Spending on technology for sales and marketing has grown so much in the digital era that it's often said the CMO controls a bigger IT budget than the CIO. But have we reached peak CRM? Could it be that the pendulum of technology investment will now swing round towards the chief procurement officer?
Rob Bernshteyn certainly believes so. As CEO of spend management vendor Coupa, he has, of course, a vested interest in arguing for more investment in what he calls business spend management (BSM) technology. His argument, however, is founded on the perception that connected digital technology has begun to shift the balance of power from sellers to buyers. As he told an audience of buying professionals at Coupa's Inspire EMEA conference in London earlier this month:
Collectively in this room and around the world, we represent trillions of dollars in spend power — and the power every day is shifting more and more to those with the money and the right to choose who they spend it with, from those that are trying to sell something.
Information is becoming more and more and more transparent. We have the right to choose. Why wouldn't we use best practices, incredible technology solutions, collaborative communication with one another, to help us decide who we want to work with?
The case to invest in managing spend
Later in the day I sat down with Bernshteyn and he elaborated on his thinking. Enormous amounts of money are spent on marketing and ad tech to target offers — often very inaccurately —: to potential buyers, he says. And yet at the same time, enterprises are investing very little in evaluating suppliers and ensuring that they are getting the best deal:
There is so much information technology, trying to get that dollar from my wallet, it's unbelievable. And then we go into these companies and help them think through, how are you doing spending? It's unreal.
There's no visibility, there's limited control, there's lack of understanding of the supplier relationships, and there's virtually no confidence that they're getting the best deals from a sales perspective, particularly in indirect, in the long tail. There's minimal consolidation across geographies in large-scale organizations.
His contention is that access to information is starting to change the way that organizations buy. This has reduced the influence of sales teams on the buying process. The corollary is that procurement teams can now harness this information and their spend data to strike a better deal with suppliers.
I really do believe that the spend side is gaining more and more control with every passing week, than the sales side. I'm sure you know the statistics. 90% of the work in selecting a supplier, whether it's technology or any kind of supplier, is done without ever speaking to that supplier. It's done online, it's nothing the supplier influences. Information is becoming democratized and transparent.
The more that happens, the more power those that are actually holding the wallet are in control. We're committed to helping them — and we're committed to helping suppliers as well — but largely, we are in support of information technology for the spenders. That's a big category in my view.
The key is to do a better job of collecting and harnessing information on the spending enterprises are doing — both individually and collectively. But organizations are held back by older systems that focus on automating the buying process without being able to consolidate data on what is being spent:
The functional champion that we've been working with has been left with all of these, in my view, frankly, broken, old, siloed technology solutions that are not interoperable, that are not usable, that are not delivering measurable business value to them. And they are looking for a way to get their arms around all of it in a comprehensive, open, user-centric, prescriptive, quick way.
The path to strategic value
The ability to be prescriptive — to recommend new courses of action — is an important part of the value a system like Coupa brings to the table, he argues.
We have customers who are not properly bargaining. They're renegotiating a contract that is a certain percent of spend that isn't adopted. When to the left, there's this other contract that's about to expire, but nobody's even using that contract. And if they use it at 10%, they would save this percentage of value. This is the kind of things we're bringing out ...
We’re literally putting light into areas of darkness.
Coupa also emphasizes its ability to analyze spending patterns across its customer community, along with other indicators. This aggregated data can provide benchmarks to alert an individual business that it is spending less effectively than its peers, or can give early warning of a supplier underperforming. Suppliers can benefit too from learning how customers perceive them, adds Bernshteyn:
We want to be friendly to suppliers to the extent that we want them to be notified about how they're being perceived within our customer community — so that they could course correct and do the things required to compete fairly. We want a bit of transparency there, that's the spirit in which we're approaching it.
All of this enables the CPO to contribute to business strategy at a board level, he believes. Several customer stories — Coupa calls these 'spendsetters' — during the opening keynote at its event showcased examples of strategic business impact. In one case, a new approach to procurement had made it possible to set up in a new country must faster and more cost-effectively than previously. In another, better spend control had generated savings to fund more rapid business expansion. Bernshteyn sums up:
They have to, as many of them are doing now, articulate their position as something that either drives revenue for the company — reach more customers, more expansion, whatever, on a certain budget, usability etc — or deliver meaningful savings that the CEO and CFO and others can talk about on earnings calls.
One of the hidden benefits of going digital is that, once the data from a given activity is analyzed, it becomes possible to find new ways to perform better. Sales and marketing have been early beneficiaries of this effect as they were one of the first areas of enterprise activity to move to the cloud and go digital. Back-office functions like spend management have been laggards, but are now starting to catch up, as Bernshteyn points out. That is giving buyers greater agility and knowledge that they can use to strike better bargains.
So have we reached peak CRM — the apex of investment in CRM tools? I should add that this wasn't a term that Bernshteyn used, but I felt it summed up the proposition. To answer that question I think we must also take into consideration another trend, which at diginomica we call the XaaS effect — the move away from selling as a series of separate encounters towards more of a continuous relationship between buyers and sellers. This evolved first in the Software-as-a-Service (SaaS) business, but is now spreading to other industries and therefore becomes Everything-as-a-Service (XaaS).
In this more connected, ongoing relationship, the two parties to the transaction take more of a collaborative approach. It's no longer an adversarial struggle between buyers and sellers, but a partnership that seeks value for everyone involved. An important consequence of this trend is a much greater emphasis by sellers on customer experience. That in turn leads to much more investment in customer service, to the extent that Salesforce, the CRM giant whose annual Dreamforce conference runs this week in San Francisco, now achieves as much revenue from its Service Cloud product line as it does from its Sales Cloud.
It should be no surprise, therefore, to find that buyers are becoming more savvy about monitoring their suppliers — it's merely the flipside of this greater emphasis on customer experience. And therefore we can't yet argue that CRM as a whole has peaked, because the customer service element is still rising. But we are I think past the peak of salesforce automation as the main component of CRM. On the other hand, spend management automation looks set to grow as businesses become more aware of the need to monitor the experience they receive and its true impact on their bottom line.