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Coupa builds out functional capabilities with DCR Workforce buy

Stuart Lauchlan Profile picture for user slauchlan September 4, 2018
Summary:
Coupa's acquisition of DCR Workforce is a pragmatic expansion of its functional capabilities.

Rob Bernshteyn CEO Coupa 2018
Rob Bernshteyn, Coupa

A busy day for Coupa yesterday as the firm turned in Wall Street-pleasing quarterly numbers and expanded its spend management capabilities with the acquisition of the technology assets of DCR Workforce.

DCR Workforce produces contingent workforce management and services procurement software, which Coupa plans to integrate into its own offerings as Coupa Contingent Workforce. This will enable users to approve service projects and release work orders, track time, expenses and signing off on deliverables, and complete invoicing, payments and spend management on temporary labor and projects.

Coupa Rob Bernshteyn said the acquisition is highly complementary, adding new capabilities:

In our core offering we handle all the transactional capabilities for spend in a collectively exhaustive way - the way you procure, the way you expense and the way we invoice for spend components. Interestingly enough, a very significant portion of that spend is actually services today. There’s certain situations where you need advanced capabilities for power users, when you talk about managing the services of a contingent workforce. That includes a lot of different components in the full lifecycle of working with these folks.

So that means handling onshore and offshore management of project; that means tracking of all resources and onboarding and offboarding those resources; managing those resources in a compliant and audible way; looking at it from a talent pool perspective as well as an individual perspective and a freelancer perspective; and looking at everything from the requisitioning and sourcing of those assets to onboarding them and tracking them in timesheets and invoicing against them.

And there’s a whole host of capabilities of interaction with these suppliers - evaluating them, categorizing them, making sure they meet your requirements, making sure you collectively understand the risk profile of different temporary labor you might bring on, utilizing questionnaires for individual candidates, onboarding them in a way where you have background checks and drug tests and full resource pool tracking. So this is advanced management of a category of spend that we manage today transactionally, but are now enabling in an advanced way or a whole host of our customers and prospective customers will be very interested in this.

AI aspect

There’s an Artificial Intelligence angle here as well, he noted:

We’re particularly keen on some of the AI capabilities as it pertains to the automatic ranking of some of these temp labor candidates. This is an incredible system that the team has built there using algorithms for absolutely no bias, for machine learning of large databsets with a closed loop. So when you understand who your resources are and whether or not they’re successfully fulfilling contracts, you’re more likely to bring on those types of resources in the future.

Explaining further, he added:

When you think about selecting candidates for a given set of temporary labor initiatives, the contingent workforce labor initiatives at your company, it’s important to understand how to rank those candidates. A system that has a closed loop approach to thinking through how to rank those candidates is very powerful.

Now it becomes even more powerful when it’s overlaid on a large existing data set and a growing data set. So you could clearly envision that as we continue to offer subscriptions of this product to our existing and new customers, that dataset will grow as will the community intelligence that is brought out from that data set, making those rankings that much more powerful. We’re continually looking for ways to expose valuable used cases of community intelligence across the application to provide prescriptive insights for our customers and that’s the letter P in Coupa - prescriptive.

All told, this is big deal, said Bernshteyn:

We often talk about the C in Coupa standing for comprehensive and we have a continued push around our platform in this area. This is very similar with DCR to what we did with Trade Extensions and the Simeno acquisitions just last year. DCR adds significant breadth as well as depth to this overall business spend under management platform and it does so in areas where there’s a lot of demand out there. This new functionality will definitely be attractive to many of our current customers, we know that and we think it will be very interesting to the market at large.

Customers

It certainly seemed to interest Wall Street. Coupa’s share price soared on the announcement, buoyed up by better-than-expected quarterly numbers. The highlights:

  • Total revenues were $61.7 million, up 38% compared to the same period last year.
  • Subscription revenues were $55.4 million, up 39% compared to the same period last year.
  • GAAP net loss was $13.9 million, compared to a loss of $13.7 million for the same period last year.
  • New customers in Q2 included Telenor, McCain Foods, Leprino Foods, US Concrete, Wabash National, Hubert Burda Media, Boyd Gaming, Veeam Software, Tencent, The NPD Group, Inchcape and Benteler.

Bernshteyn also pointed to some go-lives of note during the quarter:

Unilever went live in North America in a first phase of a global procurement transformation initiative. Western Europe and Brazil are the next planned locations as Unilever continues to roll out their Coupa powered Easy Buy solution across the globe, all with the focus on rapid user adoption as a key measurement of success.

Also, the Co-op went live with Coupa Source to Pay and supplier management in the first phase of their deployment addressing spend at their food depots and support center. The Co-op is now planning and scoping their next phase and is considering expanding Coupa to additional spend categories.

The CEO also observed that customers are increasingly open to talking about their successful adoptions:

At their 2018 Capital Markets event, Rolls-Royce highlighted the introduction of Coupa across various ERPs and major geographies as a replacement to outdated legacy footprints noting that Coupa is now helping them reduce procurement spend by a target of £400 million this year, all with an internal theme that is 23% smaller than it was while also managing to exceed the 5% industry benchmark savings rate.

Also, two customers Aon and Cornerstone OnDemand referenced our solution on their own quarterly earnings call citing the cost savings and optimized spend they were realizing from their newly implemented Coupa deployment. As we set out every day to express our core value of ensuring customer success, it’s both humbling and inspiring to receive validating endorsements like these.

And those customers are still coming, he added:

We continue to see customers join us, prospects that become our customers who convert from a whole host of legacy solutions or subpar barely deployed incumbent solutions as well as continue to win in competitive scenarios with some of the larger incumbent solution providers. They’re offering some of those same solutions in an ASP or hosted environment. So we continue to see strong traction there...ultimately our competition in this market is ourselves. It’s not anything incumbents, early entrants or any other competitors that might be called out...We have a very bold vision of what we want to do in this business spend management marketplace. We feel like we’re in the early innings of what’s possible and we’re 100% focused on the longer term as we always have been for nearly a decade now.

My take

A nice set of numbers and a very savvy-looking acquisition with a sound rationale behind it and a strong business case for potential customers.

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