Helene:
Welcome to another exciting episode of Procurement Game Changers. Today, we have a very special guest joining us, an accomplished entrepreneur with a remarkable track record in the world of business and innovation. Please give a warm welcome to Thejo Kote.
Thejo isn’t just an entrepreneur, he’s a problem solver in the complex landscape of procurement. Having previously led a successful venture called Automatic, which was later acquired by Cyrus XM for an impressive $110 million. Thejo now handles Airbase, the only Procure to Pay solution combining enterprise great power with a delightful user experience. With the launch of their innovative guided procurement feature, Airbase is revolutionizing their procurement process. They’re not just tackling common inefficiencies, they’re guiding companies to smarter spending and tighter control. In essence, Thejo and his team are setting new standards for compliance, efficiency and delightful user experiences. Airbase goes beyond traditional point solutions for AP, expense management and corporate calls. It offers a comprehensive suite of best of breed products that can be customized to meet your company’s needs today and scale with you tomorrow.
So welcome to the show Thejo.
Thejo Kote:
Thank you for having me Helene.
Helene:
So let’s start with the basics. What led you to procurement?
Thejo Kote:
So I learned about this problem when I was building my previous company, and it was in a very different domain, but in many ways I was supposed to be involved in how we procured things, how we spent money as a company, and it always was a pain point, and I didn’t have the time to do anything about it back then from 2011 to ’17, when I was building my prior company. But it went into my ideas notebook of pain points that I face when I’m building any given business because lots of things are broken when you’re building a business. And when I finally had the time, I sat down, I dug into it and spoke with lots of practitioners, CFOs and controllers, accounting managers, those kinds of folks.
We have come into the procurement domain over the years. Initially we were a lot more of an accounting tool focused on the backend of that procure to pay cycle. Increasingly as we have gone up market, the procurement workflows, intake workflows, solving that problem became more and more important. That’s when we engaged more and more with procurement professionals and ultimately now we have a pretty good solution for the whole spectrum of spend management. But that’s how I ended up working on that problem.
Helene:
So interestingly, so that you know, nobody has told me yet, oh, I studied in procurement because that was my dream job
Thejo Kote:
Yes.
Helene:
Everybody says, oh, this was by accident, or any other path to get that. To be honest, I didn’t start in my career in procurement either.
Thejo Kote:
I think because in business school they teach you how to make money, not how to spend it efficiently. And you realize after you start a business, when you’re running a business that wait a minute, I think I need to do a good job on how we spend the money. And so that’s how it happens.
Significance of Spend Management
Helene:
That’s a good point. So there’s one thing that stands between a company’s growth and unexpected setback is how they manage their spending. And so in the complex landscape of today’s knowledge economy in particular, understanding and optimizing spend management isn’t just a best practice, it’s a necessity and it shapes profitability, it dictates operational efficiency and also sets the tone for a company’s future. So despite its significance many businesses struggle with it and they’re missing out on insight that could drive them forward. And now with technology revolutionizing every facet of business operations, it’s only logical that spend management too is ripe for digital transformation.
So today, we’re joined with Thejo, you’re a pioneer in digitalization, spend management through your innovative SaaS solution. And your work normally addresses the common pain points companies face, but also open doors to a realm of possibility. So now we’ll get started about spend management. So let’s get started with the basics and try to explain the concept of spend management and its certificates in particular in today’s knowledge economy.
Thejo Kote:
Yeah, look, in 2023 now when we’re having this conversation and recording this, spend management has become a little bit of a murky term. And lots of different companies coming from different backgrounds and angles claim that they do offer a spend management solution. And honestly, the market is a little bit confused. But my definition and what it has always been from the day I started working on Airbase sometime in 2017 has been that the North Star goal for us has been to bring together all of the non-payroll spending that happens in a business, because payroll is a big problem of its own, and we focus on every other dollar, all the non-payroll dollars that are spent globally, which is a complexity for that mid-market, early enterprise customers who we tend to focus on. So how do you bring all of the non-payroll dollars that are spent globally into a single platform, which includes both the workflows and the payments and money movement?
