The Total Economic Impact™ Of Coupa For Source-To-Pay

Cost Savings And Business Benefits Enabled By Coupa For Source-To-Pay

A Forrester Total Economic Impact Study Commissioned By Coupa, July 2024

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Many organizations leverage legacy methods and technologies for supplier-related business processes like sourcing, contracting, procurement, and payment, which keeps them siloed from each other. Digitizing these processes and unifying them onto the same platform can help organizations increase their cash flows by streamlining source-to-pay processes, having a better understanding of their suppliers, making better purchasing decisions, and optimizing costs while ensuring regulatory and environmental, social, and governance (ESG) compliance. Source-to-pay platforms that leverage artificial intelligence (AI) like Coupa can empower businesses to focus on growth while creating value through efficient spend management and data-driven decision-making.

Coupa’s source-to-pay platform is powered by community-generated AI via its network of 10 million buyers and suppliers and a dataset that includes $6 trillion worth of economic spend. The Coupa platform marries sourcing, contract management, workforce management, supplier risk and performance analysis, procurement management, electronic invoicing, digital payments, and spend analysis on a single platform. This can enable businesses to unlock value by comparing suppliers, de-risking their supply chains, digitizing and automating processes, optimizing operational efficiency and productivity, and leveraging their full purchasing power in negotiations to drive better deals and improve margins. Using Coupa’s platform and community-generated AI, companies can improve its fraud detection, automate contract reviews, optimize cash and financial forecasts, mitigate supplier and supply chain risk, and ensure regulatory compliance and efficient spend management.

Coupa commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Coupa for source-to-pay.1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Coupa on their organizations.

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Return on investment (ROI)

276%276%

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Net present value (NPV)

$66M$66M

To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four representatives of organizations with experience using Coupa’s source-to-pay platform. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that is a global manufacturing organization with 60,000 employees and revenue of $80 billion per year. Although Coupa provides solutions for businesses of all sizes, the ROI in this study is modeled for an organization the size of the composite.

generates $0 in annual revenue, spends 0% of annual revenue on COGS/COS, and replaces 0 legacy solutions by Year 2. Custom results are based on your inputs and the TEI case study.

Interviewees said that prior to using Coupa, their organizations’ sourcing, contracting, procurement, and payment operations were siloed and leveraged manual processes or legacy technologies. These limitations led to inefficient buying, payment, and reporting processes, an inability to capture potential margin improvements in contract negotiations, and an increased risk of supply chain failure.

Interviewees said that after the investment in Coupa’s platform, their organizations were better able to manage their supplier relationships, contracts, spend, and payments. Key results from the investment include the ability to use Coupa’s AI-driven platform to capture a wide range of margin improvements, improve the efficiencies of various business processes, and mitigate supply chain risk.

Key Findings

Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:

  • Cost of goods sold (COGS)-related margin improvement of 1.4%. Improved visibility into spend with suppliers of direct materials enables the composite organization to improve its position in negotiations for the 20% of direct materials contracts that come up for renewal annually, accruing savings of up to 1.4% on such contracts.

For , this benefit could be worth over three years.

  • Logistics-related margin improvement of 2%. Similarly, having a better understanding of its total spend while taking advantage of any potential early payment discounts helps the composite improve its margins related to logistics contracts by up to 2%.

For , this benefit could be worth over three years.

  • Selling, general, and administrative (SG&A)-related margin improvement of 0.7%. Improved spend management, supplier discounts, and better supplier analysis also lead to savings with SG&A-related services contracts. The composite saves 0.7% on advertising and services contracts with Coupa.

For , this benefit could be worth over three years.

  • Asset redeployment-related margin improvement of 10%. Coupa’s tracking of assets and inventory enables the composite to reduce the purchase of duplicative goods, leading to savings of 10% by deploying already purchased assets and inventory instead of buying new ones.

For , this benefit could be worth over three years.

  • Invoicing efficiencies of 50%. Having the ability to make more invoices electronic and to automate payments enables the composite to improve the efficiencies of the finance teams handling these processes by 50%. Half of the prior finance professionals doing this work are now able to focus on strategic finance initiatives, which saves the composite an additional, unquantifiable amount in the future.

For , this benefit could be worth over three years.

  • Sourcing and spend reporting efficiencies of 100%. The composite previously needed 13,000 hours from its workforce to complete manual sourcing and spend reporting processes. With Coupa, the composite’s entire process for reporting on sourcing and spend is automated by the platform, which saves it 100% of this labor cost and allows it to redeploy these teams to higher-value work. Additionally, reporting is now better, timelier, and has less human error.

