Gary Hare: Coupa-Aquiire Deal May Signal the ‘Start of True E-procurement for the Mid-market’

After Coupa bought Aquiire in October, procurement veteran Gary Hare said in a Spend Matters interview that the deal “surely sends a signal, but maybe not an obvious one.”

Hare knows where Aquiire came from and possibly where this acquisition is taking Coupa.

He knows because until 2009 he led Vinimaya before it morphed into Aquiire — back when the company got several of the patents that Coupa hopes will propel it forward.

So read along as Hare, now the CEO of Vurbis USA, talks about the future of e-procurement in this Q&A, which has been edited and will appear in two parts.

Spend Matters: From your perspective as the former CEO of Vinimaya, who rebranded themselves as Aquiire in 2017, what does the recent acquisition of Aquiire by Coupa signal to the market? Why do you think it’s important?

Gary Hare: Because Coupa is involved, it surely sends a signal, but maybe not an obvious one. Here’s why. We’ve both heard talk about the Vinimaya patents influencing the deal, right? Of the four Vinimaya patents I’m aware of, the first three are related. Let’s talk about these first.

They describe a buyer-operated system that can search multiple supplier websites, extract, aggregate and render catalog content back to the buyer without modifications having to be made to the websites. It’s actually described in the patent itself as an alternative to punch-out, which existed at the time, and we know requires modifications to the website to work.

But remember, in 2001, when the application was filed, to build a B2B website with punch-out could cost millions, well beyond the means of all but the largest suppliers — Grainger and Staples, for example — so if buyers wanted the benefits from e-procurement, they had to take control of supplier on-boarding. And the leading vendors at the time — Ariba, Oracle, SciQuest among them (this was before Coupa’s time) — had to help if they wanted to sell licenses, so the era of buyer-assisted supplier on-boarding was born — catalog systems, content services, supplier networks, marketplaces, punch-out — and in the case of Vinimaya, the capabilities described in the patents, and the products based on them. All owned and controlled by the buyers.

But now it’s 2018. Today, a supplier can deploy a full B2B site for less than $5,000 using products like Magento and Woo Commerce, and add punch-out capability using plug-ins. With punch-out now easy and affordable, demand for buyer-assisted on-boarding solutions should decline. This is why I question whether these three patents, and the associated products, were highly valued by Coupa.

But the fourth patent is a different story. It basically describes comparison shopping, a key part of what you’ve seen in Aquiire’s recent marketing materials, the concept of real-time procurement.

Now look at the enterprise procurement market, which is mainly global 2000 buying organizations — it’s saturated. Everybody’s implemented or is implementing an e-procurement system. Also, the way that e-procurement is deployed in this market, with pre-negotiated pricing, volume discounts and rebates, doesn’t require real-time procurement, just the opposite, everything is planned in advance.

But the mid-market, let’s say buying organizations with $100 million revenue or less, is up for grabs, and it’s big, very big. Mid-market companies don’t have the purchase volume to get discounts and rebates, so they shop around for the best deal, compare prices “real time.” Today, they use Amazon Business, Grainger.com or other online stores. They join purchasing consortiums. They browse paper catalogs and order via email or phone. Maybe they get in the car and drive to Home Depot or a Staples store. It’s pretty inefficient, and there lies the opportunity.

So maybe this acquisition signals the official start of true e-procurement for the mid-market. Also, the same real-time shop-and-compare approach could be applied to the tail spend market, which you could consider the mid-market for suppliers. We’ll see, I guess. Hey, Coupa’s roots are in the mid-market. They started out as an open source platform for small companies.

SM: We’ve seen several companies making plays for the mid-market. Why do you think it’s not well-served now? What do you think needs to be done to capture those companies?

GH: Three things. First, and most obvious, it needs to be affordable. These companies will never spend $1 million or even $50,000 on an e-procurement system. Second, the functionality needs to be different. Again, enterprise e-procurement is about ordering from known sources at negotiated prices, but mid-market e-procurement is about shopping — finding products, comparing pricing, getting the best deal available. And third, easy access to suppliers, specifically their catalogs, web stores and order systems, which is the one thing both the enterprise and mid-market require.

SM: In its explanations of the deal, Coupa has said its goal is to enable “Google-like” search. Do you think that’s an accurate description or even the ultimate best terminology for what Aquiire was trying to do?

GH: I think when Coupa says Google-like versus Amazon-like, they are again comparing the way e-procurement is deployed in the enterprise market — which can be called Amazon-like because you are mainly searching structured data from known sources, like databases, to what’s needed for the mid-market, which is more Google-like, where you’re searching unstructured data from disparate sources over the web, comparing prices and terms real-time. Technically, its queries versus crawlers.

SM: On that same topic, what about “the death of punch-out”? Does that seem like a worthy goal to you?

GH: No, not at all, that’s nuts. Punch-out has always been the right answer for on-boarding suppliers for e-procurement. It’s an accepted industry standard that’s been used for almost 20 years, and it works great. But historically, it’s been too costly and complex for the masses to implement. Again, that’s no longer the case. Picture a world where every supplier had punch-out: Buyers of any size could plug and play with whatever supplier is best for them businesswise at the time, big or small, local or global. The internet would be the one and only supplier network. So, to me, punch-out is alive and well and is ready to re-emerge, though we need to collectively do a better job getting the word out to the supplier community.

In Part 2 of Gary Hare’s interview, which runs tomorrow, he focuses on the next “big thing” for procurement/P2P vendors: “They should be looking right at the suppliers. They’ve been holding the market back since day one.”