That concept, again, is important. If you start to define it that way, it’s fairly easy to say, but much harder to do because it includes really robust intake workflows for the collaboration around how spend is happening. But then it also includes robust AP automation, expense management, corporate card spending, how all of that ultimately has to flow into the ERP system, real time reporting, all the platform elements, integrations. So that’s been a multi-year journey for us where we started with that simple problem statement. Because once you do that, the level of control, the level of visibility, the employee experience that you can deliver around how they spend money, all of those and the overall operational efficiency of the business and the spend culture in the business dramatically improves. And so that’s kind of the journey we’ve been on.
Helene:
No, absolutely. And we are focused ourselves on the consulting category, but the consulting spend, it’s a very big pain, also pain point, and I think that’s pretty relevant and what applies to one category applies to all of them, but with the complexity of making sense of all of this and consolidating and giving an overview of what’s happening. What are the most common challenges or pain points, if you will, companies face in handling their indirect spend?
The Digital Transformation of Spend Management
Thejo Kote:
So let’s pick a good-sized mid-market and early enterprise company, say a few hundred employees or up to a thousand, 2000 employees, they seem to have a common set of pain points as it relates to all of the indirect spend that is happening. One tends to be right on the front end. How does the decision to spend money happen? If you think about it, in many ways, a collaboration problem., You have lots of different teams involved and people involved in that decision making process. And the larger the company is, the more complexity, the more process, the more checks and balances. So you have almost always finance and accounting involved in that decision, FPNA, at some point accounting, if you want to create a PO and things like that. You have, depending on what you’re buying, IT and security involved in that decision making process. At some point legal gets involved in that process. Obviously there’s the employee who is the owner of that spend, who is asking to spend that money, the budget owners, the department owners.
Before you know it, it’s like all of these stakeholders that have to essentially collaborate efficiently to spend that money. And that’s really painful. And that’s the key problem that Airbase solves on the procurement workflow side of things. How do you bring all of these kind of elements of a business that has to get involved in the decision to spend money onto a single platform? How do you make it a really good experience for the employee? How do you also allow through integrations with other systems of record? Because each of these teams live in their own systems. So IT and security teams may be living in a Jira or a GRC system of some kind. And legal teams mostly do their work in a CLM system. And financial accounting tend to be in a system like Airbase then connected to an ERP system.
How do you bring it all together? How do you make sure the data is flowing back and forth? How do you ensure the employee is not expected to jump through four different systems to simply get an approval to go spend some money? How do you make that efficient? So it starts, the pain starts on that front end of how do you even decide to spend money? And after that, on the tail end, it’s just all about the operational process to control the visibility. So as you’re spending the money, you receive an invoice, how do you make sure you have a good process of handling that, processing that, getting the right approvals? How do you make sure you have adherence to having POs in place before you actually receive an invoice, and it’s not a surprise?
Or on the other end of the spectrum, it might be on the corporate card spending side of things. Can you have pre-approval of card spend? How would you do that? How can you drive virtual card adoption where you can have pre-approval spend? At the end of that approval, you create a merchant specific card with all the right controls, and then you use that to spend money. Can you dramatically drive up control and visibility of a card spend? So there are all of these elements across the landscape of indirect spending and non-payroll spending that you could significantly level up, which ultimately makes the experience better for all the personas involved in the spending of money, finance and accounting and employees, especially, budget holders. Just levels up the experience element of it. It also significantly improves control visibility on the other hand.
Helene:
That’s a very good point. So we have the pain points and we have the benefits that digital solutions can bring. I think this is typical of the growing pains of the company. I’ve learned that in business school. That seems very relevant on you start your company, you’re very small, you can make your decision with the people in the room. And so spending is easy because you decide, sometimes you’re alone deciding, but then the more you grow, the more people are involved, that you were saying, the more people can buy themselves. So you need to guide them, you need to give them access to spending options or that’s corporate cards on one hand, but that’s also workflows to allow them and delegation, authority. And all of this is getting more and more complex. And I think that small companies are not armed to that because of the way they grow.
