Coupa Acquires Sourcing Solutions Startup ZenPurchase

Businessman hand touching M & A on virtual screen - merger & acq

Coupa, a firm known for its successful cloud-based procure-to-pay solution (with strong source-to-settle suite aspirations) and a ferocious growth pace, has just announced the acquisition of ZenPurchase, a tiny startup with no more than a handful of employees that only saw the light of day barely 2 years ago.

Spend Matters had a few quick exchanges this morning with Rob Bernshteyn, CEO of Coupa, and will provide more in-depth analysis later in the week. For now, we will share some cursory details and information based on our earlier conversations with both firms as well as some speculation based on conversations with other industry insiders with a perspective on Coupa.

First, the deal…

Coupa is acquiring ZenPurchase, which calls itself "a collaborative enterprise procurement software company." For those of us not in marketing, this translates to "a sourcing solution provider." The company's co-founder Sanjayan "Sunny" Manivannan has, like Rob Bernshteyn, a background that includes both Harvard Business School and McKinsey & Co. ZenPurchase's other co-founder, Bryan Kaplan, is already working for Coupa as a developer. Things are moving quickly.

Coupa states that it will "build ZenPurchase’s solutions into its organic cloud-based platform, applying them across all facets of procurement, expense management and invoicing. The resulting technology will enhance real-time collaboration across multiple products in Coupa’s web-based platform." As we already know, collaboration has been one of the rallying roadmap themes among several providers for a few years now.

If we think back to Coupa's acquisition of Expenser (announced close to 2 years ago) this acquisition will probably play out in a similar way (i.e. it will quickly be consumed by the Coupa platform, not left as a standalone, albeit integrated module). The focus on ZenPurchase has been all about end-user usability and embedding functionality, whether it’s consumer-mobile-styled drill-downs or real-time analytics. It is more likely that the acquisition had as much to do with "hiring by acquiring" a couple of talented driven individuals, with a combination of solid solution development expertise and business savvy expertise, and handing them some golden handcuffs in the process. It also helps in giving Coupa some succession planning options to fill the senior executive ranks with top-notch talent. This is very similar to, say, Dave McCormick joining FreeMarkets where he eventually took over the reigns from Glen Meacham (both were ex-military and ex-McKinsey).

Coupa has been in need of more sourcing substance for some time – sourcing is not its meat-and-potatoes line of business, and even if the tool has gone beyond its earlier rather perfunctory "3 bids in a box," it's not a sourcing toolset that can hold its own against a best-of-breed sourcing provider. So this is a natural step in the process toward a "true" source-to-settle suite, and we really look forward to coming innovations from them.

There is also most likely client/prospect pressure on Coupa – from firms that would like to kick out "Provider A," but its strategic sourcing team is complaining about loss of functionality. Done right, incorporating the ZenPurchase know-how, templates, processes, etc., into Coupa should help quell those objections.

We also think ZenPurchase shares Coupa's lean, user-focused development and “scalable” delivery model, which is critical to SaaS/cloud firms that need to maintain a low support headcount to client ratio in order to stave off the older, on-premise-derived competitors that typically need a several X-high headcount per client. We only put “scalable” in quotes because it goes beyond technical scalability, and Coupa has had the enviable problem of growing pains in various areas, but is not the focus of this update.

Stay tuned for more coverage later in the week. Feel free to shoot me questions that you want me to think about, or bring up directly with Rob or Sunny.

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