Coupa Software – Macroeconomic Impact, Competitive Dynamics & Corporate Culture

How would you describe Coupa and how it’s evolved over the years? The company has always indicated a strong focus on business spend management but has clearly broadened its approach more recently to include areas such as procurement, payments and supply chain management.

What exactly is Coupa’s TPRM [third-party risk management] product? Why do you think it’s gained so much adoption within the financial services vertical?

Something on everyone’s minds around Coupa and the software industry in general is the market backdrop in terms of the economy. People talk about at best an uncertain economy, at worst a recessionary global economy. How do you think that’s been affecting the company and will affect it particularly in 2023? It’s not lost on me that on one hand, the situation could impact sale cycles and pricing. On the other hand, the company’s business and value proposition to some extent is the ability to save enterprises and mid-market companies money by enabling a more efficient and effective way to manage expenses. How do you see it faring given the current economic backdrop?

I think a lot of people might think companies would be less inclined to cut or not invest in BSM [business spend management], given that should probably be a priority amid a potential recession. What you’re saying is that this is important, but not among the top two priorities. How do you see Coupa faring given the current environment? I think a lot of people wonder, is the company nice-to-have or need-to-have? It sounds as if it’s actually more nice-to-have and this characterises it as more vulnerable than some might expect, during the next couple of quarters at least.

It sounds as if you’re saying Coupa could actually be more adversely impacted over the next couple of quarters, depending on how economic conditions play out. Are there specifics you would highlight in terms of sale cycles and pricing in terms of where some of the vulnerabilities could be?

Coupa’s normal sale cycle might be 18 months, which is probably longer than a lot of companies would suggest their average sale cycles are. Based on the current conditions, could you see that sale cycle being elongated even further?

It sounds as if it’s an 18-month sale cycle for enterprises, which may go up, as I think a lot of people would expect, in 2023. What about pricing? Could you see Coupa being more aggressive with pricing because it wants to win or keep deals or the competitive circumstances are such where it feels it’s necessary to do that? In general, clients could be more demanding when it comes to the pricing side. How much pressure could there be when it comes to pricing in the coming quarters?

It sounds as if there is some more vulnerability from a pricing perspective. Why didn’t Coupa win as many enterprise license agreements? Is this just the way the company sells or, as you alluded to, how it’s perceived? Was it just not able to connect the dots in terms of making the right pitch to the right people? How should we think about that?

Employee churn seems to be an issue and I’m guessing it becomes more of an issue when times become tougher. To what extent do you think that this has played itself out, meaning the people who would leave have left and the people who are loyal and diligent remain at Coupa, or do you think there’s still more to go? To what extent has that disrupted and could disrupt operational and financial performance?

I think it’s fair to say there has been had a fair amount of stability at the top of Coupa, with CEO Rob Bernshteyn’s leadership for 13 years. How much of this is something that leadership is aware of and trying to address or how much is considered just the way things are?

There was a recent unconfirmed report indicating that a PE firm could potentially be interested in Coupa from an acquisition perspective. Given what you’ve been saying about leadership and culture issues, that’s an opportunity where someone could identify those as areas for improvement and look to add some value. Of course, acknowledging this is a company with a USD 27bn market cap in February 2021, and this is more recently USD 3bn-4bn, so clearly we’ve seen a market decline in market value. Do you think an acquisition could make sense and perhaps there’s a lot of unrealised value there?

From potential financial investors or acquirers to the strategics who could be interested, you mentioned an Amazon and highlighted your top competitors to Coupa – doing nothing, building a solution out internally and SAP Ariba. Could you see one of the current competitors, or someone in the periphery of the competitive set it sees regularly, having an interest? Who might those companies be?

In terms of other potential strategic acquirers, SAP Ariba would maybe make sense but it sounds as if that would be tough to do on a couple of different levels. Who else could make sense?

Coupa talks about competition in a couple of different ways in terms of specific companies it comes up against. The company discusses large enterprise software vendors, so Oracle, SAP and Workday. How would you say it stacks up against and competes with those companies in its core markets, such as procure, invoice, expense and pay? Its biggest historical focus seems to have been on procure and then it’s trying to build out these other areas and increasingly coming into contact and conflict with some of these competitors. From an enterprise play, where would you see the most competition coming from?

Is the issue SAP Ariba is having related to the notion of re-platforming? Is that the pain point here, where you have customers being forced to transition to a new platform and they’re not happy about that, and it’s thus something they’re reconsidering?

Do you see Workday being as formidable a competitor as the company suggests? It sounds as if you’re focusing on SAP Ariba, and Workday maybe seems more of an afterthought. Is that the right way to think about that or is Workday not as formidable right now but has the potential to be very, very strong in three years?

We haven’t talked about the notion of smaller point solution providers competing with larger companies, such as Jaggaer, Basware, GEP, Ivalua and Esker. Do any of these or other point solution companies come up more often than not, maybe in certain niches, and are ones that we should be aware of or following?

Should the goal for Coupa be to get higher up so that it’s talking to people that are more frequently decision-making at the table, unlike CPOs [Chief Procurement Officers]? That might be the CFO. Is that aspirational for the company at this point?

You mentioned GEP. Is there anyone else you would highlight as smaller, niche vendors that were notable from a competitive perspective?

Some smaller companies, even though there are more niche providers, have been around for a while. Are there any technologies or companies that are smaller but emerging that are worth highlighting when it comes to BSM and what Coupa is doing or wants to do?

What you’re saying is important around the notion of vendor consolidation. Would you say tougher economic circumstances contribute more even to that theme?

You highlighted the notion of the suite vs point solutions and touched upon Coupa’s suite and how it has built a lot of the modules out through acquisitions. The company has not been shy about deals but hasn’t really done any significant deals for the last couple of years. Are you suggesting it hasn’t fully integrated the deals that were completed no later than early 2021?

Coupa is thinking about growth, having generated 50% growth or so in FY20. Growth over the past 12 months ending in July was 22% and expectations are for annual growth over the next couple of fiscal years to be 15-20%. What do you think about the projected growth rate? Do you think this is conservative or overly aggressive? What do you see in terms of growth over the next handful of years?

You talk about key employees in Coupa’s sales and support organisations. What other bigger-picture growth drivers would you point to over the next couple of years? The company highlights a number of growth levers – enterprise, mid-market, global, power apps, federal, community intelligence and pay. What would you point to as most important to supporting and driving those revenues over the next couple of years?

What percentage of Coupa’s revenue do you think comes from enterprise vs mid-market?

You said something which is really important, that Coupa should look to enterprise as a growth opportunity but needs to reconstitute, whether it’s the company’s product set, go-to-market or execution, to be able to win and keep those enterprise deals. What 2-3 things would you highlight that it could or should do to more effectively pursue enterprise customers?

What is your 1-3-year outlook for Coupa?