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Analyst Insight: Raindrop Systems

Executive Summary

Key Stakeholders: Chief Procurement Officer, Procurement Directors and Managers, Controllers, Vice Presidents of Accounting, Accounting Directors and Managers, Legal Directors, Finance Directors and Managers, Sales Operations Directors and Managers, Marketing Operations Directors and Managers

Why Raindrop Matters: Mid-market organizations between $100 million and $1 billion in annual revenue are in a tricky situation where they have the advantage of being relatively small and nimble, but must also face enterprise-grade operational challenges to support global supply chains, customer bases, and vendor ecosystems. Raindrop provides organizations at this size and above with a freemium SaaS product to support organizations starting to support mature enterprise spend practices while maintaining the governance, compliance, and security issues that come up for enterprises

Top Takeaway: Amalgam Insights recommends Raindrop as a business spend management solution to be considered for organizations with over $20 million in revenue that currently have fragmented or non-existent sourcing management, supplier management, and payment management capabilities.

Introduction to Raindrop Systems

Amalgam Insights recently briefed with Raindrop Systems, an emerging startup focused on Enterprise Spend Management. This vendor got our attention because it has come up in inquiries as a potential solution for managing contracts and spend in mid-market organizations between 100 million and 5 billion dollars in annual revenue, though Raindrop does support enterprise-sized clients exceeding 10 billion dollars in annual revenue.

Founded in 2019 and based in Santa Clara, California in the United States, Raindrop is part of the SaaS trend of “Built by X, for X” companies that was built by procurement professionals to solve enterprise procurement lifecycle demands from sourcing to payment. Amalgam Insights notes that this is a trend in the finance, accounting, and sourcing markets where subject matter experts have come in to build SaaS solutions that have quickly become competitive with legacy solutions that were developed by programmers or technicians lacking deep enterprise practitioner experience. Raindrop was founded by Vijay Caveripakkam and Ward Karson, who bring both provisioning practitioner and consulting backgrounds to the company.

Contextualizing Raindrop in the Enterprise Spend Market

In exploring the Raindrop solution, Amalgam Insights notes that Raindrop’s key differentiation points were associated with providing a modern user experience to support collaboration, workflow automation capabilities, analytic tracking of savings, and clear calls to action to support cost savings, and supplier risk management. The last of these is of particular note, as Amalgam Insights has traditionally seen spend management solutions focus on being systems of record, which led to a practical outcome of creating a data repository that was both complete and overwhelming to analyze on a regular basis. In the 2020s, as Big Data has become regular data and every large data source will overwhelm the human ability to manually audit and query data effectively, people need to use a combination of workflow automation, machine learning, natural language parsing and processing, and rapid contextualization of data to effectively keep up with the constant increases in contract text, transactions, and payments in place.

Raindrop has two key current focus areas. The first is with organizations with less than 50 million dollars in business spend, based on the product’s ease of implementation and a freemium approach that allows clients to sign up for a production-ready instance of the service at no cost to see how contractual obligations can be administrated through a formalized solution. Its second key focus is on larger mid-market to enterprise organizations with 100 to 500 million dollars in business spend to support that customer base. 

Raindrop is designed to be a general spend solution to support planning, supplier management, sourcing, contract management, and payables within a single solution. This integrated lifecycle approach is intended to ensure that data capture associated with contract, vendor, and stakeholder management occurs during transactional execution of payments, contract execution and renewal, and supplier evaluation. As part of this process, Raindrop includes a semi-automated contract loading process that currently automates about half of the contract term entry. From a data privacy perspective, Raindrop has placed a focus on GDPR and on not keeping payment information to support privacy and governance issues such as PCI DSS and FedRAMP compliance.

This solution comes to market at a time when the mid-market procurement market faces a bit of a vacuum. When Scout RFP was purchased by Workday for $540 million, it had made inroads into the mid-market to support cloud-based sourcing and supplier management. However, post-acquisition, Scout RFP development has been more focused on the enterprise customers that Workday focuses on. This development is similar to the work that planning and budgeting solution Adaptive Insights saw post-Workday acquisition.

At the same time, mid-market organizations face greater complexity in their sourcing environments as competitive markets, lowered barriers to purchase, and the proliferation of suppliers in a variety of markets has led to the need to manage spend more closely. As just one example, Amalgam Insights estimates that the average 500 employee company with approximately $100 million in revenue is supporting 250 SaaS vendors, but estimates that less than 100 of them are being formally sourced or managed through procurement. This haphazard approach will lead to spend leakage, missed renewal opportunities, and the inability to aggregate and negotiate licenses over time. And although mid-market companies have typically started to invest in spend management, it is typically in a piecemeal fashion where contract management, purchasing, invoices, payments, and budgeting can each be in a separate application or spreadsheet and there is no direct coordination between each silo other than manual employee changes made on an ad-hoc basis.

Because of both the increasingly complexity of mid-market procurement management and the potential for cost savings through competitive and bulk purchasing exercises, Amalgam Insights believes that the need for mature sourcing and spend management capabilities is now necessary for mid-market organizations that are responsible for good stewardship. Amalgam Insights estimates that the total cost of ownership savings for sourcing management typically matches the expense of an employee or full-time-equivalent at about 100 employees or $20 million in annual revenue and that this cost crossover can occur even earlier in a company’s progression if it is tech-heavy in its operations.

Amalgam Insights’ Recommendations

Amalgam Insights believes that Raindrop’s offering provides a low barrier to entry for business spend as a solution that is as-a-Service, free to start, and provides a modern user interface on par with current web-based applications while providing the breadth of services needed to support business spend management and a standard set of security and compliance requirements needed to support data privacy. In light of the increasing importance of managing the source-to-pay lifecycle for mid-sized organizations, Amalgam Insights recommends Raindrop as a business spend management solution to be considered for organizations with over $20 million in revenue that currently have fragmented or non-existent sourcing management, supplier management, and payment management capabilities.

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