It means that it’s a little bit like you realize that you have a problem, you’re really like you really hit the wall. And I think that solution that can help them do that, and that is adapted to their specificities of being small and growing, that’s what is making a difference as opposed to the established very, very big system that were developed with the very, very big corporation, the Fortune 500 in mind. And that may not adapt to those smaller yet not that small companies, but specifically that are growing so requires some agility and flexibility in the way things are handled so they can keep growing with that tool, right?
Thejo Kote:
A hundred percent. And that’s partly been our thesis at Airbase as I’ve been building the business because I think segmentation is important and you can’t, at least in my opinion, try to be everything to everybody. And a kind of lesson that I took away was another kind of category of software sold into the office of the CFO, and that’s your ERP systems or general ledgers. That’s fairly well established as a journey, at least in the US. Most businesses start on the QuickBooks or a Xero or some small business solution like that. At some point they outgrow that. They go to something like a NetSuite or an Intacct. And very few businesses outgrow that at that point. But if they do, then you have the enterprise solutions, the Oracles, the SAPs, and so there is a nice progression that meets the needs of companies as they grow.
But my experience building my previous business and the insight that led me to work on Airbase is when it comes to spend management and procure to pay and that kind of whole ecosystem, that middle segment is fairly underserved. And you had these small business solutions, usually siloed individual tools, corporate card and a AP automation tool, an expense management tool. You would kind of cobble together all of these. As complexity grew, how would you deal with the collaboration problem? Slack would get involved, email would get involved, Hey, here’s a Google form that you can fill up if you want to spend money. And so it’s sprawl, right? You would end up in this situation of having lots of different tools, 5, 6, 7 tools involved in how to spend money. And the only option you had was to either deal with that or jump to an enterprise tool like an Ariba or Coupa.
And like you said, the trade-offs are not appropriate for a mid-sized company in the hundreds or a few thousand employee size. So a key part of our thesis has been that, look, that’s a problem that needs to be addressed. And I think that’s what Airbase does uniquely well, where the knobs and the sets of trade-offs that you want to think about when it comes to the cost and the UI, UX, the consumer grade experience that we can deliver, employee happiness, time to value implementation, kind of ease. All those trade offs matter. And yes, an enterprise system will always check every box when it comes to maybe the features, functionality and things like that. But how much does it cost? How much does it take to implement and how long? And will your employees be happy with it? What will adoption look like? Because without adoption, every other kind of downstream advantage that you want to drive in the business kind of goes away. And so bringing those right trade-offs and doing it well for that middle segment is kind of the journey we’ve been on for the last few years.
Helene:
If you take a step back, I was listening to the middle market is underserved for… I think that indirect procurement is deserved as a whole. I think that the solution that are available are not adapted to the diversity and the specific of the different categories that are involving in indirect. And that’s what make it so hard. I would say that you are at the crossing of both, mid-market, less serving and indirect, less serving. And you put the two together.
Indirect Spend
Thejo Kote:
Yes, and you’re right, our focus is definitely more on the indirect spend side of things. And we tend to go after we think of businesses where the majority of their non-payroll spend is indirect spend who don’t even have a lot of direct spend as our ideal customer. And that market is fairly large and those customers are also very underserved. And so we continue to focus on those, the direct spend use cases. We are slowly getting better at it and hopefully over the next two, three years, we’ll be able to broaden the set of customers that we serve with this overall vision of bringing together every non-payroll dollar the company spends, we’ll be able to serve a direct side of things too.
Helene:
That’s interesting. So simplicity of processes can directly impact decisionmaking. So how do modern solutions address that complexity issue in spend management?
