Coupa Cabana

It looks like Dave Stephens has decided to hang up his surfboard and start something new. Coupa, Dave's new venture (not to be confused with Dave’s Next Move), aims to transform the Spend Management market by delivering open source-based solutions, starting with an e-Procurement application this summer. I wish Dave the best of luck in his new gig, but I have more questions at this point than anything else, as I'm sure anyone would reading their rather spartan landing site and Dave's short announcement at Procurement Central.

Don't get me wrong. Open source is a wonderful thing in theory -- witness how linux has transformed the OS market and LAMP (Linux + Apache (web server), MqSQL (database), and Perl, PHP, and Python (scripting languages)) is eating into revenue that infrastructure players from BEA to IBM and now even to SAP and Oracle (with Fusion and NetWeaver) would love to get their hands on. But there's a big difference between embracing Open Source and actually making a lot of money off it. Merely giving away applications with somewhere between 20% and 80% of the functionality of the best of breeds and ERP players and charging maintenance is not enough to ensure success -- especially in a world where procurement professionals are used to negotiating software vendors down further than anyone thought possible. Just consider how today, any company can "rent" decent e-sourcing capability for less than it would cost for an IT resource to support an internally hosted application. And besides, I'm not even sure if Coupa plans to give away their technology -- or the kernel to allow other developers to improve it (the original Linux model). From the looks of their site and Dave's comments, perhaps their plan will be to charge some type of license up front.

Maybe Coupa will end up looking something like SugarCRM, the first significant open source business applications vendor with any significant traction that I've encountered. Today, in less than three years since its founding, Sugar claims to have over 600 paying customers. Not bad, but I wonder how much those customers are actually paying. That's because the challenge of making money off of open source is that you need serious scale to achieve returns. And perhaps even more challenging is that open source apps revenue is even more deferred than with a traditional SaaS "closed-source" software model (since less cash is exchanging hands throughout the contract length). Another challenge is that selling something that should be "free" -- at least in some people's minds -- to Spend Management professionals might be an uphill battle, especially given price erosion in the market for traditional Spend Management applications, both hosted and installed. Perhaps even more important, procurement and operations professionals tend to be pretty risk adverse, and in my view, most will be unlikely to be guinea pigs for a new business and software delivery model -- at least until it's proven.

Enough muckraking. Knowing Dave's success at Oracle, I'd bet on him and his team. So I'll give my fellow blogger the last word on his new gig: “At Coupa, we believe open source is the future of enterprise software. To that end, we intend to introduce best-in-class Procurement products at absolute rock bottom TCO based entirely on an open source technology stack. Our first product, a new take on eProcurement, will be available this July ... Via open source, we will look to our partners and customers to help shape our products. We look forward to seeding the Coupa open source project & to growing an open source community around the Coupa initiative.” Go Dave, go! This should be fun to watch from the sidelines.

Jason Busch

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