For , this benefit could be worth over three years.

  • Technology-related margin improvement of $560,000 annually. Coupa replaces the limited point technology the composite had in place before deploying a unified source-to-pay platform, which saves the composite more than half a million dollars annually.

For , this benefit could be worth over three years.

Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:

  • Supplier diversity. Coupa provides structure to the composite in terms of analyzing and understanding its supplier base, and this enables it to better track its award rates to diverse suppliers and even win awards and accolades for its supplier diversity efforts.
  • Improved supplier relationships. Coupa enables the composite to improve its relationship with suppliers, which gives them visibility into payments and allows the composite to pay them earlier and receive more early payment discounts as a result.
  • Risk mitigation. By better analyzing and tracking suppliers, Coupa helps the composite organization mitigate an unquantifiable amount of risk related to potential supply chain failure, which could impact sales and brand reputation and lead to risk related to compliance and regulatory penalties, which could lead to high monetary penalties and legal costs.
  • Community performance benchmarks and value management. The composite gets an unquantifiable amount of value from leveraging Coupa’s value management team to better understand its benchmarking and how it is performing relative to other businesses in its sector.

Costs. Three-year, risk-adjusted PV costs for the composite organization include:

  • Coupa fees. The composite pays for Coupa’s platform based on a number of various inputs — including the number of modules leveraged and the number of users — for a total of $3 million in annual fees by Year 3.

For , this cost could be over three years.

  • Implementation fees. The composite leverages Coupa’s implementation team to assist with implementation, incurring millions of dollars in fees. It pays the bulk up front for the initial deployment and the remainder in ensuing years as the composite expands its use of Coupa.

For , this cost could be over three years.

  • Planning and deployment costs. For planning and deployment, the composite needs 1,500 hours from 40 FTEs in both the initial period and the first year. This cost decreases to 20 FTEs at 500 hours each as the bulk of the deployment happens up front.

For , this cost could be over three years.

  • Training and ongoing management costs. The composite incurs time costs associated with training employees to use Coupa and for IT resources needed to manage the platform.

For , this cost could be over three years.

The representative interviews and financial analysis found that a composite organization experiences benefits of $90 million over three years versus costs of $24 million, adding up to a net present value (NPV) of $66 million and an ROI of 276%.

could experience benefits of over three years versus costs of , adding up to an NPV of and an ROI of 0%.

Reported savings on individual contracts with Coupa for interviewees’ organizations

Up to 16%

“When you deploy Coupa, you quickly get all spend and all contracts cataloged. We spent a lot of time talking about proactive spend management, and now Coupa has enabled that for us. With Coupa, we manage every dollar right the first time.”

VP of global procurement operations, food processing

Key Statistics

  • icon icon

    Return on investment (ROI)

    276%276%
  • icon icon

    Benefits PV

    $89.9M$89.9M
  • icon icon

    Net present value (NPV)

    $66M$66M
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    Payback

    10 months10 months
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Benefits (Three-Year)

COGS/COS-related margin investment Logistic-related margin improvement SG&A-related margin improvement Asset redeployment-related margin improvement Invoicing efficiencies Sourcing and spend report efficiencies Technology-related margin improvement

TEI Framework And Methodology

From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in Coupa for source-to-pay.

The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that Coupa for source-to-pay can have on an organization.

  1. Due Diligence

    Interviewed Coupa stakeholders and Forrester analysts to gather data relative to Coupa for source-to-pay.

  2. Interviews

    Interviewed four representatives at organizations using Coupa for source-to-pay to obtain data about costs, benefits, and risks.

  3. Composite Organization

    Designed a composite organization based on characteristics of the interviewees’ organizations.

  4. Financial Model Framework

    Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees.

  5. Case Study

    Employed four fundamental elements of TEI in modeling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology.

Disclosures

Readers should be aware of the following:

This study is commissioned by Coupa and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.

Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of an investment in Coupa for source-to-pay. For the interactive functionality using Configure Data/Custom Data, the intent is for the questions to solicit inputs specific to a prospect's business. Forrester believes that this analysis is representative of what companies may achieve with Coupa based on the inputs provided and any assumptions made. Forrester does not endorse Coupa or its offerings. Although great care has been taken to ensure the accuracy and completeness of this model, Coupa and Forrester Research are unable to accept any legal responsibility for any actions taken on the basis of the information contained herein. The interactive tool is provided ‘AS IS,’ and Forrester and Coupa make no warranties of any kind.

Coupa reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.

Coupa provided the customer names for the interviews but did not participate in the interviews.

Consulting Team:

Nick Mayberry

M
K

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