Why Coupa Spending Index May Be a Leading Indicator of Growth

Despite market uncertainty, business spending sentiment is increasing in aggregate across industries and within retail and financial services, according to a study of cumulative transaction data.

Download the authoritative guide: Big Data: Mining Data for Revenue

Coupa.logo

Business spend-management software maker Coupa Software did some research in its own market and then discovered a big bonus takeaway: That the study may work as a general indicator of business spending across a broad swath of businesses.

The first Coupa Business Spend Index, released in late April, reveals that despite uncertainty in the markets, businesses appear to be growing increasingly optimistic about the growth of the economy over the next three to six months. This is based on literally millions of transactions involving hundreds of businesses over a number of years saved in aggregate in Coupa’s Community Intelligence database.

San Mateo, Calif.-based Coupa describes its Community Intelligence as an AI-powered engine that objectively—yet anonymously—analyzes transactional spend data flowing through the Coupa Platform. It then prescribes instant insights that help its clients spend more efficiently. As a result, Coupa has access to a great dataset of transactional business data, which enables its Community Intelligence engine to use the latest in machine learning and AI tech to provide more accurate benchmarks and high-value insights.

Indicator of Business Confidence?

“This Spend Index really is a leading indicator of business confidence in economic growth based on their spend efficients today,” Coupa CMO Chandar Pattabhiram told eWEEK. “This is a leading indicator, not a lagging indicator. If you look at GDP or a jobs report, for example—those are lagging indicators. They will give you information from a previous quarter, long after it happens. Our information is fresh.

”Also, a lot of indices are opinion-based, rather than 100% behavior based, as ours is. This is cumulative data; it’s not a small sample.”

The Coupa BSI report is based on three key spend factors at a business:

  • average spend per person;
  • average time to approve spend decisions; and
  • average rate of spend approval/rejection.

The Spend Index analyzes spend data in the Coupa BSM Platform, which has cumulatively processed more than $1 trillion of business spending, to measure confidence around economic growth at an aggregate level, as well as an industry level within financial services, health and life sciences, high tech, manufacturing and retail. The Coupa BSI is a singular window into line managers’ thinking, at scale, regarding economic growth prospects and the downstream implications on the economy.

The Coupa BSM Platform is built upon Coupa Community Intelligence, an AI-powered engine that objectively analyzes the transactional spend data flowing through the Coupa BSM Platform and prescribes instant insights that help companies mitigate risk, remain compliant, identify smarter spending opportunities, and improve process efficiencies across all their business spend.

Business Spending Shows Optimism for Next Two Quarters

Based on spend behavior in Q1 2019, the Coupa BSI report revealed an overall index value of 105.3, an increase of 16.2% from Q4 2018 (90.6), indicating that businesses are collectively growing more optimistic about the growth of the economy over the next three to six months.

Additional industry-specific insights included:

  • Retail (significantly above trend): Business spend sentiment among retailers continues to be strong with the Coupa BSI for Retail increasing from Q4 2018 to Q1 2019, driven mainly by a nearly 44% increase in average spend per person. The Coupa BSI for Retail increased more significantly from Q3 2018 (+18.4%), reflecting a positive growth outlook over the next three-to-six months.
  • Financial Services (above trend): Companies show more confidence about potential growth in the next three to six months versus the prior quarter based on data in the Coupa BSI for Financial Services. This was mainly driven by a nearly 63% acceleration in time to approve spend decisions.
  • Health and Life Sciences (above trend): In the Coupa BSI for Health and Life Sciences, business spend sentiment increased 4.1% from Q4 2018 to Q1 2019 (and 10% from Q3 2018). This was driven mainly by an 8% acceleration in time to approve spend decisions.
  • Manufacturing (significantly below trend, but improving): Business spend sentiment among manufacturing companies continues to be significantly weaker in Q1 2019, as it had been in the second half of 2018, perhaps exacerbated by tariffs imposed on aluminum and steel imports. The Coupa BSI for Manufacturing indicates that business spend sentiment may have bottomed out in Q4 2018 (84.7) with a slight improvement of 5.1% in Q1 2019 (89.0).

“One of the values we are now able to deliver from our aggregate dataset of over $1 trillion of cumulative spend data is empowering business leaders with visibility into future economic conditions so that they can better position themselves for growth and profitability,” CEO Rob Bernshteyn said in a media advisory.

“None of us is as smart as all of us,” Pattabhiram said. “The idea is: Can the collective intelligence individually benefit each member of this community? That’s our goal.”  

To view the Q1 2019 Coupa BSI in its entirety, go here.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 15 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...