Following the official release of SAP’s full year and 4th Quarter financial results for 2021, SAP has announced the acquisition a majority stake in the working capital management company Taulia.
This week IgniteSAP will take a look at Taulia, and SAP’s existing financial management products, including SAP Fioneer.
Management of working capital is fundamental to business operations. There must be enough capital to fund costs which are expected and unforeseen costs as they arise. In order to use available funds effectively chief financial officers and their team carefully balance the demands of a business’s inventory, cash, accounts payable, and accounts receivable.
Cash takes time to work its way through the system and become available for use. Sometimes the operating capital is in the system but is not flowing effectively. Working capital management is the art of removing obstacles and speeding up the cycle of converting cash in accounts receivable, payable and inventory.
Business liquidity is dependent on the time taken for cash to move through from one set of accounts to another. By decreasing the time it takes for cash to be processed through sales, inventory and payables, businesses are able to increase their agility and resilience to external economic circumstances.
Financial management solutions from Taulia address the issue of financial liquidity and improve the speed at which cash can flow from one area of accounts to another so that payments can be made earlier by ensuring there is clear financial management of the supply chain and other areas of business operations.
Taulia is a financial technology company originally based in San Francisco. Since 2009 they have made their working capital solutions platform available to a network of over two million businesses.
Their strategic partners, which include J.P. Morgan, UniCredit and other well known financial institutions, provide the required funding within the Taulia financial network.
SAP has had a long standing relationship with Taulia. A former CEO of SAP, Léo Apotheker, is a current independent director and shareholder. SAP has now acquired a majority stake in Taulia in order to expand SAP’s Business Network and their provision of solutions for financial management.
Over 80% of Taulia’s customers operate an SAP system, including Airbus, Nissan and AstraZeneca. The acquisition of a majority stake in Taulia with increase the extent of integration of Taulia solutions with SAP products within the Business network and CFO solution Suite so that Taulia products will be at the centre of SAP working capital management.
The current Chief Financial Officer for SAP, Luka Mucic, said:
“Taulia strengthens our portfolio and adds value to a point that is key to every company: financial flexibility and stability. With that, they contribute to making supply chains more resilient. By combining the deep working capital management expertise of Taulia with SAP’s broad CFO solution portfolio and the integration into our core business software and Business Network solutions, we are well positioned to become a leader in working capital management. We will offer these capabilities at scale to help businesses improve their financial position and seize growth opportunities.”
As with other recent acquisitions Taulia will maintain its own brand and identity, and current CEO Cédric Bru will continue his leadership, but SAP CFO Luka Mucic will now be chairman of the Taulia Executive Board. SAP and Taulia have agreed not to disclose financial details of the transaction.
In September 2021 SAP and Dediq GmbH began a joint venture for the financial services industry which expanded the existing SAP financial services offering and created new products for banking and insurance sectors.
Fioneer was created to enable SAP customers to “innovate and transform their business by combining premier technology with development expertise and a global network of customers, partners and colleagues”.
Financial services industry processes of SAP customers can now operate using integrated data and are now available in the cloud via the SAP Business Technology Platform.
SAP’s acquisition of majority status of Taulia will now contribute to this expansion of SAP financial services, insurance and banking areas. SAP states that customers of SAP will benefit from the Taulia solutions: “As suppliers, SAP customers can improve their liquidity through early payment options with predictable off-balance sheet funding. As buyers, they can make full use of payment terms while strengthening their relationship with suppliers. Funders, such as banks, can pursue attractive investment opportunities in short-term financing of large credit-worthy businesses.”
SAP also intends to embed financial services for banks and insurances companies in its solutions and platforms, and Fioneer is expected to play a central role in these offerings.
SAP has of course worked with banks and financial services companies for decades but these more recent acquisitions indicate a desire to disrupt the banking sector so that innovative companies can improve liquidity and also find micro investment for new products.
The same characteristics which provide stability for large companies with a bias toward short term metrics that reinforce the status quo prevent companies from innovating and developing new revenue streams, where it takes several years to measure success and return on investment.
This means that it is still difficult for smaller companies and start-ups to find the necessary funding when they need to go through periods of intensive expansion, but this tendency is changing with the global technological evolution of commerce and industry.
The roots of this change and SAP’s move into FinTech are deep but this has recently intensified. In November 2021 when SAP published a white paper called “The Intelligent Enterprise for the Banking Industry”.
Covid-19 has acted as a catalyst for the rate of technological change and the integration between banking and technology companies. The white paper was primarily addressing the transformation of the banking and financial services industry through automation, AI, data analysis, blockchain and customer experience technologies, but the paper also refers to Rise with SAP and SAP’s “comprehensive ecosystem for the banking industry”.
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By leveraging this network of financial partners and by the acquisition of a majority stake in other financial technology companies such as Taulia, SAP are seeking to simplify their offerings to customers in the financial services industry, but also to offer more inclusive and comprehensive products to smaller to medium-sized businesses and start-ups, which can increase liquidity and get them over the investment hurdle when they need to develop new products and revenue streams.
This can take place via SAP by finding efficiencies in the existing financial structure, and business processes of an organisation, or by connecting those who require short-term funding to financial services partners.
Products such as SAP Multi-Bank Connectivity can facilitate integrated daily secure interactions between banks and corporate customers, and the SAP Business Network offers SAP Supplier Financing providing access to a network of lenders to improve cash flow.
The more ready availability of financial products and services within SAP products for non-banking corporations is an indirect result of how the culture of banking and financial services is changing. Falk Rieker, SAP’s Global Vice President of Banking in his recent introduction to the SAP white paper on banking technology said:
“Banking 4.0 will see banks rethinking banking from the ground up. Human experience is the new disrupter in the experience economy. This will affect the way banks interact with customers and manage traditional bank products, processes, and finance and risk operations.”
One of the other effects of this change is to bring a closer relationship between financial services and businesses as the ability to provide data and analysis, along with increased integration of data via common standards and secure connections, so that the level of risk for investments can be assessed more quickly and accurately.
The outcome of the closer relationship between finance and businesses as technology companies using SAP products is that innovation and product development can happen more quickly and at a greater scale. This has implications for systems integrators and individual IT consultants as the faster pace of innovation and investment in companies will require more skilled SAP professionals to implement new and supporting technology: leading to a substantial increase in demand for IT services.
If you would like to explore your options as an IT consultant in the ever-expanding SAP ecosystem, to make the most of your professional abilities please contact IgniteSAP.
