Last week, Coupa Software, one of the leading supply management solution providers in our industry, announced that it had acquired Spend360 International Ltd. Terms of the deal were not announced. We met with the executive team from the two companies to discuss the deal.
The Players
Coupa Software is a name that should be familiar to our readers and procurement leaders around the world. In the space of a decade, Coupa transformed from industry start-up to industry heavyweight including a recent IPO and an equity market valuation of more than $1 billion. Coupa’s initial solution strategy focused on procure-to-pay in the cloud, followed by expense management. These areas remain the company’s strengths. But, over the past few years, Coupa has worked to build out a suite that now includes sourcing, contracts, supplier management, analytics, inventory, and storefront components and links to its Open Business Network which the company says has hundreds of businesses, millions of users, 2 million suppliers, and supports billions in spend. While traditionally known for its downstream solutions, in 2016, we’re aware of several large suite deals that were strongly aided by Coupa’s upstream sourcing and supplier management solutions.
Spend360 is a London-based analytics solution provider that focuses on spend analysis. It was founded in 2012 and is best known for its spend classification capabilities. The company has 30 employees and counts BAE Systems, HSBC, and Nissan among its customers.
The Process
Over the course of 2016, Coupa undertook a lengthy process to find the right spend analytics company to acquire. As part of its research, the Coupa team reviewed/vetted a number of different spend analysis and auto-classification providers, including piloting and active testing of the solutions to see how they handled different spend data sets. It was Coupa’s opinion that Spend360 stood well above the other companies due primarily to its advanced auto-classification capabilities. On our call, the Coupa team referenced Spend360’s smart-learning algorithm driven by machine learning as something that is very differentiated from the traditional rules-based engines in the market today. (Note that at this writing, we have not seen the Spend360 solution. We have requested client references and may append this article if we can connect in a timely manner.) Readers are reminded that auto-classification capabilities can really only be tested/validated in a pilot-type environment using real data, so it is important to really kick the tires when investing in spend analysis.
The Plans
The new team sees opportunities to upsell/cross-sell into the current customer base including a few customers that they have in common. The Coupa team stated very directly that they will start pursuing standalone spend analysis deals. From a product integration and roadmap perspective, Coupa plans to leverage Spend360’s auto-class capabilities as the engine behind Coupa’s current UI and data visualization tool. Coupa also plans to use Spend360’s engine to enhance the benchmarking program that it offers to its customers. Finally, Coupa does not expect the acquisition to have any impact on its current partnerships, including IBM-Emptoris.
Ardent Analysis
One major industry trend that we’ve discussed in any number of reports published over the last few years is that procurement departments are thinking more holistically about their processes and the solutions that automate them. Coupa continues to make smart, aggressive moves in the marketplace and this acquisition is very-much aligned with the direction of the industry. The Spend360 acquisition is small, but strategically important in enabling Coupa to “close the loop” and deliver a full supply management suite. As procurement’s data becomes increasing “big” and also valuable, the ability to manage and categorize it becomes critical to driving and improving overall performance. The addition of an engine that can sit behind Coupa’s cloud-based solution suite is a powerful new asset that Coupa will undoubtedly sell aggressively and sell well. Other uses of the tool, which include organizing the data generated in its business network, are also promising. Coupa believes that the combined solution will compete well in the market on a standalone basis against rising spend analysis stars like Spend HQ and against the more established suite providers like Determine, GEP, SAP-Ariba, and Zycus. Will this deal make an impact on the market in 2017? Time will tell, but Coupa’s had a hot hand and we wouldn’t bet against them.
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