Thejo Kote:
So I was talking about how a simple approval process for spending can span multiple teams. It can span multiple tools, multiple workflows, which ultimately leads to a terrible experience for the employee who wants to spend money and for companies that want to move quickly, make things efficient, make sure that once a request is placed, all the right people are looking at it. It is a streamlined process. Sometimes in tough competitive markets, that speed of decision-making, the efficiency of decision-making while not losing control, because sometimes that becomes the casualty. Hey, we need to move quickly, just make it happen and we’ll figure out the approvals later. The number of times I’ve run into companies where the PO is created after they receive the invoice just because they want to pass an audit at some point in the future. It never ceases to amaze me. It is just going through the process of checking a box for the purpose of passing an audit in the future, but hey, how can you actually do it right by putting in place a good process, a good tool, a good system, which gives you a great experience to not just the employee, obviously that’s important, but every other stakeholder in that experience. Real time visibility of spend it as it’s happening. And do it efficiently in a timely manner.
And that’s what I think some of these modern tools like Airbase can bring to the table.
Helene:
So that’s very good point. You talked about the real-time access to data. It’s obviously something that is more and more important for companies. How do those SaaS platforms really ensure that comprehensive visibility on the spend management?
Thejo Kote:
So on the one hand I was talking about the sprawl of tools. So we’ve gone through that for a while where it was like, Hey, just go get a best of breed tool. So we’ll get a best of breed tool for AP automation, we’ll get a best of breed tool for intake workflows. We get a best of breed tool for expense management, and then a corporate card system is completely different. So you end up with all of these different tools in the systems and what that results is, you can’t get a streamlined single pane of glass view into how you’re spending money. And that’s part of the challenge because you have all of these payment methods, you have cards, you have ACH, you have checks, you have international wires, you have all of these different systems, and because of a lack of capabilities, one system is good at one thing, you go there to solve that problem and so on and so forth, across multiple systems.
The only place where all of that information comes together is at the end of the month when you close your books in your ERP system because it’s all flowing from these different systems or you’re manually inputting it. So visibility is definitely not real time. And so by the time you do a budget versus actuals and you go back to the budget holders and you give them visibility, okay, that’s two, three weeks after the end of the month, it’s too late. Telling them you went over a budget at that point, what are they going to do about it? But if you bring all of these elements of how the workflows are happening and how the payments are happening across every single payment method, and you combine that experience into one platform, workflows and handling of money movement lives in the same place. Now, it’s a real time view. And so every budget holder, every person who has that responsibility in the business can come to one dashboard in real time and look at exactly what’s being spent and what is their budget, how much have they actually spent. They can make better decisions in real time right now. And so you don’t have to wait until all of that information comes from multiple systems into the ERP system at the end of the month. And that’s the key benefit that at least Airbase is able to offer to our customers.
Helene:
Absolutely. And actually when we develop our tool that is called consource, which is dedicated to consulting, we adopted a vertical in the procurement. So instead of going on each of different step of the process, just like we were saying, we’re going to have a contract management thing, we are going to have the RFP management thing. So we decided to go from A to Z to give exactly what you were saying, an overview of what’s happening, a control on your spend, a control on your expenses and collaboration. So that’s why it’s music to my ear. It’s everything that we’re trying to do. A different market, different targets, but still I think the same principles and the same vision on what a tool should bring to operationals. So we mentioned about collaborations across departments, and we know that it’s crucial for management, but it’s also crucial for procurement. How can we in those digital tools, encourage the stakeholders to work together and in an efficient way?
Thejo Kote:
Look, it starts with, I think putting a tool and a process in place and the collaboration streamlining is a side effect of the right process. So I would go upstream and ask the question, Hey, what is our process today? If your process involves going into eight different tools and multiple different processes that every team follows for their own approvals and things like that, as a procurement person, getting a single view of the entire process end-to-end becomes really hard. And so I would start with asking the question, how do I bring all of this together into a single system, into a single workflow? And how do I bring this into one place where I can look at the stage of every request, what is spending on the employee’s till? What is spending in legal? What is spending in IT? What is spending in finance and accounting?
