“The development of the hosted application is pretty big in this area,” Tow says. But he still finds the T&E market a mixed bag. “For large enterprises that have already invested a large amount on infrastructure, hosting is much less of an attractive proposition, which makes them less willing to outsource T&E,” he says. “But there are some selective large companies that feel comfortable with outsourcing because people have outsourced their payroll systems for years.”
The advantages of the ASP model include speedier setup; no installation, maintenance, or upgrade costs; reduced training time; and replacement of a variable IT cost with a fixed one. “What more and more companies over the last couple of years have been saying to us is, ‘If you can deliver the software over the Internet, is there a way that I can outsource this fundamentally non-mission-critical application?’” says Rajeev Singh, executive vice president for expense management at Concur Technologies, in Redmond, Washington.
For companies with 3,000 employees or more, the traditional licensing model appears to be working okay, Singh continues. But for companies with fewer than 1,000 employees, a hosted solution seems to be more attractive, primarily because of cost considerations. Concur offers two such solutions. One is a Web portal, called eWorkplace.com. It allows a company to sign up for the service over the Web, configure the Concur Expense application, and be up and running in as little as a day. Instead of paying a licensing fee, the company pays a small up-front cost–around $3,000–and then pays Concur on a transaction basis. “It’s really a revolutionary way to sell software,” Singh declares.
A drawback to this lower-end model is that a customer must forgo a lot of customization to participate in it. With Concur’s other hosted solution, eWorkplace/ASP, a customer can get full customization and configurability capability, just as if it had installed the software on site. Unlike the dot- com product, the ASP application runs off a dedicated line to the customer.
These developments can significantly reduce the cost for a company looking for an automated T&E solution. Typical up-front costs for a 1,000- employee company using the licensing model could run anywhere from $250,000 to $500,000, while up-front costs for something like eWorkplace/ASP could be less than $35,000.
Talking To The Back Office
Web-based or not, T&E software has to be integrated with back-office systems. Although vendors claim their T&E packages will integrate with any number of a company’s existing systems, the degree of integration will vary, warns Gartner’s Tow. For instance, he says, there are cases in which a company has to set up parallel approval structures that duplicate what already exists in its human resources management system. That creates synchronization issues, particularly when an ASP is running the T&E application.
“Some of these ASPs are not certain how they will deal with real-time integration with a client’s system,” says Tow. “If they’re synchronizing once a month or once a week, they can deal with it. But if it’s on a daily basis or hourly basis, it becomes as unmanageable for them as it would be for you.”