Why Spend Management Requires an Open Approach
What does the O in C-O-U-P-A stand for? Open. There are three dimensions to how we think about openness at Coupa.
At the product level, Coupa is open in terms of being able to connect and coexist with other technologies. We believe open products win over closed products.
At the industry level, in the spend management space, Coupa is open in terms of how buyers and suppliers transact with each other—in a zero-fee supplier network with as few barriers as possible to conducting business.
At our core, at the company level, we are open in spirit. As a public company, we show our financials openly. We share our strategy openly. We engage with customers openly. We share ideas and learn from each other, from our customers, and from our partners openly.
Why is openness so important? Openness reduces friction. It creates trust. It supports innovation. It propels the best ideas, the best people, and the best organizations forward. It helps relationships grow. It adds value.
A Closed Place
These concepts are not abstractions for me. I came to this country from a place that was about as closed as can be: the former Soviet Union. My time there, and my experience leaving and coming to the United States, drove home some enduring lessons about the value of openness.
My parents and I left there when I was seven years old. Almost no one could leave the Soviet Union at that time. The exception was if you were Jewish. In Russia at that time, you were either Russian or Jewish. If you were Russian, great. If you were Jewish, not so much. The only silver lining was that the government would allow Jews to immigrate to Israel—not that they made it easy to do so. The application process was long, confusing, and unpredictable. It took us four years to get the required permission.
Throughout that time, there was the utmost need for secrecy. In those days, applying to leave was not a matter that people could openly discuss. Doing so meant running the risk of being seen as a traitor, which would lead to some serious problems. In addition, if it became known that you had applied and were rejected, then you would become a refusenik, which meant that you could be fired from your job for no reason, kicked out of your apartment, jailed, or even secretly shipped off to Siberia to die.
Even if you were one of the lucky few who got your permit, you kept that a secret as well, because while the government was letting you leave, it wasn’t from a place of “good luck to you.” It was more along the lines of, “we hope you fail miserably.”
So, my parents kept our potential exits a secret for more than four years. They only told their closest friends, another couple who lived in our communal apartment in St. Petersburg, that we were going to the United States. They made our travel plans in secret. We didn’t say goodbye to anybody. We simply left, as everyone else in our situation did, in the middle of the night, without a trace.
Even I only got the partial truth – they told me that we were moving to somewhere outside Moscow, and told me not to tell anybody. They didn’t trust me with the full story, and I don’t blame them. I never shared that information, because they told me not to, but they wanted that additional security. Imagine having to lie to your own child for your family’s safety. That is what we were escaping from.
An Elaborate Plan
Our escape plan wasn’t simply “let’s hop on a plane in St. Petersburg and fly to JFK.” As Jews, the only place that we were authorized to go was Israel, which meant that my parents needed a slightly more elaborate plan to get us all the way to the US.
First, we flew to Vienna, a central point from which people typically went to Israel. But, instead of getting on a plane to Tel Aviv, we met up with this agency that helped Russian Jews escape. We took a train in the middle of the night to Italy. At some designated point, we threw all our luggage out the window so that when we got to the immigration desk there, it looked like we were on a day trip.
In the meantime, our luggage was picked up by trucks sent from the agency and returned to us after we cleared Italian immigration. We “vacationed” with three other families in one room outside Rome for a couple of weeks while the agency arranged for a flight to the US.
At some point during our stay in Italy, my parents finally felt safe enough to tell me where we were really going. I remember being on the Alitalia flight to JFK. The flight attendant gave me a sticker book with a US map and stickers of famous places, and I had to put the stickers on the right places. I remember putting the Statue of Liberty on New York City, and my mom explaining to me, "No, no, it's not on New York City, it's on its own island." I tried to visualize it but I just couldn’t. What do you mean, it's in the middle of the water?
Well, that was the least of my surprises.
An Open Place
Not long after we arrived in New York, I remember listening to a conversation my parents were having with some new American friends, and these people were criticizing the American president. In front of my parents. People they barely knew. In Soviet Russia, that kind of freewheeling dialogue was not only frowned upon, it could result in the KGB knocking on your door. I remember thinking—aren’t they taking a big risk by speaking so openly? This was my introduction to freedom of speech.
