Scout RFP has taken on some of the largest enterprise technology companies in the world by designing an intuitive platform for procurement that has been adopted by clients including Netflix, Sephora, Hulu
The San Francisco-based startup taps feedback from hundreds of procurement professionals to create a cloud-based alternative to manual Excel spreadsheets that streamlines companies’ sourcing and supplier management processes.
With a customer-centric focus, the company has expanded its functionality and secured funding to grow its operations, culminating in its recent acquisition by Workday, the Pleasanton, California-based business solutions provider that had already been one of Scout RFP’s investors and partners.
“Everything goes back to our first value, which is to obsess over the customers,” said Alex Yakubovich, CEO and co-founder of Scout RFP, in an interview with CO—.
Procurement application software is an industry estimated to be worth more than $5 billion globally, and it is growing rapidly. According to a recent report from Market Research Future, the global market for procurement software will grow at a $9.6% annual growth rate from 2018 to 2023, to reach nearly $10 billion.
It provides a mechanism for companies across all industries to gather and compare bids from suppliers, whether those suppliers are offering goods for resale, ingredients for manufacturing, freelance labor or even office supplies, and manage those supply contracts. Other players in the space include both enterprise solutions that offer procurement capabilities, such as SAP Ariba, and startups like Scout RFP that target specific functionalities. These include Tradeshift, Coupa and others.
Scout RFP has grown to serve more than 240 companies across a range of industries. Clients include global enterprises such as Levis, Best Buy and Owens Corning, and a wide range of technology companies. All companies need to buy things, Yakubovich pointed out, whether it’s office supplies, products for resale or services such as freelance work. The only sector the company does not serve is government space, as government procurement departments tend to have unique workflows.
‘We really started with a blank slate’
Scout RFP’s obsession with understanding its customers began long before the company even launched in 2013. When Yakubovich and his partners first started looking for opportunities in the procurement space, they realized they didn’t know much about it. That led them to undertake a deep dive into learning as much as they could about their potential customers.
“Since we weren’t from procurement, we really started with a blank slate,” Yakubovich said.
Yakubovich and one of his partners had previously founded a software company that had experience on the supplier side of the procurement process, and they recognized the need for more efficient solutions, especially around requests for proposals, or RFPs, which are the forms that suppliers of goods and services submit to bid for potential customers. These forms were often filled out in Excel spreadsheets in a cumbersome process that was not well-integrated with other procurement functionality.
The Scout RFP founders set out with a goal to speak with 200 procurement professionals to learn as much as they could about the buyers’ side of the process, and ended up interviewing many more.
“We reached out to hundreds of people who very generously gave us their time to educate us on what their workflow was, what tools they were using, what tools they had at their disposal that maybe they weren’t using, and how they liked those tools,” said Yakubovich.
What the Scout RFP founders learned was that there were plenty of tools at the disposal of procurement professionals, but these tools were not being used, in part because they were too complicated.
“The adoption rate for strategic sourcing tools … was only about 10%,” said Yakubovich. “Ninety percent of the time the customers would buy something, but they wouldn’t use it. That’s why we had never seen an RFP automation tool as a supplier, because customers just reverted back to spreadsheets.”
Although Yakubovich described the space as “crowded,” he said there was room for a solution that was intuitive and could be operated “without an instruction manual.” Procurement departments tend to be understaffed, the Scout RFP founders learned, and suboptimal solutions that complicated these employees’ workflows were not readily adopted.
Everything goes back to our first value, which is to obsess over the customers.
Alex Yakubovich, CEO and co-founder, Scout RFP
Selling directly to procurement professionals
One of the opportunities that Scout RFP was able to leverage, Yakubovich said, was that existing sourcing and supplier management tools were often being sold through the finance or technology departments at large organizations, and were not necessarily designed to be user-friendly for procurement specialists.
Scout RFP’s founders decided that they would seek to sell their solution directly to the end users within these organizations. As professional buyers trained in the arts of negotiation, procurement specialists have a reputation for being a tough audience, Yakubovich said, but he and his partners also found them to be extraordinarily helpful.
“What we learned is that the people that we talked to were more than willing to share with us their experience. They were incredibly knowledgeable. They had huge pride in their craft, and were just incredibly nice people,” he said.
Creating a solution that was both user-friendly and functional became a priority for Scout RFP, he said. The team looked to personal tax-planning solution Turbo Tax as an example of how easy to use their solution should be.
“We spent the next two years building a really elegant RFP tool,” Yakubovich said, noting that the solution had “very nice adoption early on.”
Scout RFP has since expanded its functionality beyond RFP automation to other areas within the realm of sourcing and supplier management. The cloud-based platform incorporates tools that automate a range of tasks, from project intake to contract management to reverse-auction capabilities.
One of the tools the company developed is called Pipeline, which allows procurement organizations to have a “system of record” for all of the sourcing initiatives it is undertaking — a functionality that was lacking at many companies, Yakubovich said.
Understanding its end-user customers has also influenced how Scout RFP has built its sales force, he said. While software salespeople can tend to be somewhat flashy, many procurement specialists would likely be put off by that approach, the company decided.
“People in procurement are very detail-oriented, and very straightforward,” said Yakubovich. “We had to make sure to hire salespeople that were top-notch, very professional and very, very honest, because procurement people are human BS detectors.”
As a part of Workday, Yakubovich said Scout RFP will remain focused on being responsive to the needs of its end users.
“That is key to our whole philosophy and ethos around how we build product,” he said. “We talked to hundreds of people before we wrote a line of code. We just really wanted to understand the customers; we wanted to listen to them.”
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Published January 15, 2020