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Application Software
Michael Brown, Brandon Gleklen  |  June 30, 2017
Bringing Procurement Into the 21st Century—and the Cloud

There are lots of three-letter acronyms in business, but one of the most-dreaded is RFP—request for proposal.

Why? Well, buying things at scale for a business, when done through a traditional RFP, is lot different and more cumbersome than buying things for fun. In the consumer realm, shopping for new shoes or a new iPhone can actually be enjoyable. It might even relieve stress. But if you are a large public school system that needs to buy $10 million worth of cafeteria supplies for kids’ lunches, the process is complex, involves multiple vendors, and involves considerations including price, quality, and service. For a group like this, there is no such thing as an impulse buy.

Here is how said school system might purchase that $10 million worth of food today, through a standard RFP process (which is often mandated by law if the system is a public entity):

1. A procurement team would define specific goals/requirements for the food purchase, then create a Word or Excel document with 200+ questions for suppliers (e.g., “please list all the sources of your meat products”).

2. Twenty or more suppliers would respond to said questionnaire, often in the form of a 1,000-page (or larger) box of paper delivered by courier (with the literal bulk of that being marketing materials).

3. These boxes of paper would be distributed to around 50 subject-matter experts in the school system spanning various business units (think finance, cafeteria operations, facilities etc.) who sort through all the paper to find the answers to the issues they care about. These experts would then manually score each of the 200+ questions on a scale of 1-10, often on paper or in Word/Excel.

4. Finally, the procurement team would compile all the scoring from these subject-matter experts across each RFP submission and put the information into an Excel spreadsheet. The system would then use this spreadsheet to decide who gets the coveted, $10 million contract.

In theory, this kind of RFP process is a powerful tool for driving optimal purchase decisions. But in practice, the process is very inefficient and stuck in an old, paper-based world. For an employee pulled in to help evaluate a proposal, RFPs are arduous, manual undertakings that take time away from day-to-day functions. Procurement teams themselves often are stretched thin to keep projects running on time. A 20-person team might be responsible for managing a budget over a billion dollars. As a result, proposals are often skimmed and not fully understood, which can result in scattershot or incorrect scoring—meaning the wrong vendor might wind up getting the contract.

Technology to help organizations better manage the procurement process has been a prominent category in enterprise software, including companies like Ariba (acquired by SAP for $4.3 billion), Emptoris (acquired by IBM), and Battery portfolio company Coupa*, which went public last year. These companies, however, have primarily focused on the procurement activities that happen after the buying decision is made—things like purchase orders, payment and spend analysis. There is plenty of value in this functionality. But we think there is also an exciting opportunity to put a software workflow around the sourcing and purchase decision itself.

To that end, we are announcing our investment in Bonfire, a sourcing-enablement platform that manages the way procurement teams and other businesspeople make buying decisions. With Bonfire, organizations actually receive RFP submissions through the software platform—not boxes of paper!–ensuring that every question in an RFP is answered in an easily-digestible format. Team members are keyed into a process only when they are required to be involved, and given only the information they need to accomplish their tasks.

From there, scores are consolidated into a cloud-based, business-intelligence tool that is able to run complex analyses on purchase decisions (e.g. purchasing different line items through multiple vendors subject to defined conditions). Not only does Bonfire make these teams more efficient, but it also helps them make smarter, impactful, and more transparent purchasing decisions.  In the long-term, Bonfire’s technology can create a powerful network effect between buyers and suppliers as they collect data on buying and selling behaviors, and help both groups perform better during the bidding & RFP process.

We have had the opportunity to speak with quite a few Bonfire customers, ranging from large retailers to municipal governments, and we are impressed by the impact Bonfire has made in relieving much of the manual pain in the RFP process, and in driving better spend decisions generally.

Bonfire manages more than $12 billion in annual spend across more than 180 customers and continues to grow. We look forward to partnering with Bonfire in the company’s quest to make RFPs more productive—and, dare we say it, possibly even fun. Companies will see the impact in their bottom lines, and your kids could see the impact in the quality of their cafeteria food.

This material is provided for informational purposes, and it is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any fund or investment vehicle managed by Battery Ventures or any other Battery entity. 

The information and data are as of the publication date unless otherwise noted.

Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this post nor notify its readers in the event that any information, opinion, projection, forecast or estimate included, changes or subsequently becomes inaccurate.

The information above may contain projections or other forward-looking statements regarding future events or expectations. Predictions, opinions and other information discussed in this video are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Battery Ventures assumes no duty to and does not undertake to update forward-looking statements.

*Denotes a Battery portfolio company. For a full list of all Battery investments, please click here.

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