Coupa delivers on customer exemplars to redefine Spend Management

After 27 years in this game, there are three words that send a shudder down my spine - Gartner. Magic. Quadrant.

That may be heresy to many of our sell-side readers, but these diagrams pop up so frequently on my radar, pushed there by every vendor under the sun, that they’ve lost any meaning they might have had, for me at least.

So my heart skipped a beat to hear the opinion of Rob Bernshteyn, CEO of Spend Management firm Coupa, on the same subject:

We look at these reports from the analysts and certainly we engage with them to provide them whatever information they need to complete these reports as a necessary thing that we need to do, but we look at this as very different. We have an opportunity to completely innovate in a broad Business Spend Management market where we're pushing on every possible vector that matters to our customers.

In other words, thinking outside the quadrant about what end users need in practical terms is what’s crucial. That’s a sentiment I can get behind. Bernshteyn expands on his argument:

[Customers] care about product footprint that’s actually going to get implemented and is going to drive value for them. That’s why we continue to incorporate more and more use cases, including capabilities around services, capabilities around direct, capabilities around inventory, capabilities around procurement and invoicing and expenses and supplier information management, and probably most importantly, the community intelligence that we’re bringing to market that our customers are engaging with.

So we’re really in a process of redefining a much broader category than is being seen by some of the traditional Procure-to-Pay or Source-the-Contract type analyst reports. What I'd like to see, and I think we’re working to see in coming years, is a complete redefinition of what is part of Business Spend Management.

For now, Coupa’s just turned in a strong start to its fiscal 2019 with total revenues for the first quarter up 37% year-over-year to $56.4 million and total non-GAAP operating income of $317,000. Subscription revenues were $50 million, up 40% year-over-year and accounting for 89% of total revenue. Professional services and other revenues were $6.4 million.

Customer exemplars

With a stated ambition to take $1 billion share of an estimated market of $37 billion, Bernshteyn argues that Coupa has “only just scratched the surface” so far:

In our view, there's no limit on how far we can go, no boundaries, and no length. Our cumulative spend under management has reached $747 billion, and we expect to surpass $1 trillion this fiscal year. No one else in our market have this magnitude of transactional spend data in one place.

That’s one of the drivers that opens up conversations with prospects, he explains:

We’re clearly seeing companies more interested in these capabilities around spend management broadly, because if they’re growing quickly, they want to make sure they’re doing it in a compliant way and they’re set up for scale. And if they’re already established businesses, they realize that there's operational inefficiencies in the way they spend money. They’ve applied a whole host of approaches to extending out their Customer Relationship Management and Human Capital Management capabilities, they might be doing some upgrades around the ERP.

But around Spend Management, in many cases, they still either using paper or they have a whole host of small boutique mom-and-pops deployed solutions all over the organization without one seamless way to get their arms around business spend management.

This is where analyst reports and assessments are helpful to Coupa in terms of surfacing the firm during sourcing searches, but that’s only the opener. There’s more to be done at a closer level, says Bernshteyn:

When they really engage with us, that’s when the magic happens, because many of our customers simply want to work with us because they’re excited about the culture of this company. They believe that our company values are aligned with their personal values. They are interested in actually getting to real measurable results rather than just doing a go live, deployment of some technology solution. They realize that there is a modern technology platform opportunity, a once-in-a-lifetime shift from old technology solutions and on-premise, or simply hosted on-premise solutions to modern technology value as a service platform. And they engage where they set that level.

New customers in the recent quarter include Ingersoll-Rand, First American Financial Corporation, Assa Abloy, Fastweb, Just Energy, Evotec AG, Renew Financial, Simons Foundation and Klöckner & Company.

Bernshteyn also points to the speed of getting new customers up-and-running quickly:

After signing a new customer, we go directly into implementation with the goal of a fast go live. Rolls-Royce recently went live in eight countries with Coupa Sourcing and Procure-to-Pay in Phase 1 of a global procurement transformation initiative. Key rollout live areas in this phase included this Coupa Supplier Network, catalog content and XML integration and business web forms.

Blackrock went live with the first phase of its global Coupa rollout in Q1. Blackrock's primary goal with Coupa is around better controls and pre-approvals, standardized purchasing activities and increased spend in the management. Blackrock is also looking to provide a more user-friendly solution for its employees, and to increase efficiency through streamlining and automation.

Another example of successful go-live is at Airbus, where Accenture has led a “strategic value transformation initiative”, with Coupa in the mix. Bernshteyn says the customer has deployed additional modules at a faster pace than planned:

To-date, Airbus has decreased their order approval time from 27 days to three days, allowing their buyers to focus on more strategic initiatives. They’ve connected three ERPs and five third-party systems, and over 1,500 users with visibility of over $2.3 billion in spent transactions to-date.

Working with Accenture also validates Coupa’s system integrator strategy, which is a work-in-progress, explains Bernshteyn:

This is an evolutionary strategy, that we’ve had now for more than seven years, of building an army of systems integrator-certified consultants that know how to implement Coupa and do it in a way that drives measurable recurring value for our customers, so we can have the opportunity to keep them forever. We began with key consultancies in the early days and then graduated our way into working with the likes of Accenture KPMG, Deloitte and others.

My take

This is all good pragmatic stuff, focusing on the ‘what can we do’ rather than chasing the hype cycle all over the map - or the quadrant, for that matter. A good example of the pragmatic thinking when Bernshteyn was asked his views on Blockchain on the post-results analyst call.

For most CEOs this would be the cue to start pitching his or her firm’s visionary strategy around this emerging tech. Bernshteyn’s response was commendably more considered:

I don’t feel like this is a good opportunity for me to share a lot of the views on that. I think a lot of that is still very much developing and very hard to call. And I don’t feel really personally to make a very direct call as to how that's going to play out.

I think there is absolutely very distinct use cases where blockchain is going to be critical. When you think about distributed measure, for example, which could really shake-up some of the big incumbents in enterprise software world and obviously the use cases around payment. But I'm not in a position yet to share a very distinct point of view on it.

That’s the kind of comment that customers need to hear ie there’s probably stuff that will emerge here, but let’s not get ahead of ourselves. Instead let’s focus on demonstrable results in practice. At the risk of becoming very repetitive here, diginomica’s mantra is ‘show, not tell’ is always the most powerful marketing tool and customer exemplars are always the best proof-points. On that front, Coupa continues to deliver.

All told, a strong start to fiscal 2019 - and another step towards that $1 billion goal.