Earlier this month, Coupa Software, one of the largest players in the procurement and supply management space announced that it has acquired LLamasoft, a leader in AI-powered supply chain design and planning for approximately $1.5 billion. Simply put, the size, scope, and potential impact of this deal are impressive. Ardent Partners was briefed by the Coupa team, led by Donna Wilcek, their SVP of Product Strategy and Innovation and Michael Schanker, Coupa VP, Strategic Marketing on the day of the announcement. What follows is a deal overview and our initial analysis.

Deal Overview

According to its corporate website, LLamasoft, founded in 2003 and headquartered in Ann Arbor, Michigan, is a supply chain design and planning solution provider with annual revenues greater than $100 million, with more than 650 employees and also more than 650 customers including 40% of the Fortune 100. The company helps its customers design, analyze, and optimize their supply chains, specifically supporting demand and supply planning, sales and ops planning, and inventory and logistics optimization. As Toby Brzoznowski, Co-Founder & Chief Strategy Officer of LLamasoft, explained, “We have been the global leader in supply chain design. There are all of these different areas in the supply chain and all of it ultimately leads to a spending behavior, where groups are trying to examine and reduce costs and/or improve service. We have taken data from all of the siloed functions across the supply chain and connected it to create a “digital twin” of the end-to-end supply chain. This is a digital model that incorporates all of the attributes, policies, transactions, and activity happening across the supply chain. We then bring [our] deep operations research and library of data science analytics to bear and this allows our customers to make decisions in the design of their supply chain. They can establish the policies and structure of the supply chain that end up getting executed.”

LLamasoft provides a no-code/low-code platform which will ease the migration of LLamasoft’s solutions onto the Coupa platform and enable the Coupa team to become much more directly involved in driving the solutions going forward.

And, while the company has been in business for 14 years and has a long track record of driving value in the supply chain space, it is the company’s newest product, llama.ai, which has the Coupa team most excited. According to the press release announcing the deal llama.ai delivers “AI-powered decision making across the supply chain to support an almost unlimited number of use cases. With llama.ai, organizations can create purpose-built applications that leverage an end-to-end decision data model and employ a library of proven supply chain algorithms. These applications can run what-if scenarios and surface valuable insights before organizations make key business decisions.”

Ardent Analysis

For the past ten years, Coupa has been focused on realizing its vision to become the “Salesforce of spend;” that is, to become the solution of choice to help an organization optimize every dollar of spend including indirect, direct and services spend. To achieve this vision, the Coupa executive team said that it needs to bring together “disparate applications, disparate teams, and different technologies together on a platform to manage all spend.” Its sizable R&D investments (Coupa notes that it has invested roughly $100 million in R&D this year) and aggressive acquisition strategy over the past few years has enabled it to gain coverage across a much wider spectrum of spend than its core eProcurement and P2P solutions can manage, including travel, contingent workforce, treasury management, and services spend.

Coupa’s presence in direct materials has also grown in recent years with an acquisition and continued development of a sourcing optimization solution, as well as investments in supply risk management and sustainability capabilities. Today, Llamasoft sits in an adjacent area to the sourcing and procurement world where Coupa has become a veritable powerhouse. Coupa executives told us that their customers are telling them that they continue to look for ways to consolidate these processes and consolidate their solutions, and to that end, their customers with supply chains now have the opportunity to do so.

While the supply chain and procurement markets are quite distinct, if also complementary, at times, the Coupa team believes that this acquisition will also serve to create new demand for the combined Coupa/LLamasoft offering. If and how that market develops remains to be seen, but Coupa has long been a trailblazer and now has the heft to shift markets. Certainly the heightened interest and awareness in the supply chain global alone brought on by the pandemic this year could justify the deal.

Perhaps the most interesting aspect of this deal is the application of LLamasoft’s existing data science capabilities and team of data scientists to “the $2 trillion Coupa community data” set. LLamasoft specializes in developing decision-making and modeling support tools for its customers. Applying that expertise to a wholly massive and unique data set is the type of opportunity needed to better understand the true value drivers in procurement. “Getting their brain power on top of the $2 trillion in Coupa community data and determining how that delivers more value and insights to Coupa’s users is the focus. We expect all users of Coupa to see more value from this.” said Donna Wilcek.

Beyond that she continued, that the addition of the Coupa data set should help make the LLamasoft supply chain models more accurate as well. She then described a scenario where treasury will one day sit with procurement and supply chain and be able to track in real-time, the future impact on cash and profitability that different procurement and supply chain decisions have. That is powerful stuff and the kind of game-changing vision that can shift an industry. Coupa continues to blaze its bold vision, supported by smart solutions and now, large acquisitions.

Andrew Bartolini is the Founder & Chief Research Officer at Ardent Partners, an industry analyst firm focused on supply management (i.e. sourcing, procurement, accounts payable).

Disclosures: Coupa is a client of Ardent Partners. The author holds no financial investments in any company mentioned in this article.

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