Coupa blurs functional boundaries in enterprise procurement

In the beginning, it was easy to classify Coupa. The company started out as a spend management vendor with a cloud-native, SaaS approach to automating indirect procurement. But that was then. Over time, it's expanded its functional footprint into new areas, extending into other elements of what's often called the procure-to-pay (P2P) or source-to-pay process.

The expansive trend continued last week, with new announcements we'll discuss below that extend Coupa's reach into payments, deepen capabilities in strategic sourcing, and add sophisticated AI-powered analytics. Coupa no longer fits neatly into a single category.

This shift supports a successful land-and-expand sales strategy for the vendor, where customers start off with one set of functionality, such as indirect spend or employee expense management, then add in other modules to manage suppliers, contracts, or strategic sourcing. Adoption can start anywhere in the portfolio, says CEO Rob Bernshteyn:

Wherever the highest, quickest value point-of-entry is, enter in that way. You want to start with expense automation? That's fine. We have some people doing that. You want to start with sourcing? Start with contracts, or whatever you want. But then over time, begin to adopt this platform and optimize your spend.

The average Coupa customer has at least three modules, and because they all share a single data model and user interface, the analytics functionality can sit across whatever modules the customer has in place. That has a multiplier effect on the value that can be delivered, says Bernshteyn:

What you're seeing here are multiple modules working together, because they're in a unified cloud platform, to offer what we call 'suite synergy intelligence.'

Into the realms of direct buying

This platform architecture is a break with the historically piecemeal approach to sourcing and spend management. In the old model, separate vendors — often mirroring separate departments within an organization — each specialized in a particular function, leaving enterprises with no easy way to arrive at a consolidated view of the source-to-pay landscape. As in other areas (CRM for example), adopting a cloud infrastructure has enabled integration of data and processes across these separate functions in a way that wasn't previously possible.

That integration now allows Coupa to extend its functionality in unexpected directions, further blurring conventional boundaries within and around procurement. One of the most significant moves comes as a result of its acquisition of Trade Extensions, announced two weeks ago. This takes Coupa firmly beyond its original remit of indirect procurement, which concerns what an organization buys for its own operations, into the realms of direct procurement of items and services that make up what a business sells on to its customers.

Headquartered in Sweden, Trade Extensions provides a strategic sourcing and advanced optimization platform that's used by many of the world's largest brands to run complex sourcing for categories such as fresh produce or direct materials. It allows buyers to analyze complex supply chain scenarios involving thousands of suppliers and tens of thousands of items, evaluating multiple variables, including alternative suppliers, quantities, service levels and logistics factors. Bernshteyn gives the example of a retail chain buying apples:

You've got apples that you're ordering for all of your stores and you need to award business to how to get those apples into each individual store — including the freight costs of shipping them, including the spoilage and the time you have in the season to get them, including the quantity, including how much you need to have on hand versus how much you need to always have replenished, the quality levels, you want all that.

[Trade Extensions] has algorithms that allow you to do very complex what-if analysis, scenario analysis, taking account of every type of variable for a particular spend activity.

Embedded in the platform

This highly specialized sourcing optimization will only be relevant to the largest of Coupa's customers with complex buying needs, says Bernshteyn.

For those largest customers that want to do advanced spend optimization and play with all these different variables to get the exact contract that they want to sign, they will use this.

Nevertheless, the capability will be embedded in the Coupa platform, making it easier for procurement specialists to work with product managers and other line-of-business colleagues to bring their skills to bear when needed — and combining with other data and functions in the system. Part of the company's vision is to reach a point where the system itself makes the decision whether a sourcing request requires buyer involvement. This means that when a user requests a purchase, the system will add the relevant workflow, whether that be a referral to complex sourcing, initiating the creation and approval of a contract, or simply requesting a manager's approval of a routine spend transaction.

The announcement of Coupa Payments extends the platform's footprint in another direction, this time into the realm of payment and financing. In partnership with Nvoicepay, whose cloud service powers Coupa Payments, this extends automation to settlement of supplier invoices. Dovetailed with this is a new capability, currently in early release, for buyers to accept early payment in exchange for a discount. It's a need that's been poorly served, says Bernshteyn:

There's a whole cash management capability here that is being done inefficiently. There are a lot of suppliers out there, for example, that are very willing to take 99 cents instead of a dollar if you give it to them right away. That's not being taken advantage of, certainly not in indirect.

Coupa is building this into its invoice handling process through simple point-and-click options for buyers and suppliers. That's just the beginning of what may be possible, Bernshteyn believes:

There's a whole host of things we could explore, if we can really open up that collaboration, make it transparent, give people visibility to the needs of both sides of the equation, I think we can do some interesting things.

Building on community

The collaboration with Nvoicepay builds on last year's launch of the CoupaLink ecosystem of partners, each offering certified solutions that connect into Coupa's API-based open integration platform. Coupa Payments is the first third-party offering that the vendor has put under its own brand. Previously, when it has sought to bring in new skills, Coupa has acquired, but Bernshteyn sees CoupaLink as a 'middle way' to bring third-party innovation into the platform without having to go down the acquisition route. He says future collaborations will be guided by customer adoption of solutions within the CoupaLink program.

Other announcements at last week's annual Inspire conference saw the vendor introduce functionality it had previously previewed, as its latest release enters general availability. These include the general availability of Perfect Fit Insights, which provides the ability to benchmark performance against data drawn from the Coupa customer base for 25 different KPIs such as first-time match invoice rate and expense report approval cycle time. Customers can enter their chosen goals for each KPI and the system will show specific improvement recommendations to help achieve those goals, based on the prior experience of the community. Alongside the unveiling of the AI-powered Risk Aware supplier risk management capability, the vendor positioned this as another example of applying 'community intelligence.'

The company also opened early access for its advanced services management module, called Service Maestro. This is designed to improve control and automation of services procurement, incorporating features such as automated drafting of Statements of Work and the ability to automate tracking of submitted timesheets and invoices against contract stipulations and service level agreements.

Another early access feature is integration with the Amazon Business catalog, which allows organizations to give staff conditional access to items from Amazon's B2B marketplace.

One crowd-pleaser was an option to change the color of the Coupa portal to match a company's own brand color. Popular messaging platform Slack also got a look-in with the ability to turn it on as a notification channel from Coupa.

My take

Several of the new generation of cloud-native enterprise application vendors don't fit neatly into conventional functional categories, and Coupa is a prime example. The cloud platform allows them to set their own roadmap for adding functionality, tailored to what they see as customer demand and market opportunity. That means they can redefine the boundaries as they go, and discover new ways to deliver value to customers.

The latest set of announcements adds strategic depth to Coupa's offering that will help put it on the radar of even more global brand names, as well as continuing to build its midmarket presence. But there's still more to do in order to meet the full range of large enterprise requirements. For example, it's good to see the number of countries where Coupa provides invoice compliance rising from 18 to 31, including India. But it's a surprise to see the likes of Brazil not on that list.

Similarly, there were some impressive international brands talking about their global implementations of Coupa at the event. But one that I sat in on mentioned several areas of functionality that had come up during the pilot where Coupa had needed to make tweaks, for example in how it handles withholding tax in different jurisdictions.

So Coupa, like any up-and-coming SaaS vendor, is still in the process of rounding out its capabilities to match some of the more arcane but necessary requirements when serving a truly global enterprise customer base. At the same time, the synergies inherent in the cloud platform allow it to enable new capabilities that more established, traditional vendors can still only dream of. It has become a serious contender at any level and we may be surprised to see what names of note it will add to its customer list in the coming year.