Our escape from the Soviet Union is an extreme illustration of what happens when things are closed: Lack of communication. Secrets. Lies. Friction. Uncertainty. Mistrust. Fear. When you have nothing to fear, you can be yourself. You can be open.
People’s Court
As I became more assimilated into America, I realized that while the system gave you freedom to live your life the way you wanted to, and engage in any business of your choice, it fell upon each individual to decide whether they wanted to live life in an open, transparent, and authentic way. I noticed that not everyone chose to do so. My first exposure to this was the TV show, “People’s Court.”
I was addicted to the show, but I remember thinking, what kind of human relations are these? These people are focused on revenge and spite over such trivial things. Yes, there’s a system that attempts to be free and fair, but there are too many individuals within it who are simply grounded in greed. Their spirit is not one of collaborative problem-solving; it is one of getting the most for oneself at others’ expense.
I even tried this out for myself. Early on in running my baseball card business, I put together sealed packs with a great card on top in order to sell a bunch of near-worthless cards. That's what I saw around me, and so I thought, why not me? I found out that the system not only supported this type of behavior, it clapped when you got away with it.
Over time, I became really uncomfortable with these types of practices. As I matured, I realized there was a broader lens to this whole thing. In the long run, it can't just be, “your loss is my gain.” In business, over the long term, one plus one should equal more than two, if you have an open spirit with your partners and customers and employees. There's much more value to be created from openness, and from working together, than there is from us trying to trick each other, and win at each other’s expense.
From Ransomware to Open Products
Coming up professionally in the enterprise software industry, I didn’t always find this spirit of openness. In the world of on-premise software, the vendor's desire, especially if that vendor was the market leader, was to avoid interoperability at all costs so that customers would have to standardize on their products.
These closed systems hurt customers, because they needed a way to interoperate with other systems. When there wasn’t any way to do so, these customers would begrudgingly buy a single vendor’s offering, even in areas where that vendor added very little value. This power dynamic is why the phrase “ransomware” became popular in our industry. While ransomware was great for vendors’ bottom lines, it rarely created value for customers.
With software becoming cloud-based, this dynamic is changing, and quickly. Vendors are moving in the direction of greater openness and interoperability, in many cases because they are forced to do so. When I took the helm at Coupa, I was determined to embrace the trend toward openness proactively, and infuse that spirit throughout the company.
From a technology standpoint, our whole platform is built on Ruby on Rails, an open-source language. We are certified to integrate with SAP, who some might argue is our primary competition. Our CoupaLink program provides open APIs to be able to integrate with other systems. As an example, we just added a very important partner, Nvoicepay, which automates supplier and expense payments, to that program.
There are more such partnerships to come. In some cases, Coupa will be the hub, and in others, we’ll be the spoke. Over time, we want to achieve complete interoperability of supplier financing, inventory management, budgeting, forecasting, financial planning and tax systems. We’d like to make it so just about anyone can snap into Coupa and leverage the value we offer.
By being open, we can create more value for customers faster, by leveraging the ecosystem of other technologies. One company can't do everything. We will focus on our core competencies, and work with other innovative solution providers in our industry who are doing the same.
An Open Network
One of our greatest strengths is offering a transactional platform for business spending. We’re market makers, connecting buyers to more than three million suppliers in an open network where any supplier can transact for free.
In any network environment like this, the entity at the center can make money. Companies like MasterCard and Visa sit in the center of billions of transactions and make a percentage on each one. Investment banks connect you to funds, for a fee. Lyft connects you to transportation, and they take a cut of what you pay the driver. It’s a legitimate business model.
So why is our network free, while many in our space remain closed and fee-based? Aren’t we missing out on a big opportunity to retain more value for ourselves, and now that we are public, for our shareholders? It’s a legitimate question.
The answer is that in order to create a vibrant supplier network for the long term, which is what we are aiming for, you start by servicing the side that is facing the greatest challenges. There is simply no shortage of suppliers trying to sell their offerings. But, there is certainly a great deal of inefficiency in how companies spend money. What we're good at is supporting the corporate buyer with best-in-class information technology. One of the buyer's problems is dealing with fee-based supplier networks, which take a cut from the supplier. Buyers can't easily get the suppliers to participate, or if they do, the suppliers increase prices to make up for the network fees.
