Category Archives: Market Intelligence

Will Coupa Inspire?

Inspire starts tomorrow, with what many would consider an impressive line up of speakers, including the great Wozniak, co-founder of Apple. The question is, will you be inspired, and, most importantly, will you be inspired by what they have to offer.

It’s a good question, and one each person will have to answer for themselves. But, at least in the doctor‘s view, an equally good question is what should inspire you?

In our space, most of the technology being sold is, believe it or not, (well) over a decade old. In some cases, it’s *gasp* two decades old. RFX / Auction is over two decades old, and one of the early purveyors, FreeMarkets, was founded 22 years ago. Coupa launched its core offerings on Procurement Independence Day 11 years ago, and the core technology in each of the half-dozen companies it has acquired over the last few years is over a decade too — including Trade Extensions (now Coupa Advanced Sourcing) and Spend 360 (Coupa Analytics).

So what should inspiring? Especially in this day in age? One word. One critical word that is the last word in Coupa’s one sentence event description that claims Inspire is the biggest industry event for creating real, business value. New and differentiated value that you could not obtain before. And where should one look for that value?

The User eXperience

A good user experience can’t be oversimplified. An application that takes a week to learn basic functionality and a month to do anything of moderate complexity greatly extends time to value and limits how much a user will ever be able to do. But an application that is intuitive, makes it easy for a user to do standard tasks with no training, and complex tasks with the help of user guides gets a user to value quickly. Plus, a good experience makes a user want to do more while a bad experience makes a user want to avoid the application as much as possible. And a user experience that is leaps and bounds ahead of the current standard will bring immediate, unexpected, benefits that cannot be predicted.

Multi-Functional Application

Right now, a lot of the current technology is not only narrowly focussed on Procurement but also on direct and indirect sourcing of products and basic services. There is little focus on specialized areas — such as Marketing, Legal, and Finance — or on broader applications — such as Finance analytics, Logistics improvement, MRO. An application that can also provide the same value to other departments and bring more than point-based value to the enterprise is many times more valuable than an application with limited focus and even more limited results.

An Inclusive Design

As SI has continually pointed out over the years, your success is extremely dependent upon your suppliers’ success because their failings are your failings. If their products fail, your customers blame you. If their reputation fails, so does yours. They need to be as successful as you in order for you to succeed. So tech that helps you make this happen is key.

So, in summary, when looking for inspiration, look for that which is going to really change the way you, and your team, does business. And if you find this at Inspire, then it will be a game changer for you.

One Hundred and Six Years Ago Today …

The United States Supreme Court declared Standard Oil to be an “unreasonable” monopoly under the Sherman Antitrust Act and ordered the company broken up. Given the constant M&A spree across the technology space as a whole, and not just the Procurement space, the concept of an unreasonable monopoly is again becoming relevant.

Alphabet (Google), Apple, IBM, Microsoft, and Oracle are all Fortune 100 companies, and all of these not only control massive amounts of data (that is now more valuable than gold), but massive amounts of software — and in most cases, back office software and, in a couple of cases, Procurement software. Now, only Oracle has a major Procurement offering, with SAP (Ariba), a Fortune 200, being the biggest in our space, and makes companies like Coupa (at a mere 1.67 B valuation, 1/70th of SAP’s) a drop in the bucket, but still, at the rate Coupa in particular is gobbling up companies and building a best-in-class S2P offering, it won’t be long before an Alphabet, Apple, Microsoft, or even a Salesforce take interest and gobble them up, offering an integrated inbound-outbound back-office management system at a 100B+ valuation like SAP.

At this point you gotta wonder if we’re soon going to have to worry about technology monopolies and our software companies being broken up — Alphabet has undue influence over the internet even compared to Apple and Microsoft; Microsoft has undue influence over the desktop even compared to Apple; and Apple has undue influence on the mobile market with its iPhones and iPads, and these companies all have a host of other offerings (subsidized by the insane profits their primary product lines offer) that are, or will, become hard to compete with. And if one of these companies ever gets the IBM back-office model or the Oracle one-instance model right, they will literally have an enterprise software monopoly.

