Coupa and Hiperos: Supplier Management, Compliance and Risk Landscape Implications

This Spend Matters PRO brief explores the competitive implications of the Coupa-Hiperos transaction on the supplier management landscape. The analysis includes summary sector M&A implications and summary landscape/competitive implications. It also explores the potential impact on closer competitors to Hiperos (e.g., Aravo), more distant, network and community oriented peers (e.g., Achilles, Avetta, Browz, etc.); and “sleeping giants” on the periphery of the market such as D&B and Thomson Reuters.

Perhaps most relevant of all, as “compliance as a service” becomes more commonplace as a component of source-to-pay systems in areas ranging from supplier qualification to transactional/invoicing areas, we believe these latter groups may begin to come into contact with Coupa for the first time as the worlds of supplier intelligence and hybrid software, network and compliance collide in a networked manner across various industries.

Summary Competitive (M&A) Implications

From an overall M&A perspective, our analysis suggests that:

• A track record of buyer success in the supplier management market is likely to make further acquisitions attractive to other suitors. Kroll’s acquisition of CVM Solutions is one example of a transaction that was easy for a larger buyer to “slot into” its broader business lines, creating a highly profitable entity. We believe that Coupa is likely to have similar success to other “larger” acquirers that have picked up assets in the sector in the past.
• The acquisition (generally) continues to put fuel on the fire in driving M&A activity and consolidation in the procurement technology sector, including the supplier management market as a scarce “supply market” tempts larger buyers. From a target perspective, this includes “pure-play” supplier management providers such as Aravo, ConnXus and HICX (which specialize in one or more of the core supplier process and data enablement* areas). It also includes those providers that have broader value propositions often associated with data aggregation and supply chain risk management (e.g., Resilinc, riskmethods, etc.)
• The acquisition is not likely to drive higher valuations (alone) in the supplier management market, as we estimate that Coupa did not pay a standard (read: 5-8X+ multiple) for private SaaS/cloud companies owning to a variety of factors.
• The transaction may encourage other smaller vendors (sub $15 million revenue) in the supplier management and related markets to proactively investigate their exit options (vs. waiting to be approached) given sector interest in the area.
• Coupa’s actions may encourage larger risk and information providers (e.g., D&B, Thomson Reuters, LexisNexis, etc.) to look at other inorganic options to expand their own supplier management, compliance and risk portfolios. It will be interesting to watch if D&B, under new private equity ownership, decides to treat the supplier management, compliance and risk areas more strategically overall through inorganic expansion beyond its current offerings today.

Summary Landscape/Competitive Implications

The transaction has a range of ramifications for the supplier management, compliance and risk landscape. These include:

• The potential for other software-centric suite providers (e.g., SAP Ariba, Jaggaer, Oracle, Ivalua, Zycus, etc.) to extend (or not) their supplier management offerings into the compliance, pre-qualifications and multi-tier assessment areas. In particular, it will be interesting to watch the SAP Ariba response (if any) given its investments and strengths in the supplier risk management area as a sub-component of supplier management, including third-party information aggregation and provisioning.
• The pressure that the transaction may put on specialist vendors such as Aravo and APEX Analytix to compete outside of previously less competitive niches. Increasingly, these providers may come up against providers in Coupa/Hiperos in competitive situations whereas in the past, they could glide in under the radar, largely complementing suite providers vs. going head-to-head against them.
• Whether providers of GRC (supplier governance, regulatory and compliance Management) — like Allgress, ControlCase, Intelex, LockPath, MetricStream, Modulo, Oracle, IBM, ProcessUnity, RiskVision, RDC, RiskView, RSA Archer, RSAM, SAP and Quantivate — decide to extend their value proposition to deeper procurement-centric capabilities and controls centered on suppliers and associated third parties.
• The opportunity for managed services/BPO providers such as Accenture and GEP to build capability in the area of “compliance as a service”; in GEP’s case, as an outgrowth of its own supplier management technology capabilities.
• Exploring if Coupa succeeds (or not) at building mindshare around the value proposition of integrated source-to-pay and business spend management (BSM) with in-depth supplier compliance as a checkpoint to all forms of supplier engagement, from initial on-boarding to sourcing to transactional buying. Coupa’s success (or lack of success) will be critical to observe in this regard. For example, if they are successful and large banks (an anchor industry for Hiperos) begin to build end-to-end P2P processes with Coupa based on Hiperos-validated vendor compliance as a requisite, it could force the hand of other technology providers to build similar capabilities and/or make strategic acquisitions to remain competitive in targeted vertical markets.
• Whether other community- and network-centric providers (e.g., Achilles, Avetta, IS Networld, Browz, GHX and Hellios Information) decide to adapt their offerings in a world where competition might come from new, software-centric angles. As we have noted before, providers in this segment focus on outcomes-based supplier on-boarding, credentialing and management services. Some of these providers position themselves as a “pre-sourcing” or “pre-qualification” services. But most important for this sector is that these vendors and firms typically deliver on a network-based value proposition built on similar communities of interest focused on driving compliance and risk management (from a buyer perspective). Decisions that these providers should confront as a result of the Coupa-Hiperos transaction include:
  • Whether they align/partner with source-to-pay or specialist technology providers to gain capabilities (e.g., as Hellios has done with Aravo).
  • Whether they integrate their workflow, rules and information via more open API frameworks into existing suites and modules to extend their networks.
  • The degree of software investment they will make in the broader supplier management area (e.g., could they become competitive in the Spend Matters Supplier Management SolutionMap overall?).

The Final Word

As we have noted before, the real power of supplier management comes from combining it with other capabilities to create a single source of truth that procurement and non-procurement team members can use across just about all vendor touchpoints — even those that can be automated and do not require human involvement — that span the source-to-pay lifecycle.

It is in these integrated business scenarios that supplier management can (and should) become a core part of the expanding procurement suite value proposition — with validations, multi-tier visibility and broad-based compliance at the core not just of vendor on-boarding, but broader lifecycle management spanning all associated modules (e.g. sourcing, contract lifecycle management, e-procurement, invoice-to-pay, etc.)

If Coupa convinces the market of the power of this integration — and there most certainly is power to it — the competitive implications of this small transaction could cause a permanent shift in the source-to-pay market.

* Supplier Process and Data Enablement includes the following software-centric areas:  

• Supplier discovery management (SDM) — platforms to discover new suppliers, possibly with respect to diversity or sustainability requirements, or other unique search requirements (e.g., contracting frameworks/vehicles within government).
• Supplier information management (SIM) —  technology that tracks all of the relevant information about a supplier, including locations, employees, products and services, certifications, and insurance certificates
• Supplier performance management (SPM) —  technology that focus on relevant performance data on quality, reliability, delivery, invoice accuracy and sustainability
• Supplier relationship management (SRM) — solutions with functionality to manage vendor relationship, such as capabilities for supplier development, supplier collaboration and supplier innovation management
• Supplier network management (SNM) — technology/platforms that can support supplier discovery but are primarily designed to allow a buyer to transact (through e-document and e-payment exchange) with suppliers
• Supplier quality management (SQM) — usually refers to specialized needs required to support direct materials procurement, including the management of nonconformance, cost of poor supplier quality and general quality management
• Supplier Governance, Regulatory and Compliance Management (GRC) — a class of technology that specifically focuses on ensuring suppliers conform to regulatory requirements, maintain compliance requirements and adhere to buyer requirements