I was frustrated that I had been railroaded into big ERP implementations three times before I went to Juniper and I didn't want to do it a fourth time.
Unfortunately, he had barely settled in at his desk before learning the company had signed to implement an end-to-end SAP ERP system that included procurement. But Hearn had other ideas, as he recounted in sessions and interviews during Coupa's annual conference in May this year.
Hearn put together a business case for implementing Coupa's cloud-based procure-to-pay suite and went to see CIO Bob Worrall armed with the figures. Worrall takes up the story:
When Dave walked in, I set the spreadsheet aside and said, 'Look me in the eye and tell me your career is worth making this happen.' If you are willing to bet your career and your reputation and your family's livelihood on making that decision, we're in the boat together.
Realizing that Worrall would have other fish to fry as he worked to replace Juniper's existing on-premise Oracle ERP software with the cloud-hosted SAP system, Hearn not only took up the challenge but also promised that the Coupa software-as-a-service project would take up minimal IT resource:
While Bob had upwards of 250 people changing out the ERP that he had selected, I said, 'Give me one IT person and I'll put in Coupa.' That was my sales approach. I didn't sell cost to him, though I did have to produce cost savings.
That wasn't the last battle for Hearn, though. One of Juniper's longest serving board members was Bob Calderoni, then still chairman and CEO of Ariba — the procure-to-pay component of the SAP suite. Inevitably, questions were asked about the decision to reject Ariba in favor of Coupa. But Hearn stood his ground.
I was like, 'I just cannot believe this. Politics has nothing to do with whether a tool is good or not.' But my team hung in there and did a full analysis, and the data proved it.
Hearn had come to Juniper from Kaiser Permanente and a ten-year stint in procurement roles at Sun Microsystems. Originally schooled in direct procurement, managing the supply chain for Sun's display monitors and flat panels, he was used to taking a strategic view of procurement. But when he moved across at Sun into indirect procurement — the function that buys for all an organization's internal needs, from stationery to office equipment and cleaning services — he found a completely different mindset in place.
Established concepts that were commonplace in direct procurement, such as category management and make-buy decisions, were unheard of in what was then regarded as a purely transactional function. Now an independent advisor (he left Juniper in January this year after completing the Coupa roll-out), he sees this failure to apply strategic thinking to indirect procurement as a missed opportunity. It leaves enterprises pinching pennies on clerical efficiencies when he believes they could be saving millions from better sourcing.
We've had 25 years of seeing indirect as a clerical activity.
There's indirect, direct, and then on the sales side many organizations use third-party services for support. Are you going to look at category management or are you going to perpetuate these boundaries?
Indirect needs sourcing management. Shame on us as managers and leaders, we didn't manage it.
His plan at Juniper was to find those greater savings by rolling out Coupa. A key part of the plan was to give every employee access to Coupa so that they would be guided to existing suppliers that had already proven their ability to perform. That was a big change from the old Oracle system, which only a minority of staff were able to access:
At Juniper only one-eighth of the people were allowed to access the old procurement system, because it was so hard to use, of course. You couldn't train everybody, so around 1,200, 1,400 could access it. But our vision in procure-to-pay was, everyone had to have the ability to see it because we're trying to guide them to preferred suppliers.
Getting the cost savings
A second plank was that Hearn's team would focus its attention on the larger-value purchases. This too was a big change from how they'd worked previously, when their main role was seen as purchase order administration, so they spent 60% of their time on smaller purchases. But that meant they didn't have enough time to properly scrutinize the 9% of purchases that were $100k and over, which represented three quarters of the overall spend. In a presentation at Coupa's 2015 conference about the Juniper roll-out, Hearn explained his thinking behind this switch from traditional PO administration to more of a contract management role:
We want to put 80% of my team’s time on contracts greater than $100k. Why? The opportunity for supplier leverage on smaller contracts is low. If it’s under $100k you pick a supplier we already have in the database. I even cut out my buyers from looking at it.
You have to not manage the transactions, you have to manage the dollars.
But his plan to let every employee access the procurement system met resistance from the CFO. Once again, Hearn had to defend his plan and explain the thinking behind it:
She called me, and she said, 'What's this I hear, you are going to give access to the procurement system to 9,000 employees? That's crazy, they are going to spend more.'
[By] logically taking her through why going to 9,000 was the only way to get the costs savings because we had to steer them — then she got it.
There was one more obstacle to overcome. The team was imposing a single, cloud-based, digital system across a global organization in which various countries had their own way of doing things, in many cases based on longstanding paper-based processes. Over eight months starting in mid-2014, the Coupa software was rolled out to 37 countries across Juniper's global operations, each country in turn going live overnight. Seven remaining countries in south-east Asia were postponed until later in 2015 for fear that the move to an all-digital system would be especially fraught in countries known for their fierce attachment to paperwork.
Hearn's team prepared the ground by creating short 'how-to' YouTube videos and making sure that staff knew what to expect. In the event, all went smoothly, says Hearn.
We rolled it out to 44 countries and the only call I got was from China, who said you had to take a PO with the government stamp. None of the other countries had a problem. We did it and only China called.
The Coupa roll-out was completed in 2015 and in January this year Juniper went live with its SAP ERP implementation. Having delivered what he set out to achieve, Hearn left Juniper to become an independent consultant to chief procurement officers on moving to strategic sourcing. In April he also became a member of Coupa's executive advisory board.
Hearn believes enterprises must move away from the old model of indirect procurement being a purely administrative function. He evangelizes a more strategic role that focuses on the business outcomes procurement teams can help deliver.
We're no longer seeing the procurement group being purely transactional, being the compliance police.
It is OK to develop a relationship with your supplier that helps you get work done and helps the supplier be a benefit to your company. Suppliers are an extension of your supplier chain and value delivery. When it's purely transactional, you're suboptimalizing your supply chain.
I first heard Juniper's story when Hearn spoke about the project at Coupa's annual conference in May last year. This year's event brought more details now that Hearn has moved on. He spoke on a panel about procure-to-pay adoption alongside Juniper CIO Bob Worrall and I was also able to sit down with him face-to-face. I should mention that both of them were careful not to name any ERP vendors — I've named them here after further research.
On Monday I wrote about Coupa's impending IPO and the investment it has to make in selling its solution. The Juniper story illustrates some of the obstacles that can get in the way, whether it's CIOs imposing a chosen vendor as part of an enterprise-wide contract, CFOs worried about losing control, or employees simply not wanting to change the way they've always done things.
These are barriers that Coupa shares with pretty much any catalyst for digital transformation. As I'm fond of reiterating, success depends on being willing to not only eliminate paper-based processes but also to think beyond the transactions and focus on business outcomes.
I had one more conversation at Coupa's May event that sheds additional light on the obstacles it has to overcome when persuading enterprises to adopt its solution. I'd originally thought this would be all one post but it's ended up spreading over three — the final of which I'll publish next.