Scout RFP co-founder on the year ahead as part of Workday

A month ago, cloud HCM and finance vendor Workday closed its acquisition of strategic sourcing startup Scout RFP. This week I spoke to Scout RFP co-founder and President Stan Garber as well as Tony Rizzo, VP and General Manager of Workday Supply Chain, about their plans for the year ahead.

Workday's sudden entry into the sourcing market took many by surprise, but it is a natural extension of its existing procure-to-pay offering. This has proven very popular among customers of its core financials product — at the last count, 650 out of a total 725 Financials customers had opted for Workday Procurement, an attach rate of almost 90%.

But it would be wrong to think of Scout RFP as simply an add-on to the existing product. Its own customer base and its continuing growth ambitions promise to open up a rich seam of new prospects for Workday, as well as bringing it into industries the larger vendor has previously spurned. At the same time, Workday's broader global reach will help accelerate Scout RFP's expansion into new geographies.

Acquiring Scout has meant Workday can enter the market much faster than by building its own solution, explained Workday CEO Aneel Bhusri last November in a Q&A session at the vendor's European user conference in Milan:

It would have [taken] at least two to three years to catch up to where they were today — and they would have been two or three years ahead of that. The market's actually happening right now. So that was the calculus.

Simplifying the sourcing process

Founded just over five years ago, Scout RFP set out with a mission to simplify and automate the sourcing process, which typically entails crafting a request for proposal (RFP), inviting suppliers to respond, and then either sifting through the replies or holding an auction to select a winner and award the contract. The company's founders had felt the pain of this process in their previous venture, Onosys, a pioneer of online ordering in the restaurant and pizza chain industry.

In most businesses, this RFP process is managed using spreadsheets and documents stored in the likes of Sharepoint or Dropbox. Scout competes against an absence of systems in a field that's ripe for sensible automation. Where enterprises have invested in a software solution, these often turn out to be too hard to use and end up being neglected, says Garber:

They're sometimes really fantastic tools, but it's like jumping in the cockpit of a 747 to drive across town.

In contrast, the consumer tech background of Scout's founding team means that their product is designed for ease-of-use and rapid adoption, he explains.

One of the unique things with Scout is just how fast organizations deploy the products and start getting value. We've had organizations that have been able to deploy within a week — and most take no more than 40-60 days on the high side.

Part of the explanation for such rapid timescales is that there's very little need to bring data into the system to get started. The organization's RFP templates are typically stored as spreadsheets or document files, which are easily brought into Scout to start running sourcing events. Integration to downstream procurement and finance systems are typically added later in the adoption cycle, says Garber.

Streamlining source-to-pay

The pressure is now on chief procurement officers (CPOs) as well as CFOs to streamline these processes, a trend that Bhusri had highlighted in his comments:

Sourcing in a strategic way, I think that's going to be more important — especially if there's an economic downturn. Sourcing is just a super valuable place to be.

There's no question that when you sit down with the CFO, they're now thinking about procurement as either a best-of-breed pillar or something really important to finance. And that wasn't the case 10-15 years ago.

The current player with a modern source-to-pay offering is Coupa, whose success Bhusri acknowledges, but he believes the market needs another option:

We're not getting into the space because we want to compete with Coupa — the world's big enough for both of us. But the world needs more than one best-in-class solution. And right now, we felt like, beyond Coupa, there was nobody else.

Product integration, market expansion

What makes this particularly appealing for Workday is that source-to-pay provides another route into enterprises that will then become a prospect for its financials product. It's often difficult to make a compelling business case for replacing core financials. The payback from Scout RFP is much simpler to demonstrate, says Rizzo:

It's essentially a surround-the-core strategy. You get these adjacent markets that have a much clearer value proposition ... Being able to drive value on one sourcing event can be your whole ROI.

That case will become all the stronger once Workday has fully integrated the Scout product into its platform, he adds:

It's very important to us, this whole notion of a unified platform — seamlessly do your sourcing, have the contract show up in your procure-to-pay system, be sure you're in compliance, have a unified process from source-to-pay.

Ultimately the integration will extend through to being able to do demand planning using Adaptive Planning, or drill down for more detailed insights in Prism Analytics. But all of this will happen over time, and won't hold back the growth of Scout's existing business. Garber says his team is keen to seize the potential of Workday's global sales reach and will focus on execution in the coming year:

The big goal for us is, focus on growing the product and growing the customer base. They don't want to disrupt us too much ...

Very much this year is execution for us. Through the Workday ecosystem, we have a huge opportunity to get a lot of market share very quickly. We've got lots of airplane time coming up.

Scout's sales motion will bring "Great opportunities to sell into markets we don't sell into," adds Rizzo. One of those is manufacturing, which Workday has historically avoided. That's a sector that's become increasingly important to Scout, says Garber. In the early years, most customers were using Scout for indirect spend, but now direct spend accounts for close to half of the total value going through the platform, as more and more customers start using it to source materials. That opens up a beachhead that Workday may want to exploit once it's ready to target the manufacturing sector — though that's more of a long-term view, Rizzo confirms.

My take

Workday has moved decisively with its acquisition of Scout RFP to seize a huge opportunity that is opening up as organizations start recognizing the need to automate their source-to-pay processes. It's a trend I've been watching in my coverage of Coupa — here's a prediction I made back in 2015:

Over the next decade, spend and sourcing is going to be radically transformed by connected digital processes. Woe betide any organization that cannot buy all its needed resources on-demand in a properly managed, automated, end-to-end process all the way from selection to payment. Anything less will not be competitive in a digital economy. But getting there will mean tearing down many of the walls and boundaries that today artificially and wastefully divide and separate the activities of sourcing, buying, supplier management and payment.

Workday has seen the success that Coupa has had with its end-to-end solution. It also knows from its own experience that there's a big demand out there for modern procurement and sourcing systems. Now it's in the right place at the right time to put all of that together.