And the sad thing is that while data, internet, desktop and software monopolies are bad, right now Fortune 500 / Global 3000 companies desperately need end to end solutions in order to be efficient, effective, and bring their laggard supply management programs into the modern era. We need a few apparent monopolies to define the space, get it recognized, advanced the laggards to the point where they are ready for best in class solutions, but then we need these monopolies hampered so that new best in class companies have a chance to take the space program. It’s a delicate balance that is needed, but will it be maintained?

Analytics Gotchas To Watch Out For!

Companies win or lose in the modern marketplace based upon the actionable insights they can derive from their data. We’re in the age of information warfare (that is used against us everyday, especially in political elections, but that’s a post for a different blog), and companies are competing with, or attacking, each other based on the quality of their data. This is why big data science is taking off and why many companies are engaging third party “experts” to help them get started. But not all of these experts are truly experts. Here are some questions to ask and gotchas to walk out for when considering the pitches from supposed experts.


What’s in the 10% to 20% that wasn’t mapped?

While it’s true you can get a lot of insight when 80% of the spend is mapped, and often enough to get an idea where to dig in, there’s two things to watch out for when the data “experts” come back and say they’ve mapped 80%. First of all, is it 80% of spend, 80% of transactions, or 80% of the supply base? Be very careful to understand what 80% was mapped. If it was spend, chances are it’s the big value transactions, and the tail spend is unmapped. If the tail spend contains small, but critical components to production (such as control chips for expensive electro-mechanical systems), this could be problematic if this spend is increasing year over year, or everyone could be okay. If it’s 80% of transactions, this could leave the largest value transactions unmapped, which could completely skew the opportunity analysis. If it’s 80% of the supply base, the riskiest suppliers could go unmapped, and the risk analysis could be skewed.


How many of the recommendations are backed up with your data and not just industry benchmarks?

If the “expert” says that their benchmarks indicate huge opportunities in specific categories, make sure the benchmarks are based on your data, and not data gathered from your competitors (and used in lieu of doing a detailed analysis on your data). Make sure the “experts” are not taking shortcuts (because your data was dirtier than they expected and they didn’t want to make the effort to clean it).

Remember what Sir Arthur Conan Doyle said, It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts. And, specifically, before one has their own data, not just any data!


Never forget there are lies, damn lies, and statistics!

In the best case, statistics are used for supporting arguments rather than leading, illuminating, arguments. In the worst case, they are used to plug holes in the preliminary analysis that the “expert” would rather not tell you about. (Experts rarely want to admit your data is so dirty and incomplete that they couldn’t do their preliminary analysis to the promised level of accuracy in the time given. They’d rather discover that during the project, after they have it, and, if necessary, put in a change order to clean it for you, and take more of your money.)

Remember that statistics can be used to skew arguments just about anyway you want to, especially if you are willing to use +/- with 90% confidence …


Not everything that can be counted counts!

Remember what Einstein said, because in this age of data overload it’s never been more true. Detailed analysis on certain types of trend data, social media reviews, and segmented consumer purchase patterns don’t always yield any insight, especially when the goal is spend reduction or demand optimization. It all comes down to what Denning said, if you do not know how to ask the right question which will help you focus on the right data then you discover nothing.


There’s no such thing as an alternative fact!

While most consultants in our space won’t try to sell you alternative facts, they may try to sell you alternative interpretations to the ones the data suggest. This is almost as bad. Always remember that Aldous Huxley once said that facts do not cease to exist because they are ignored. If we only had to deal with experts and consultants ignoring facts. These consultants especially in the political arena, that try to sell alternative facts or alternative interpretations are selling what has to be the biggest crock of bullsh!t they have come up with yet.

Finally, its not only opportunities that multiply as they are seized (Sun Tzu), it is also misfortunes that come from making bad decisions from bad or incomplete analyses.

And yes, someone has to be the gnashnab!

Important Things to Consider in a Merger and Acquisition

When doing a M&A, many companies over focus on the balance sheets, and the potential balance sheet that could result from the merger/acquisition. For example, if the company being acquired has a product that could be sold to a large percentage of the current customer base at a pretty penny, if the customer base of the company being merged with would be very likely to acquire the current company’s product, if the combined offering would appeal to a large new customer base, and if the merger could take a considerable amount off of overhead (through facility, asset, and resource rationalization), a merger or acquisition is often give a thumbs up even if the M&A could be toxic. How so? Let’s discuss.

