Savings key to spend management leadership, says Coupa CEO

SUMMARY:

You won’t hear any ‘strategy BS’ from Coupa CEO Rob Bernshteyn. He wants the spend management vendor to be widely known for just one thing: saving money

Coupa inspire 2015 5bn cash savingsThere was one clear message that Coupa Software wanted delegates to take home from its Inspire conference in San Francisco last week: quantifiable savings.

All around the show floor, customer testimonials cited the total savings each one had achieved by using Coupa. In the center sat several pallets piled with stacked bundles of replica $100 bills, representing the more than $5 billion Coupa claims its customers collectively have saved to date.

It’s all designed to ram home a point that buyers often feel diffident of making, Coupa’s CEO Rob Bernshteyn told me when we sat down together last Thursday on day two of the event.

I think a lot of procurement folks and controllers, they’re not taking credit for that quantifiable value that they’re delivering. They often get caught up in the how rather than the what.

Why not go to the exec and say, ‘I’m going to save you $150 million and I’m just going to ask you for a budget of this much, just to go do it.’

That’s a conversation folks would be happy to have with them. But they tend to be stuck in the back office, a little bit afraid to go to speak to these folks and articulate the quantifiable value they deliver.

Leadership up for grabs

It’s a pragmatic message, but one that belies a larger ambition. Coupa looks across the enterprise applications space and sees each major area of CRM, HCM and ERP all having their own recognized cloud leaders. Bernshteyn sees leadership in Coupa’s own area of supplier relationship management (SRM) still up for grabs.

SRM, there’s no cloud owner there. That’s the game we’re playing to win.

In that ambition, Coupa faces stiff opposition from SAP, which after its acquisitions of Ariba in 2012 and Concur last year is presenting itself as a business networks vendor that connects buyers and sellers. There are many other smaller players and specialist vendors that offer parts of the picture — including IBM, which resells Coupa alongside its Emptoris contract management product.

While bolstered by its latest funding round and $1 billion-plus valuation, Coupa is still building out a complete functional footprint. Bernshteyn argues that it is starting out with the functions that matter most. In this, all of it built on a single dataset and codebase, it is emulating the course followed by dominant SaaS players in other areas.

We built a platform first and then we started putting on top of that platform 80:20 use cases that could leverage that platform. The first use case is the hardest one to get right. It’s the pre-approval process. In the cloud area certainly we’re a leader in that area.

The second one we went for is the invoice process. There is no leader in that area.

Then we went and did expenses. We have deals where a customer will come in and they’ll either start with invoicing, they’ll start with procurement, and more and more we’ll see them start with expenses as well.

A very substantive portion of our recurring revenue now is starting to come from these other areas. It was 100 percent procurement, and now it’s roughly now sixty or so percent procurement based, the other forty percent are these other modules.

Historic legacy problems

As a cloud vendor, Coupa also has an open API that means it can link more easily to partners that offer additional functions. The traditional approach has been to build proprietary functionality and keep everything within the platform, said Bernshteyn.

The challenge I think a lot of players in the space are not even remotely prepared for, is having open APIs into your platform.

This notion of islands of ownership I think is going away. I think there will be hubs of ownership. We want to own that supplier hub but we have no interest in not seeding a broader ecosystem around us.

Rob Bernshteyn, Coupa
Rob Bernshteyn, Coupa

One of the difficulties of being a relative newcomer in the space is the historic legacy problems enterprises have faced with conventional procurement software products, said Bernshteyn.

Some of the incumbents have promised a lot of things and massively under delivered.

People have been really burned in this category, particularly the procure-to-pay area. We’ve replaced so many broken deployments.

It’s another reason for emphasizing the value customers have experienced from deploying Coupa. The company has built up an established track record it can point to. But one advantage of being a newcomer is the freedom to do things differently, and to build the product in response to the needs customers have today, said Bernshteyn.

We’re not defining our roadmap based on the way the space has evolved. That’s not the way the customer, in our view, ought to be thinking about spend management.

Start with the business problem. Where is there inefficiency in our spend process? Is it because a bunch of sales people are all over the place charging in expenses they shouldn’t be charging? Is that the biggest area of opportunity?

Is it because our indirect spend is not in control? Is it because our direct spend is not in control? Is it because we’ve got legions of people entering invoices somewhere, we’re not automated in a bunch of processes?

Where’s the biggest opportunity to make an immediate impact? Begin deploying there, and then build out from there.

Painkillers and vitamins

In some cases the impact is in simplifying and streamlining processes. But by emphasizing the opportunity to save costs, Coupa is able to present a positive message around customer profitability.

There’s two components to it. You’re really offering both a painkiller and a vitamin.

The painkiller is that spend processes — paper, annoying, frustrating — there’s just pain. You can automate out a lot of pain, you can remove a lack of collaboration around things. You can make things more streamlined, you can take all those contracts you’ve negotiated and make them come to life so people buy against them. There’s pain to be removed.

But then there’s this massive vitamin story here, the massive boost you can create which is the boost to profitability. That’s massive — and so easily quantifiable, something I think many of the other spaces still have a hard time quantifying.

Executives are realizing this is one of the last areas of operational inefficiency, particularly indirect spend. It’s very hard for companies to get their arms around that long tail of suppliers. That’s what we’re enabling.

That is what Bernshteyn wants Coupa to be known for. It’s why quantified savings were such a dominant theme of last week’s event and why the company’s preferred tagline is ‘savings as a service.’ There’s no grand strategy, he said, beyond simply building a reputation for delivering bottom-line savings.

There are board meetings happening all over the world. People are looking at income statements. They’re leaning on the CFO and CEO about profitability. I want to get to a place where there’s at least one or two people in every one of those board meetings that says, ‘I know we’re having some issues with profitability. Have we fully optimized it? I heard of this company Coupa, their savings as a service platform, if we deployed that we could get even more out of that.’

That’s it. We don’t need to be strategic. I don’t need to get up and glamorously talk about the connected Internet of Things and the big network we’ve built and a lot of other BS for investors and stuff.

Just give me that. Just give me that board member saying to that CFO, ‘We were shy by one penny on that thing. Did you do everything? You sure you did everything? ‘Cause I heard there’s a platform could help you streamline things.’

My take

Bernshteyn cites four pillars of enterprise applications. I would add collaboration as a fifth pillar, but agree that spend and resource management is one of them.

Can Coupa be the cloud vendor that everyone looks up to in the space, as Salesforce is in CRM or arguably Workday in HCM? It has a ways to go, but the field remains open. SAP, through its Ariba and Concur acquisitions, is a more established SaaS player but it will be a few years yet before those two separate stacks are converged into HANA.

By taking a fresh approach to an aspect of enterprise operations that is often hidebound by outdated processes and conventions, a player like Coupa has the potential to make rapid progress. It is already able to show off some significant enterprise customer wins. The next year or two will be crucial in demonstrating how strong a challenge Coupa can mount.

Disclosure: Salesforce, SAP and Workday are diginomica premier partners and Coupa is a partner. Coupa paid my expenses to attend its conference.

Image credits: by @coupa.