And if you can get that view in one place that makes a procurement person’s job who is orchestrating all of this and partnering with the people who want to spend that money and helping them think about the options available to them, all of that becomes a lot easier. So I would first, in the absence of any tool, define the ideal process, and then tools like Airbase and our guided procurement module, they’re very flexible. And so part of the power is to define the process and the flows that work for our businesses, integrate and push and pull information from other systems that the business may be using. All of that flexibility, a tool like Airbase and our guided procurement module provides. Now, what is important for a procurement person to do is to ask themselves, Hey, what is the right process for our business? And start from there.
Helene:
Yeah, I think it’s a very good point. So when you are able to really encourage that collaboration and make sure that everyone is involved at the right moment in the process, not only do you make teams work better together, but you are also streamlining the process. You are making sure that you’re not spending too much time on a given step because someone is not involved, or you have to go back in the process because IT didn’t give a decision. So it’s not only the collaboration for the sake of collaboration, it’s because collaboration-
Thejo Kote:
You’re also ensuring things are not falling through the cracks. And you’ll end up in this place where at some point, Hey, why didn’t we do a security review on this really important thing, which ultimately led to a security breach. How did this vendor get in and how did information about our customers get into that vendor systems? And they had kind of a breach of some kind. We have to deal with that problem. How did it slip through the security review process that we have for vendors? And so simple things like that. And that can have really big impact on businesses. But that’s what we recommend to our customers, and luckily a lot of them are seeing the benefits of that and doing that.
Helene:
So just to sum up a little bit and trying to show how a solution like Airbase is indeed addressing all those challenges and what type of client are the best ones to work with Airbase.
Thejo Kote:
For us today, like I said, one, we tend to focus more on companies that have indirect spend. And so if you are a manufacturing business, lots of inventory, lots of purchasing of inventory, that’s kind of not the greatest fit for us. And we tend to go after what I think of as knowledge economy companies. And then a simple definition of that is, hey, the majority of the employees of the business are sitting behind a desk doing work and typically on a computer. Then the patterns of spend, what you spend money on, how do you spend, how collaboration and decision-making processes happen, how those workflows happen, all those use cases, airbase as a platform is really good at supporting. And so that tends to be one dimension of the ideal customer. The other one is just the size of it. So we tend to focus today on companies between a hundred and say, 5,000 employees.
That’s the sweet spot for us. And even within that, it’s maybe 200 to two and a half, 3000 employees is an even better sweet spot, that’s where most of our customers are today. And that has grown over time. And so the upper end of that has grown over time as the capabilities of our platform has grown. And we think that 5,000 may become 10,000 over the course of the next 12 to 18 months as we continue to aggressively invest in R&D and the product and the platform. But the big vision for us ultimately remains to provide the best solution for that middle segment. And so that’s a balance that we have to also focus on and make sure that we don’t try to become everything to everybody and then we are nothing to anybody. And that’s how we think about it.
Helene:
I think that’s a very good point. I think a lot of platforms trying to answer all the needs, and at the end, they’re so generic that they don’t say anything. They’re answering, but they’re answering in a very poorly fashion to everyone.
Thejo Kote:
Look, especially in venture funded technology companies, when you’re trying to build them, that’s the classic challenges. How do you focus as much as possible, but in a large enough market that can lead to venture type returns?
Helene:
Yeah, it can make your investor happy.
Thejo Kote:
Yeah, exactly.
Helene:
Some perspective. Let’s try to look a little bit at the future. How do you foresee the future strategy of spend management, especially with digital shift, what’s next?
Thejo Kote:
Look, I think we’re still very early in this cycle. That’s what I keep trying to remind even our team, is that yeah, there is competition. We kind of keep an eye on what competition is doing. We obsess a lot more about our customers. But the big opportunity for all of us is just still the lack of adoption of tools and digitization in the market as a whole, right? And if you compare the paper check payments, maybe Europe is maybe better about that. But in the US if you compare the volume of paper check payments today still and how much digitization is yet to happen on that front, it’s really simple and basic things like that. There is a lot of room for improvement and efficiency, and so the market is big. So we tend to focus on those kinds of opportunities where it is still behind.