Culture. As pointed out in last Friday’s post on how Fraggles and Doozers Require a Delicate Balance to Co-Exist, if the cultures are opposite and the relationship not delicately balanced then one, or both, sides of the relationship are going to suffer. Badly. And despite one’s belief to the contrary, you can’t always Dance Your Cares Away.

Process. How do the two companies accomplish their daily operations? How defined and rigid are their processes and how much do they overlap? If one company has a practice of just handing out “suggested” budgets and buying what they want and another has a minimum two level approval just to buy a stapler (crazy, eh)? Trying to instill a heavy process-driven no-maverick culture on what has essentially been a wild, wild west is no easy feat, and might take longer, and cost significantly more, than one expects. Considerably.

Data. The number crunching M&A advisors continually underestimate the difficulty of doing systems integration. It doesn’t matter if all of the systems have file export capability, APIs, or even interfaces to third party connective middleware — it’s difficult. Why? In the majority of organizations, data is dirty. Very dirty — full of spelling and classification errors (including SKU/categorization, document ID, timestamp, etc.), duplicates, holes (key fields missing), and so on. And in order to integrate, harmonize, and normalize (down to a minimum number of) systems, the data has to harmonized and normalized so that it can be matched one to one (on common suppliers, products, locations, etc.). This is a significant data cleaning effort, that, in large organizations, can often take months, or even years, due to the huge volumes of data that have built up. The Finance geeks will usually take the word of a high priced consulting firm that will promise their ability to do the project in X months for Y dollars, but then realize when they dig in deep it will at least 3 times as long. This is a huge cost and a considerable delay to expected efficiency gains.

Platform. If the M&A is between two software companies, the purpose is usually to acquire a (semi-)complementary software technology that, when integrated, will provide the combined customer base with a bigger, more valuable (and to the combined company, more profitable) offering — but that’s not always as easy as both parties might expect. Generally speaking, software companies that create software for a living believe “it’s all just code, and we’re good at code, so integration will be no problem”, but that’s not always the case. If the two products are on (completely) different stacks; if one product requires a deep knowledge of complex mathematics, modelling, or data science and the other is just implementing a simple business process without a lot of complicated logic; or if one product requires deep domain expertise (such as insurance pricing in a complex regulatory market, aircraft engine reliability testing, etc.) and the other requires nothing more than a knowledge of modern UI elements, that is definitely not the case. And if the acquiring company is the one whose developers have never coded anything that requires deep mathematics or domain knowledge and the acquired company’s code requires world-class expertise to build, this is generally not an integration that’s going to go smooth, if it happens at all.

In other words, a successful M&A is not all about the numbers — it’s about the synergy, which usually has nothing to do with the numbers at all (but which will typically push the numbers up as soon as the two companies truly become one).

… And Trade Extensions is No More!

As of Thursday, one could look up a Form 8-K filing on the SEC site from May 3, 2017 that simply stated that Coupa had completed its acquisition of Trade Extensions, now called Coupa Advanced Sourcing for those of you on the ball (and watching TE profiles on LinkedIn for updates as well). SI expects you’ll see a formal press release early this week.

While SI completed its initial analysis shortly after announcement, it’s going to hold off publishing until after Coupa Inspire to see if Coupa inspiration changes the doctor‘s mind at Inspire. 🙂 # Look for a deep analysis the week of the 22nd.

(For speculators, you can check out SI’s historical writings on M&A in general and its posts on the importance of cultural conformity in partnerships and then balance these views with the simple fact that only one* acquisition of an optimization platform provider has succeeded in the Sourcing/Procurement space to date, and probably take a guess as to the doctor‘s current view. But it would be only a guess.)

*Tigris was swallowed by VerticalNet; CombineNet shrivelled in SciQuest, now Jaggaer; Mindflow was killed by Emptoris (which was in turn butchered by IBM, whose initial foray into optimization was so bad that they ended up giving it all away for free in COIN-OR) and the founders of Algorhythm subsumed their optimization capabilities into their rapid application development platform Applifire! Only the VerticalNet acquisition by BravoSolution was a success, and likely only because the BravoSolution model required keeping VerticalNet more-or-less in-tact as the US operation of the global BravoSolution organization (as there was essentially no US presence at the time).

#Or at least lets him focus in on one analysis in particular (as his analysis is actually a bifurcated analysis that depends on decisions and directions taken over the next year … will make for a very long blog series as is … )