Coupa Gains on Competitors in Expense Management, Driven by CEO’s Unusual Vision of SaaS and Success

4/22/13Follow @wroush

Three decades into the PC revolution and nearly two decades after most businesses joined the Internet, you’d think that software makers would already have identified every conceivable inefficiency in the way companies work, and that they’d be running out of ideas for how businesses can use technology to save more money.

Not even close. Take purchasing and expense management as an example. Electronic systems for procurement, invoicing, and reimbursement have been around since before the dot-com crash, but the average company still spends a jaw-dropping $28.91 to process a single expense report, according to a 2010 report from research firm Aberdeen.

That leaves a big opening for startups that promise to help other businesses get their spending—and the way they manage it—under control. And one of the companies plowing right through that opening is Coupa, based in San Mateo, CA.

Backed by $49 million in funding from Mohr Davidow Ventures, Crosslink Capital, Battery Ventures, BlueRun Ventures, and El Dorado Ventures, Coupa is attempting to steal the markets for corporate procurement and expense management software away from older competitors like Concur, Ariba, and Oracle. It offers a subscription-based Web and mobile service that aims to make placing a purchase order, paying an invoice, or submitting an expense report just as easy for corporate employees as shopping at Amazon.

It may not be as sexy as building mobile games or running a crowdfunding campaign to build a smart watch. But the fast-growing startup, which has doubled in size over the last 18 months, to nearly 200 employees, is out to fix a problem that affects every business—namely, the dreary process of actually paying and accounting for the supplies, materials, and services that keep a company operating.

A Coupa group photo from April 2013

A Coupa group photo from April 2013. (Click or tap image for larger version.)

Coupa’s solution seems to be working—last year market research firm Gartner placed it first in its rankings of e-procurement companies, above Ariba, SAP, and 50 other competitors. It’s used by more than 300 companies, including some as large as McDonald’s, Subway, Salesforce.com, Gannett, Blackstone, Reebok, and Adidas. On an average business day, half a million transactions flow through the system, with a total value of more than $5 billion per year.

And after four meetings with the company since September 2011, I’m ready to attribute the company’s rapid growth largely to its bold CEO, Rob Bernshteyn. He’s a a former SuccessFactors executive who joined Coupa in 2009 and is carving out a place as one of Silicon Valley’s most single-minded leaders.

Bernshteyn’s vision for Coupa is part technological, part ideological. The technology part is all about the cloud; the company argues that a Web-based, software-as-a-service approach is more flexible and efficient when it comes to tackling a complex, cross-organization function like expenses.

The ideology part, which seems to be just as important in this case, has to do with the way Bernshteyn views customers and the way the company thinks about sales.

In a nutshell—and this is going to sound like marketing folderol, but bear with me—Coupa is focused on helping its helping individual users be more successful in their organizations, rather than on increasing nebulous measures of “customer satisfaction.” The distinction is pretty key, and I’ll come back to Bernshteyn’s ideas about that in a moment.

But first, the lowdown on Coupa’s technology. It consists of a suite of cloud-based applications. There’s one for submitting requisitions and purchase orders electronically, one for tracking invoices from suppliers and making sure they’ve been approved and paid, and one for tracking employees’ business or travel expenses. There’s also an application for centralizing purchasing contracts, another for benchmarking your company’s spending against other companies that use Coupa, and yet another for running reverse auctions, where suppliers compete for a company’s business.

Inside the search bar that stretches across the top of the main Coupa screen is a simple prompt asking, “What do you need?” That Google-like interface is designed to make employees feel like they’re just shopping online, while at the same time helping them comply with purchasing policies.

Most employees would like to do the right thing when it comes to spending company money, Bernshteyn says. They just don’t have the patience to dig through company policies or use complex client-server software to find an approved supplier, so sometimes they take shortcuts.

“There is maverick spending everywhere,” Bernshteyn says. That’s because “in the past, procurement was a blocker. If you wanted to get anything done, you had to go around them. Our philosophy is exactly the opposite.”

