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Fly Me to the Web

The latest T&E software runs on internet-based networks--and the host can be a third party.

If you have any doubt whether travel and entertainment (T&E) expense management software can save companies a lot of money, talk to Mark McAndrews. “We needed something to automate our system,” recalls McAndrews, chief operating officer at Merrill Lynch & Co., in New York.

The 1,000 or so employees in Merrill’s investment banking department were flying frequently in the service of deals, racking up hotel and meal bills in a hurry. In the process, they were generating lots of paper–paper that had to be collected, shuffled, and approved. “Secretaries were spending a high percentage of their time doing nothing but filling out T&E reports,” says McAndrews.

Merrill Lynch also needed software to ensure that employees were adhering to the company’s travel policy, while reducing the human element in the auditing process and allowing managers to maintain flexible control over that policy. “Every time the policy changed we didn’t want to be writing all sorts of new [software] code,” remarks Dan Hall, vice president for investment banking technology. And Merrill wanted to get a handle on the information flow stemming from its T&E activity. “We had no idea who we were spending our money with, and we needed that information for our vendor negotiations,” says McAndrews.

McAndrews and Hall looked at about 20 software vendors before choosing Captura’s Captura Expense. Since the system went live, the time it takes to process a report and reimburse an employee has been slashed from four to six weeks, to an average of four days. The average cost of processing a report–estimated at $25 to $30 per report–has been reduced to a few dollars. “It was a monstrous reduction,” comments Hall.

What’s more, the improved processing times also have contributed to the firm’s balance sheet. “We bill back a lot of our expenses in an underwriting or M&A deal, so getting expenses in quickly has helped us collect more from clients,” McAndrews observes.

This year, Merrill Lynch will upgrade its Captura system to an intranet-ready version. When the company first began studying T&E systems, the Web wasn’t an important consideration. “We didn’t know of any installations three years ago that were Web based,” McAndrews says. “Even a system that just used E- mail was considered state of the art then.” Today, all the major vendors, and a host of minor ones, are moving their wares to the Web.

Intranet Economies

When a T&E expense application is hosted on an intranet, employees need only a browser-equipped computer and network connection to use it. Unlike the client/server computing model, the Web model doesn’t require a piece of the software to be loaded on each traveler’s PC or laptop. And it doesn’t matter what kind of PC or laptop a traveler uses, as long as it can run the desired browser.

The savings from simple technology deployment and central maintenance can be added, of course, to the kind of benefits T&E applications were cooked up to create. Such benefits include:

* Reduction in the cost of processing an expense report.

* Better compliance with company travel policy.

* Reductions or reallocations of manpower. At Vodafone AirTouch Plc, an international wireless network provider with U.S. headquarters in Folsom, California, an Extensity Inc. T&E system will cut the number of people processing expense reports from six to three when it’s rolled out this month.

* Better capture and reporting of data. “We can pick up vendor names, so we can see if a traveler used a corporate-sponsored hotel where they can get better rates,” says Kelly Webb, project manager for shared services at Vodafone AirTouch. “And it allows us to go back to the vendor and say, ‘We’ve been using you this much over the period of a year, so we would like to see a better rate.’”

* More timely filing and processing of expense reports. This is especially important for time-sensitive collection of reimbursements. And it’s a lollipop for travelers, too. At Cisco Systems Inc., in San Jose, California, it once took employees 45 minutes to complete an expense report and two to four weeks to be reimbursed under a manual system. With its state-of-the-art T&E system, it takes 8 minutes to complete a report and 48 to 72 hours to be reimbursed.

* Reduced need to cut expense checks. Payments can be made directly to a credit-card company, funneled into an employee’s bank account, or incorporated into a regular paycheck.

Evidently, more and more companies are getting the message. According to a report prepared by Brian McDonough for IDC, a technology market-research firm in Framingham, Massachusetts, the market for travel expense management (TEM) applications had license and maintenance revenues of $72.9 million in 1998, and should grow at a compound annual rate of 35.6 percent from 1998 to 2003.

According to IDC, the top five players in the TEM market, ranked by revenues, are Concur Technologies Inc., InterPro Expense Systems Inc., Captura, Extensity, and Necho Systems Corp. Not on IDC’s list is IBM Corp., which offers a large- company T&E application through its IBM Global Services consulting organization. IBM’s application isn’t considered an off-the- shelf solution, given the amount of consulting customization needed to install it, explains Timothy Tow, a senior analyst at Stamford, Connecticut-based Gartner Group Inc., an IT consultancy.

ASP T&E

Web-enablement also allows T&E software to be rented from an application service provider (ASP). That’s an increasingly attractive alternative for companies fed up with the high cost of information technology. “People are tired of upgrade costs, tired of the complexity, tired of the downtime involved with bringing new software into place,” says Tow.

The ASP, or hosted, model has been a mainstay of payroll systems for years, and T&E software makers are gambling that it will become de rigueur in their industry, too. Among the converts to the hosted T&E model are automakers General Motors Corp. and Ford Motor Co. (both Captura systems users).

“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.”