And also if you look at adoption and the maturity of the consolidation aspect of it and how many companies still use individual silo tools, that’s been the norm. That’s how it’s happened over the last 20, 30 decades. And some of these ideas that I’ve been talking about, yes, we have been evangelizing those, Hey, you should bring all of that into a single platform, a single pane of glass, everything from intake workflows to actually creating that PO and then immediately going into the AP automation workflows, bringing together expense management, corporate card spending, AP automation, everything into a single platform, giving everybody a view in a single place. Those are relatively new ideas, at least in the segment that we tend to focus on that historically hasn’t happened. So even that is a journey and an adoption curve because even when good solutions become available, companies don’t adopt that overnight.
And so there there’s a technology or adoption curve that you have to go through.
Helene:
Absolutely.
Thejo Kote:
So a lot of that that I think will continue to happen, but one thing I’m convinced about is that five years from now, 10 years from now, I don’t think procurement leaders, accounting leaders, finance leaders will look at the landscape of tools available to them and say, no, but I want to have six different tools in my business. That’s the right way to solve the problem. At least in our segment, I feel fairly confident that as long as the consolidated offering checks the boxes that every stakeholder cares about at a level of depth. Because yeah, there are different stakeholders. Your AP automation solution, the AP team cares about it, your controller caress about it, your accounting manager cares about it, but your expense management tool, employees really care about it and their experience and the intake workflows and procurement workflows, procurement leaders really care about it. So it’s also hard to deliver at a level of depth to make all of these different stakeholders happy. But once you do that, I’m fairly confident that it becomes a no-brainer for adoption in the business. And that’s kind of, I think, the evolutionary path that the segment as a whole is in. And that’s a journey that we are on too. Right.
Helene:
Wonderful. So we are wrapping up the conversation, and you may not know, but we usually end our podcast with the takeaways. So there’s only one key message that you’d want our audience to remember about our discussion. What would that be?
Thejo Kote:
It is a theme of what we’ve been talking about throughout this call, which is the belief of a lot of leaders over time has been that, hey, a best of breed tool, have lots of them to solve individual point solutions. I think you can have both. You can have consolidation, you can bring a lot of different elements into a single platform, and you can get that best of breed depth that you need in an individual area of the overall problem. And that’s what we’ve been trying to prove. And yes, it has taken time to deliver on the breadth of the solution and the depth of the solution, and we keep chipping away at that problem. And every day that passes, every week that passes, we are able to deliver on that nonstop promise of every non-payroll dollar globally one platform. And so we are able to do that for a larger and larger segment of the market as we cover more and more use cases. And it’s a complex problem. It’s an important problem, and I think it is fair for the buyers procurement leaders, the office of the CFO in general, to demand more and to expect more. And that’s what we’re trying to deliver.
Helene:
That’s the word of the end. As we say in French [inaudible 00:31:27]. Thank you, Thejo,
Thejo Kote:
Thank you, Helene, for having me.
Helene:
As we conclude another episode of Procurement Changes, we saw journeys through the transformative landscape of spend management. A special thanks to our guest Thejo, for sharing, Invaluable insights on the challenges fed by companies, the poor of digitalization, and the immense potential of modern SaaS solutions. Remember, are the heart of these innovations lies, simplicity and efficiency, aiming to streamline operations and provide real-time data for informed decision-making. So if this discussion resonated with you, please show your support. Subscribe, give a thumbs up and share with your network. Together, we’re not only learning, but actively shaping a dynamic and inclusive future for procurement. So thank you for joining us on this Enlightened episode. Stay safe spend form, and until we meet again over.
CLICK HERE to watch our previous episode
; 
