this point in time.
Dawn Tiura: I love this. Marcell, thank you for your time today. I would love to get you on center stage as SIG at some point to talk about your journey live. I think it'd be so inspirational to our audience. I have from Senior Directors to CPO's but talking about the journey from tactical to strategic to digital and just to see that there's so much future ahead and that the future is so bright. So, I would love to invite you to a SIG event to stand center stage and share your story at some point if you would amenable to that.
Dr. Vollmer: Thank you, I would love to. It's really great talking about it and if this can be inspirational and helps other people also to define their own story, I would love to do that. And the good thing is also that it is that you have opportunities, and you can also go into function like procurement. You have a beautiful function where you get an overview about the entire company's business model, understand that. And I think procurement is maybe a little bit understating the value they can bring. Also, the marketing internally to basically develop talents, and I would love to support here. Because I strongly believe that procurement is the place to be, and also fantastic talent pool for the company can leverage.
Dawn Tiura: You are actually preaching to the sermon person right now, because that is exactly what I tell people. We see things as it's happening. We can impact play on the field as things are happening. We see redundancy. We see stupidity and I just think it's fantastic to be a CPO in today's world. So, you've inspired me, and hopefully you've inspired a lot of our listeners; and Marcell, I'd love to invite you back for a follow up podcast and just hear about your digital journey at a later date.
Dr. Vollmer: Wonderful, I look forward to that. It was great talking to you and many thanks for your time and the interview. Highly appreciated.
Dawn Tiura: All-right, thank you.
Dawn Tiura: So, folks, this is Dr. Marcell Vollmer, Chief Digital Officer of SAP Ariba. And folks, I hope you join us for another podcast as we continue on this series, we will check back with Marcell and talk about his digital journey. I want to wish everyone a wonderful day. Thank you. Bye-bye.