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April - 2011 - issue > Technology
Will Cloud Help You to Spend Smarter and Save Money?
Ravi Thakur
Friday, April 8, 2011
Two significant things have been happening over the past few years that have fundamentally changed how organizations operate. The Great Recession and the emergence of Cloud based solutions. The Great Recession taught organizations to look at their overall business and really tighten their belts wherever they can, to ensure that every dollar is being used wisely. Part of that ties in perfectly with how Cloud technology allows organizations to quickly deploy solutions to immediately tackle pain points such as: marketing automation, spend management, and human capital management. The emergence of cloud providers during a recession is a true testament to the value that cloud solutions offer organizations of all sizes. This article helps articulate how cloud solutions help organizations “Spend Smarter and Save Money.”

Over the past few years, as organizations try to protect margins, they would slash employee expenses, i.e.: payroll, travel, bonuses, etc. But, there is only so much you can cut from your employee base, organizations had to take a hard look at where else they could cut costs. So what did companies do? They decided that they needed to spend smarter and save money. For most organizations, spending money is not a problem and it really boils down into two different areas: purchasing and travel & expense spend. The challenge is ensuring that all their employees are using pre-negotiated pricing for goods and services and also being frugal when it comes to spending the companies money. It’s easy to negotiate a price discount with a supplier; the hard part is ensuring that your employees are actually buying goods and services against that pricing. It’s easy to tell an employee to take a shuttle instead of taxi; the hard part is enforcing it. This is where Cloud solutions can help.

The Cloud is a way for technology companies to deliver best in class, highly innovative solutions to customers without having to deal with the heavy infrastructure costs that traditional SaaS or on-premise technology companies have traditionally dealt with. Here at Coupa, we have been able to deploy thousands of users from hundreds of organizations at a fraction of the cost of what we would have had to have done even five years ago. This translates to solutions that deliver more value at lower costs than ever seen before in the enterprise space to organizations of all sizes. It’s really the democrization of value-add enterprise solutions to organizations of all sizes.

The Great Recession hastened how quickly Cloud solutions have been adopted into the enterprise. Organizations will no longer pay, nor afford, multi-million dollar enterprise software implementations – those days are over! Fortune 100 companies to small startups, now want to invest in solutions that deliver quick value, high ROI, and low TCO’s.
The emergence of these two changes in the world of business has created a new space: Cloud Spend Management!

Though companies’ have achieved tangible results from automating their physical supply chain processes, organizations’ financial operations rarely realize comparable benefits from such investments. This is particularly true of purchasing and spend management processes. Organizations, today in 2011, still have manual, non-integrated and very inefficient processes for helping employees buy what they need to do their job at pre-negotiated prices by the company. Imagine, how much more efficient your organization would be if your employees could create purchase orders and expense reports with as little training as it requires to use Amazon.com or Facebook? That’s where you have an explosive marriage of Spend Management and the Cloud! Exactly what organizations are looking for as we are coming out of the Great Recession – the ability to reduce costs and reap savings upwards of 10 percent of total spend. It’s a lot harder to grow revenue by $1 then it is to reduce costs by $1, given the cost of sales, development etc., to even generate $1 in revenue.

This is where the Cloud and solutions can change the game for you. With easy to use interfaces, deployments measured in weeks, and TCO’s that are multiples less than traditional on-premise, ASP solution – there is no limit to the impact you can make on your company’s financial performance with spend management in the Cloud.

Cloud Spend Management solutions are developed from a single code line and built
atop a multi-tenant architecture, offering significant benefits over premise-based and hosted solutions. These advantages include:

* Rapid Innovations: Upgrading licensed solutions can be a hassle when you account for the IT and business resources that need to be involved and the system downtime. Also with in-house, installed solutions new solution functionality is only available when and if a company decides to go through the upgrade process. On the other hand, cloud-based solutions deliver rapid innovations multiple times a year, all involving minimal, if any, effort on the client side. This means that organizations can immediately benefit from new features and functionality introduced by the solution provider.

* Ease of Use: For consumers, the Internet has changed the way users search for and buy products/services online – think Amazon, Facebook, Google or iTunes. For businesses, though, the tools and software they use to manage and control spending is overly complicated and difficult to use. Cloud spend management is revolutionizing the way businesses look at their procurement and expense management processes by delivering an intuitive and dynamic solution interface that is as easy to use as Google or Amazon, without sacrificing the robust functionality businesses expect to effectively control spending. Ease of use translates to increased user adoption, which drives greater compliance and greatly reduces maverick spending that cannot be tracked.

* Data Aggregation: One of the common shortcomings of on-premise and hosted software is that they focus exclusively on spend occurring within the company firewall, depriving clients a particularly valuable information asset – their performance benchmarked against the larger customer community or market. By contrast, cloud-based solutions built upon a multi-tenant architecture can aggregate and analyze all data flowing through the system across customer instances. This enables client organizations to benchmark their individual spend metrics and performance against the market for a wide range of operational key performance indicators (KPIs), giving potential insights on how and where to optimize and improve their spend management practices.

* System Integration: Long lead times, high costs, complex planning sessions and deployment delays – these are the factors, inherent to licensed solutions, that usually make organizations balk at the thought of implementing any technology solution and integrating it to other systems. Cloud-based solutions enable companies overcome these challenges by providing business administrators and IT personnel with easy-to-use and cost-effective tools for system integration. With cloud spend management solutions, organizations can quickly and easily automate the entire procure-to-pay process by integrating directly with their ERP or accounts payable systems to easily match invoices to PO’s, confirm item receipt and provide timely payment to suppliers.

* Rapid Payback: Cloud solutions, which typically operate on a subscription or pay-per-use model, are drastically reducing the total cost of ownership of any automation initiative. Traditional licensed software solutions involve heavy, upfront capital investments in hardware and software. Further, these solutions are also more expensive and time-consuming to maintain and upgrade. With cloud-based systems, most of this expense goes away. Clients typically either pay an annual subscription for the service, or pay based on the volume of transactions they process through the solution, resulting in a rapid return on investment (ROI).

Ultimately what the Great Recession has taught us is to reduce our risk tolerance, look for the safer bets and quicker ROI’s. It’s not a world where organizations are forced into large software deployments and have to take on all the risk. With most Cloud services, if you are not satisfied with the service, cancel and only pay for that subscription period. The ability to deploy quickly and easily and to scale as business needs dictate is how organizations are better geared to serve their employees and customers in this new world.

The author is Vice President - Service Delivery, Coupa Software
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