Our solution is to make it so that our buyers can transact with anyone through our network. But, rather than having them force their suppliers to use our network, why not let them offer suppliers a menu of options--email, fax, EDI, or cXML? This way, buyers can derive value from our platform even if suppliers don’t want to use our network. If a supplier comes to see the value of the Open Supplier Network, they can connect any time.
Reality Check
Openness matters from a technology perspective, and it also matters from a “reality check” perspective. In 2017, there is no way to make people stay within a closed supplier network. We live in a world where people can simply Google some supplier and buy directly. In fact, many do. Many businesses are now coming around to the realization that openness attracts more customers over the long term, and they’re adjusting. We’ve proudly gone to market with that spirit, right from the beginning.
We believe that over time, all buyer and supplier interaction will be frictionless and electronic. For example, all one will need to do is speak the words, “I need a whiteboard,” into an internet connected device. A whiteboard from the supplier that is physically closest to them and has it at an acceptable price point, at the highest quality level, will show up, and the whole transaction will have been paid for and recorded with no further effort.
This is perhaps one of the reasons that Amazon bought Whole Foods—to create a perfectly optimized food delivery network focused on the needs of the buyer. This is what is already happening in so many industries. The question is—should we embrace openness to get there faster, or should we try to constrain it and profit from transaction fees for as long as we can? We decided to embrace it, in order to get to a perfectly optimized network faster.
An Open Company
We’ve spoken about our product, and our network, but what about the spirit of openness of our company? Here again, we’ve made a deliberate decision to operate differently, and to support a partnership approach to doing business. We bring the technology and spend management domain knowledge. Our customers bring their industry and company knowledge. We partner to create measurable business value. This requires both parties to be open about their respective businesses. The way we create openness is by building trust. Here is how we do that across the company.
In sales, my colleagues who demonstrate our products to customers don't work in our sales department, they work in our customer success department. They’re showing real product, not demoware or vaporware. We may discuss future enhancements and innovations, but we only show what we have, and we openly state what we don't have. When an RFP comes in, too many companies in the software industry say yes to everything, and then try to figure it out later. We don’t do that. We say, this we can't do, but here's why you may want to consider doing it differently.
In product, how do we decide what we will say “yes” to? That, too, is open. Customers submit their feature requests to the Coupa Community, and the entire customer community votes on them. The ones that get the most votes get prioritized for development, and we often work with a handful of key customers in the development process. We believe ideas can come from anywhere, so we’ve operationalized processes for collaborating with our customer community, processes that we will continue to scale.
In marketing, we’ve worked with our customers to reveal what we call the real math of success. We have a whole program dedicated to helping customers quantify the value they’ve gotten using our software. That helps them make their business case internally. And, because they’re willing to share those numbers publicly on video and on stage at industry events, other people can trust that they can also attain measurable results.
In technology, we make our platform data and uptime public at trust.coupa.com.
We went public last year, and one of the reasons was so that the diverse community of people in the world who do business with Coupa can see our financials. This has added another layer of transparency and openness to our discussions with prospective customers. Curious about our margins? You can take a look for yourself—here's how much we make per unit. You want us to sell to you for a lot less? Well, look at what that will do to our business. Do you want a business partner that's hamstrung, or do you want to work with a strong, durable company that continues to invest in its business for the long term? Well, then please pay us fairly. In a perfect world, you would pay us based on the value we create for you, but for now you can see what our cost structures and profitability are, and that our prices are fair.
Why do we work so hard to maintain this level of openness? Marc Benioff of Salesforce is famous for saying, it’s all about trust, which I agree with. But I also think that trust is based on openness. In a closed system, where you’re constantly looking over your shoulder and having to watch your back, it’s risky to trust anyone. That creates friction. It slows things down, and forces you to do things in a suboptimal way. The fastest way to build trust is to be open and transparent, and then people will be open and transparent with you as well, and you can do great things together.