Say you need a new peripheral device for your office laptop. Coupa’s goal is to make it easier to find the right piece of equipment within its system, and get the purchase approved and paid, than it would be to buy the same gadget at Amazon or Office Depot. “Because we have a very intuitive platform that’s easier to use than any other alternative, companies don’t have to push it—employees are pulling,” Bernshteyn says.

One of Coupa’s boasts is that it’s the only maker of spending management software that puts procurement, invoicing, and expense tracking into a single system. Concur mainly handles expense reporting; Ariba, which was acquired by German software maker SAP last year for $4.3 billion, is mainly used for procurement.

Bernshteyn calls Coupa “a single solution for controlling all non-payroll spending in the cloud.” The company says customers who have consolidated these previously separate functions have reduced their administrative costs for expense management by up to 11 percent.

At a recent conference for Coupa customers and partners in San Francisco—where Coupa announced that, among other things, it had purchased a San Diego expense management startup, Xpenser—I talked with Hyrum Kirton, vice president of procurement at Salt Lake City, UT-based Avalon Health Care. Avalon runs a network of 40 skilled nursing facilities and hospices and has 4,800 employees and $320 million in annual revenue. The company has long owned an enterprise resource planning system, and ERPs traditionally include finance and accounting functions. But Avalon’s system didn’t provide a centralized process for handling purchasing and accounts payable, which was a point of frustration for Kirton.

“It was very difficult for me to know for sure that everything was being bought within our guidelines,” he says. “I could make recommendations and give best practices, but it was very difficult to police.”

Avalon spent two years evaluating new e-procurement systems, Kirton says. The company had four main requirements. The new system would have to centralize invoicing; it would have to show facilities managers their budgets, and deduct all expenses from those budgets, to encourage spending discipline; and it needed to be “provider-pay,” meaning that suppliers shouldn’t have to spend anything to hook into the system. Finally, Avalon wanted employees and managers to have the ability to submit and approve spending requests on the go, via their mobile devices.

Kirton says Coupa was the only system that provided all four key features. Because Coupa is Web-based, for example, its system is accessible from any smartphone browser.

On top of all that, at Kirton’s request, Coupa’s engineers built some features specifically for Avalon, including an accounting module that helps the company deal with tax and freight expenses. “I feel fortunate that they have been giving me that amount of time, given our size,” Kirton says. “I am not their biggest customer by any stretch.”

Kirton says his job has gotten easier, and his whole department has become more effective, thanks to Avalon’s contract with Coupa. And that leads back to Bernshteyn’s almost monomaniacal emphasis on what he calls “customer success.”

At a company all-hands meeting that I attended in September 2011, Bernshteyn told his troops that both engineers and salespeople at Coupa should focus first on making the platform so easy to use that managers and employees choose it over other methods, and then on making sure that something good happens as a result.

While many companies obsess over metrics such as J.D. Power satisfaction ratings, Bernshteyn says the only measure he cares about is whether customers feel like they were able to get something important accomplished using Coupa. “We are not interested in satisfying anybody,” Bernshteyn said at the all-hands meeting. “You need to deliver real business value. You need to hear words like ‘I was able to go to my CFO and get promoted. I created real change in my company.’”

Translated into sales strategy, that means Coupa doesn’t spend a lot of time pushing the individual features of its software, even though it has plenty to offer. In Bernshteyn’s view, a successful customer becomes a “referenceable” customer, meaning they’ll volunteer to advocate the product.

“Our job is not to sell technology,” he says. “It’s to go through this cycle of awareness to implementation to customer success, which leads to referenceability, which leads back to sales. This will make us absolutely invincible in this market.”

Whether Coupa is yet invincible remains to be seen. Its current stable of 300 or so customers represents only a tiny slice of corporate America, and competing systems from giants like SAP and Oracle are deeply entrenched in the companies that use them. But in an era of consumerization in business, there’s a general push for office software that’s faster to implement and less cumbersome to use, whether on desktop PCs or mobile devices.

Those are Coupa’s strong points, and it’s why the software is now running on the iPads of store managers at tens of thousands of Subway locations around the world, where it’s being used to order everything from Swiss cheese to chocolate-chip cookies.

“The big players left us an opportunity to fix the mess,” Bernshteyn says. “The opportunity is huge.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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