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Coupa-Aquiire Deal Highlights Key Change: Marketplace E-Procurement Models Aren’t One-Size-Fits-All Anymore

10/25/2018 By

Spend Matters’ recent coverage of Coupa’s purchase of Aquiire details Coupa’s acquisition rationale and the general wisdom of its decision — but the deal also calls attention to a useful context that evaluators of “Amazon-like” e-procurement systems would be well served to understand.

Amazon has spawned at least three approaches to satisfying our collective shopping urge.

There’s the original model that Amazon has seemingly perfected; a supplier-funded approach where it makes available to consumers as many options as possible.

There’s the enterprise-funded approach, where organizations deploy internal marketplaces that are designed, ironically, to eliminate shopping.

And finally, there are industry-specific solutions like PowerAdvocate (focused on the energy sector) and Prodigo Solutions (dedicated to health systems). Both of these companies successfully targeted the largest players in their selected, highly regulated markets, and both have achieved relative dominance.

Aquiire was smart. It used the consumer success of Amazon to position itself as the business-focused version. For example, instead of being known for “punch out” shopping convenience, Aquiire innovated on an approach where selected vendor catalogs are instantly made available through real-time (patented) search capabilities. Again, Amazon was built for unlimited shopping convenience while Aquiire was built to give employees a consumer-like shopping experience by making it easy to buy from their company’s pre-negotiated supplier catalogs and masking the advanced purchased controls required by business.

That’s why, among other reasons, the Aquiire acquisition is highly strategic for Coupa. It not only provides the company a way to support its customers who desire purchasing controls, but it will prove to be a highly effective way to grow the use of Coupa Advantage, which offers customers pre-negotiated prices from suppliers. It all makes sense.

Not a fit for all industries

But not necessarily in the energy sector and not in healthcare. Let’s use healthcare as the example, as Prodigo, a healthcare procurement technology provider, actually started out using the Aquiire platfrom (then known as Vinimaya).

Prodigo told me they discovered that as good as Vinimaya was at managing the “point of sale” for indirect spend, its platform was not designed for the highly sector specific nuances of healthcare.

Why? The dynamics of the healthcare market require too many potential inputs at the point of service and a bevy of additional sector nuances manifest as highly specific application requirements. Consider:

  • Healthcare doesn’t even have a concept of direct or indirect. It thinks in terms of clinical and non-clinical spend.
  • Because clinical spend is literally life and death, a hospital marketplace requires a system capable of manipulating, enriching and auditing search results to shape the behavior of requestors. The idea here is to use the system to drive alignment to the compliance priorities of supply chain leadership.
  • The management of items and their equivalents whose prices fluctuate based on class of trade, distribution tier, etc. is essential functionality for clinical and non-clinical sources of supply.

So, it’s not as simple as catalog integration and applying clever real-time search.

At a minimum, incremental capability across multiple sources of supply for the same item is required. And finally, hospital purchasing is not only data intensive, but it’s a market in need of standards that POS systems can actually help drive, if they’re built for the task.

In other words, although Amazon, Coupa, Prodigo and PowerAdvocate are inevitably compared, they couldn’t be more different.

How the systems differ

Amazon is, well, it’s Amazon.

Coupa has listened to its customers, and its acquisition of Aquiire reveals an important philosophical distinction. Clearly, it is maneuvering to deliver purchasing controls to its community and drive more predictable returns from Coupa Advantage, while increasingly giving users, as previously noted by Spend Matters, a Google-like search across all their pre-negotiated supplier catalogs.

Furthermore, as Spend Matters’ coverage pointed out, Coupa wants to provide fingertip access. You can’t make that happen without imposing certain limits. Ask Apple.

Things have changed. The “Amazon experience” is just the tip of the iceberg now. Evaluators of “shopping applications” must understand that while the interface to content provided by these systems may be becoming a commodity, the way these systems integrate and extend ERP, handle data, manage inventory, facilitate contracts administration, etc., is becoming increasingly differentiated.

Whether open and supplier-funded, closed and enterprise-funded or a hybrid model built for a specific industry, the objectives of these systems are different. And when they stray from their core, their weaknesses are revealed. System evaluators must realize that the value of these systems is not a function of where they appear to be the same, but where they differ.

Tom Finn is a guest contributor to Spend Matters. 

An earlier version of this article misstated aspects of Aquiire’s search functionality. The error has been corrected.