I recently presented at a panel on Top 10 Trends in Enterprise Software.  This was a good event, rich with dialogue and interesting ideas, but what struck me most was the enthusiasm around a renewed focus on the enterprise customer.  When Dave Stephens and I started Coupa in 2006, the media and VC community were so enamored with consumer-oriented Web 2.0 startups, that it was hard to get people to listen to our pitch.   The “conventional wisdom” at that time was that the enterprise applications market was more-or-less cornered by Oracle and SAP.   New entrants needed too much capital to scale the business, and couldn’t effectively compete against the big boys. We persevered though, and eventually raised the funding that has allowed us to build a product we are proud to stand behind.  We’ve built a strong business around Coupa e-Procurement, and now people want to hear our story about how we’ve approached the enterprise applications market differently.

Cloud computing and software-as-a-service (SaaS) enabled us to operate a lean business, open source tools allowed us to develop cost-effectively and the web made it possible to build awareness and generate leads with minimal investment.  Even more important, though, was our decision to eschew a services revenue stream, and focus instead on making our product so simple to use and easy to implement that we could attract more subscribers to the service. That turned out to be a wise move, and has since become a hallmark for how many enterprise software companies are developing their products.  Today’s enterprise software leaders are building solutions that require few services, if any, to start using the product.

When I first started building enterprise applications at Oracle, we expected to generate $5 in services for every dollar of software license revenue.  Today, if you can’t flip that paradigm on its head ($.20 of services for every $1 of license or subscription revenue), you’ve got a problem.  In fact, the ratio between services and subscriptions should be even lower.  If you can’t achieve that revenue mix, you probably haven’t designed your solution correctly.  You simply cannot achieve the viral growth like Salesforce.com experienced with a heavy services model, and expect to steal market share from an entrenched incumbent, like Salesforce did to Siebel.

If you’re still skeptical on the merits of the self-service, simple to use, fast to deploy model over services-heavy alternatives, let me offer three arguments:

1. It fundamentally shortens the sales cycles, while making the prospect smarter about what they are getting into.  With offerings like free trials, prospective customers get more than a canned demo from a salesperson – they see how the software will actually work in their environment.  There’s no way to offer trials (cost-effectively) if it means that the prospect and vendor need to invest thousands of dollars up front to implement the software.  And I’m a firm believer that a more educated prospect is a better prospect (and customer).  I don’t want the shelfware problem of the 90’s and early 2000’s.
2. The customer payback period shrinks. In today’s climate, no CEO/CFO is going to sign off on a 12-24 month payback. And if the product takes six months to implement, that delays time to value and ROI even more.  I heard one of our competitors speak about how their implementation services business continues to grow because of all the business process re-engineering associated with their procure-to-pay implementations.  They acted like it was a good thing.  Maybe for them, but certainly not for the customer.
3. As a vendor, you get leverage in your operating model. A services-heavy businesses model may work if the goal is to achieve modest profitability and slow growth, but it will hinder your ability to invest in the game-changing product/solution innovations that drive faster growth.

Coupa has been easy to implement from Day 1, but we set a new standard for deployment speed with the introduction of Coupa Quickstart earlier this year.   Customers can now configure Coupa e-Procurement and cut their first purchase order in under 90 minutes.  Several new customers implemented Coupa through Quickstart and the results have been amazing.  See for yourself – in the video below, I run through the Quickstart process in just 10 minutes.

Footnote

To close out this post, think about what Salesforce.com did to Siebel.  An even better analogy might be to consider how TurboTax upended the tax preparation industry, especially services firms like H&R Block.  The vast majority of Americans can now complete and file their 1040’s on their own, guided only by the questionnaire and best practices embedded in the software.  TurboTax served as inspiration for Quickstart as we challenged ourselves to make it easier and easier for the end user to configure and deploy Coupa e-Procurement.  And if you don’t believe that this matters all that much, I pulled some numbers that compares tax preparation services revenue for TurboTax and H&R Block since 2000.   Which one do you think has the wind behind its sails?