Integration with legacy systems was one of the top priorities articulated for its new T&E solution by Vodafone AirTouch. That steered it away from an ASP, says Webb: “We thought it would be difficult for an outsourcer to handle our accounting system.” With Extensity, the company has an intranet T&E system that ties into its Oracle ERP back end, feeding data into the accounts payable module, as well as handling extracts from Oracle’s HR, project accounting, and general ledger systems.

Of course, that didn’t discount the importance of the solution’s being Web-enabled. “The Web was high on our list of criteria,” says Webb. “We’re moving away from desktop-support types of things. It’s getting prohibitively expensive, and it’s unfriendly for upgrades.”

Integration with a back- office system was also a concern for Sensormatic Electronics Corp., an electronic-security firm in Boca Raton, Florida, when it chose Solix Internet Inc. (www.isol ix.com) in February 1999 as its T&E software provider. Sensormatic had installed a Baan ERP system in one of its Canadian locations, and the company’s existing T&E software wasn’t going to interface very well with the ERP system. “Solix had experience with Baan, and it was committed to giving us a turnkey solution that was integrated with the Baan system,” says Sensormatic vice president and chief information officer Larry Hatfield. “It gave us a Web-based, thin-client solution, which was where we wanted to go. And Solix committed to handle the whole project for us–integrate it, roll it out, test it, and turn it over to us.”

Cisco’s Partner

While Web-enablement has become a critical component of any T&E package that wants to make headway in the market, offline functionality is still an important consideration, since travelers don’t always have access to the Web.

“The offline client was one of our reasons for choosing Extensity,” says Steven Bernstein, manager of Internet solutions at Cisco Systems. “Our home-grown system didn’t have an offline client, and our sales force was screaming for the ability to do expense reports offline.”

Technology considerations aside, when Cisco began looking for a T&E package, it wanted a partner rather than just a vendor for its needs, according to Bernstein. “In actual activity, a partner may not be that different than a vendor,” he explains, “but in attitude it is substantially different.”

In Extensity’s case, Cisco wanted the vendor to deploy its software first in Europe, then in Asia, and finally in the United States. “That was something very different for any T&E vendor to do,” Bernstein says. “Travel-expense policy and local legal requirements vary substantially from country to country. Because we were doing this deployment essentially backward, we were looking for a partner to accommodate that sort of a rollout. And Extensity was very willing to do that.”

While T&E software remains a niche market, some vendors see it as a way to leverage their way to bigger and better things within a company, such as procurement and employee self-service applications. “These companies are starting small with the [T&E] market,” Gartner’s Tow says, “but because that affects so many employees within an organization, they see that as a good beachhead for capturing the desktop space.”

Flying High

Leading vendors of worldwide travel expense management software, ranked by revenues.

Vendor World Wide Web URL
Concur Technologies www.conc ur.com
InterPro Expense Systems www.interproinc.com/tec hnology.htm
Captura www.cap tura.com
Extensity www.e xtensity.com
Necho Systems www.necho .com
Oracle www.orac le.com
VIN.net International www.vinn et.com
PeopleSoft www. peoplesoft.com
Managemark* www. managemark.com
SAP www.sap.com
Ariba www.ariba .com

*Managem ark was formerly known as On The Go Software.

Source: IDC, CFO

Smaller Solutions

Can small and midsized companies afford the T&E software from top vendors, such as Concur, InterPro, and Captura? “These are very expensive solutions,” says Timothy Tow, a senior analyst at Gartner Group Inc., a Stamford, Connecticut-based consultancy. “You really have to have a high volume of transactions to support bringing in one of these applications. Most midmarket firms don’t have the volume of transactions to justify deployment of a solution like that.”

The big players are just beginning to turn their attention to the middle market. In the meantime, smaller companies are buying services from such second- tier vendors as Managemark (formerly On The Go Software; www. expensable.com), TimeBills.com (www.t imebills.com), Clarus (www. claruscorp.com), Red Gorilla (www. redgorilla.com), and Momentum Business Solutions (www.mo mentum.com).

That was the case with Teknion, a contract office furniture manufacturer in Marlton, New Jersey. Over the past three years, Teknion has seen its sales force balloon from about 20 people to more than 90. Processing expense reports manually for that many employees became too cumbersome, so Teknion looked for an automated approach.

Two things the company looked for in a T&E system were the ability to route reports to supervisors for initial scrutiny and a better way to track reports. Price also played an important role in Teknion’s decision to choose Managemark’s ExpensAble.com subscription service. “Some products were upward of $80,000, which we thought didn’t make any sense for us,” says controller Ed Shollenberger. By contrast, Managemark charges a subscription fee of $5 to $10 a month per traveler.

The service, which uses Quicken ExpensAble expense management software as the front end, was also attractive to the company’s techies. “Our IT manager liked the fact that the system was Web-based and hosted by [Managemark],” says Shollenberger. “We didn’t have to buy a server. We didn’t have to worry about our help desk getting involved.” Since ExpensAble.com doesn’t interface with Teknion’s financial systems, transactions are still manually entered into the company’s general ledger.

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