Ecosystems: Everyone in the software industry talks about them, yet there’s surprisingly little agreement as to what actually constitutes one. Is it a digital network? Is it an integrated supply chain? Is it your Twitter following?
How can we maximize value from ecosystems when consensus on a definition remains elusive?
In my native Montana, where squirrels outnumber SQRLs and lynx run nearly as fast as Linux, no such confusion exists. Ecosystems are everywhere! Growing up amid the Rockies and the glaciers in the western part of the state, I observed how the streams feed the forest, which shelter the grasslands, which nourish the waterfowl, which in turn forage at the feet of the bison herds. All these intricate connections rely on the same habitat, yet no single system directs the complex interrelationships among the flora and fauna residing there.
Perhaps that’s why, as an outdoorsman, I’ve always felt at home in the software business. An ecosystem, such as that launched ten years ago by Apple connecting application developers with consumers, clears fertile ground for participants to collaborate, innovate, and trade. Is it any wonder that the world’s five most valuable companies — Apple, Amazon, Google, Microsoft, and Facebook — all thrive within robust ecosystems?
Yet few visitors to Apple’s App Store seek to purchase products developed by the company itself. Instead, they log on to download their favorite song, game, or movie. While the value it adds is undeniable, Apple nonetheless remains a conduit. A conduit, interestingly, takes its original meaning from the waterways that give life to a habitat. In nature, an ecosystem represents more than the sum of its plants and animals. Its distinct features — climate, terrain, elevation — reinforce the sustaining interactions among its resident species, extending, in an evolutionary sense, the competitive advantage of each.
Digital ecosystems — not only business-to-consumer platforms such as Apple’s App Store, but also business-to-business marketplaces such as SAP Ariba — operate much the same way. Though sometimes thought of as merely a network of buyers and sellers connecting to do business, in reality, a digital ecosystem entails much more than that. In addition to facilitating commerce, networks should enable trading partners to collaborate on innovations that open new operating models and revenue streams. Participants should be able to transform product design and delivery, align cross-border operations, and drive mutually beneficial business processes. And when surrounded by a robust ecosystem, they can.
Just as in the natural world, an elegantly designed ecosystem in the digital one confers yet another advantage: attractiveness to newcomers. Out in Big Sky country, it’s amazing how the tranquility and abundance of the environment lures visitors — and I don’t just mean city slickers seeking refuge from the bustle of modern life, though there are plenty of those. I’m referring to migrating species. When an ecosystem works as intended, whether in the wilds of Montana or the thickets of the digital economy, word gets around. The best flock to join in, and the benefits accrue to existing participants. As the saying goes, there’s strength in numbers.
Consider the growth of SAP Ariba’s own ecosystem. Our delivery partners, including Accenture, Deloitte, and IBM, to name a few, provide invaluable expertise ranging from consulting to implementation to integration. Meanwhile, just this past April, Vertex — the leading provider of tax technology — wrapped its solutions within SAP Ariba through an application programming interface (API). A year earlier, Thomson Reuters introduced its Onesource solution to help companies using SAP Ariba cloud services to calculate and comply with taxes associated with global transactions. By visiting SAP Ariba’s app center, the more than 3.4 million buyers and suppliers connected to the Ariba Network can harness these innovations to simplify the complex process of invoice reconciliation and maximize their existing procedures and investments. And they are rapidly doing so. That’s the power of an ecosystem.
For more on digital ecosystems, see Rethinking Your Value Chain In Today’s Digital Ecosystem.